Wednesday 18 January 2017

Developers net €210m in land swap with State

Two of the country's biggest property developer dynasties ended up with prime city sites in return for discounts on housing, writes Roisin Burke

Published 24/01/2010 | 05:00

PRIVATE developers built €2.1bn worth of affordable housing for the State between 2005 and 2008, clearing upwards of €210m profit in the process, Department of the Environment figures suggest.

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Spurred on by the government's push to meet the clamour of demand from buyers and lobby groups, developers churned out 14,000 affordable homes in this short time span.

As the property boom dust dies down and negative equity takes hold, big questions are being asked about the actual value for money of some of this housing stock. With this come questions about the value of some of the deals struck between state bodies and the private developers they tasked with building social housing during the boom instead of building it themselves.

The desperation to fast-track affordable homes was behind one trio of mega million land-swap deals that saw two of the country's biggest property developer dynasties getting their hands on millions of euro worth of state-owned prime real estate.

The Durkan and McCormack families won coveted city centre sites in exchange for discounts on units their companies were building in the housing estate belts of outer Dublin.

In 2005, Bertie Ahern's government faced massive pressure to speed up affordable housing provision against the background of looming social partnership talks with the trade unions. It was also getting flak for diluting Part V of the Planning Act that stipulated 20 per cent social housing in developments, letting developers pay their way out of the provision instead.

Its big new idea was to swap state-owned land for cheap housing. Bertie announced the plan at ICTU's annual conference in Belfast in June of that year. The Affordable Housing Partnership (AHP)

would be set up, with former ICTU leader Des Geraghty cannily selected as chairman, and it would oversee this land swap for affordable housing drive.

The first land swap deal the AHP struck was with the horse-loving Mayo builder family, the Durkans.

Durkan New Homes is controlled by affordable housing supremo Neil Durkan and his family, which has major property interests on both sides of the Irish Sea.

They are keen racing enthusiasts -- Neil's father, Bill, owned a Goff's Millions Curragh 2006 race winner and the company has sponsored many Leopardstown and Galway race meeting events. The family made generous contributions to Fianna Fail's annual Galway Races fundraising initiative in 2006 and 2007.

The Durkans were also keenly supportive of the political system; Durkan New Homes sent €500 cheques to politicians from several parties on the eve of the last general election in 2007, with a letter from company directors Neil and Liam Durkan saying, encouragingly: "We wish you all the best next Thursday".

Clearly as fine a judge of a property bargain as they are of horseflesh, the Durkans could see that the Harcourt Terrace site was a winner.

Worth over €30m, it comprised 0.87 acres situated bang in the heart of the then-booming office block heartland of Dublin 2. In 2006, Durkan New Homes won out over five other developers to bag the site -- the former garda station and the film censor's office sites.

In return, Mr Geraghty's AHP was to get €35.4m worth of discounts on 215 homes that Durkan was building in among the swathes of housing estates in south west and west Dublin in areas such as City West, Tallaght and Clondalkin.

The deal meant Durkan was knocking about €160,000 off the sale price of each home. The properties involved, almost all apartments or duplexes, were priced at around €200,000 for a two-bed unit. It sounds like a decent enough deal: less than an acre of city centre land swapped for money off badly needed affordable homes.

But Durkan's side of the deal won it a prime Dublin 2 site with enduring value, while the AHP, on the taxpayer's behalf, got an interest in housing stock on which prices are now tumbling.

Right next door on Harcourt Terrace, just under half-an-acre of former Department of Agriculture land was also swapped in a deal for which Durkan also won the tender in 2004. It was exchanged for €15.7m worth of discounts of about 33 per cent off 193 affordable apartments and duplexes in southwest Dublin.

These two Harcourt Terrace deals combined mean close to €50m worth of really top property in Dublin city centre was swapped for discounts off 497 apartments and duplexes in the sprawling Dublin hinterlands.

These areas have become a negative equity nightmare as prices have tumbled on most of this west Dublin housing stock. Two-bedroom apartments are down from peaks of close to €300,000 to as little as €139,000 -- if they can be sold at all, while a one-bed can be had for €104,000 -- less than half its original selling price.

The lands at Harcourt Terrace will, of course, have fallen hugely in value too, but centrally located, well-serviced property in Dublin 2 is likely to retain and recover value much more quickly.

Durkan has just won a long slog with An Bord Pleanala to develop the site as a massive office and residential building, which it hopes will be completed to dovetail with a recovery in the property market's fortunes.

The Durkans were not the only winners in the land swap. The McCormack family's Alanis Limited were the lucky beneficiaries of the AHP-led property swap of a plum Dublin 4 site. Former investment banker John McCormack and his sons Alan, Niall and Brian are fellow directors, and former Anglo Irish Bank executive Marcus Ryan is a partner.

Alanis has bought and sold retail property worth millions on London's Bond Street. Two of the McCormack brothers, Alan and Niall, teamed with private clients of Anglo Irish Bank in 2005 to pay €78m for the luxury shopping centre, the Royal Exchange, a City of London property that boasts tenants such as Prada, Gucci and Tiffany.

The McCormacks were regular partners with the now struggling Kelly developer family, Derek Quinlan's property vehicle and Ged Pierse's Pierse Contracting on major projects such as IFSC blocks, the Clarion Quay apartment complex and the Ibis hotel chain.

In 2006, the State-owned Broc House on Nutley Lane, Donnybrook, Dublin 4, just opposite Elm Park Golf Club, was swapped with Alanis for discounts totalling €9.05m on 89 affordable three-bed homes at Phibblestown Wood, Ongar, Dublin 15.

These were mostly three-bed homes sold at their discounted price for between €227,000 and €330,000.

Even if the discounts were good value, a price tag of €9.05m for Broc House was a bit of a steal for the developer, zoned as it was for residential use, with agent Jackson Colliers Stops promoting it as perfect for high-end residential development.

Alanis didn't respond to a request for comment on how well it had done out of this exchange. The AHP didn't respond to a request for comment on Friday on the extraordinarily good value both this and the Harcourt deal gave the developers involved.

Broc House had been bought by the State for a reported €9.02m five years before. Just a year earlier, the Office of Public Works sold the former Veterinary College at Ballsbridge, also Dublin 4, a two-acre site, for €171.5m, and it sold nearby property at Lad Lane, Dublin 2 for €22.5m.

House prices in Ongar were already dropping by 2007, and affordable housing buyers complained that some of the Broc House exchange discounted units were too highly priced. The developer reduced the price, then the AHP paid it an extra €3m to make up the difference -- our taxes compensating the developer for the market risks that arguably should have been all its own.

But it's not all plain sailing for the developers and -- funnily enough -- a Durkan company is finding itself on the potentially less lucrative end of a land deal with the State in the horse-breeding heartland of Co Kildare.

Durkan offshoot Devondale wants to build 101 big detached houses near the famous Georgian stately home, Castletown House.

Brian Durkan argued at a recent An Bord Pleanala hearing regarding the development that Devondale has already donated 31 acres to Kildare County Council to provide nearby Celbridge with a new park beside the Liffey.

Former Castletown House owner Desmond Guinness and Knight of Glin Desmond Fitzgerald are among nine objecting parties, but all but three local councillors are in favour of it.

The taxpayer was spared more of these deals by the collapse of the property market. Affordable housing swaps were earmarked for state lands including Magee Barracks in Co Kildare, lands at Gormanston, Co Meath and acres of Department of Agriculture lands in Cork, Dublin and Galway.

At the start of 2009, there were 3,700 unsold affordable housing units, with 630 of Dublin City Council's affordable homes lying empty, according to a report from the Comptroller and Auditor General.

Sunday Independent

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