Irish builder gambles €100m on property market revival
Lack of competition enables New Generation Homes to make massive land grab in Dublin
Irish house builder New Generation Homes has spent "over €100m" buying up a vast land bank around Dublin to build new houses in one of the biggest gambles on the property market recovery ever seen. The company is headed up by 28-year-old Arklow man Greg Kavanagh.
It is understood that New Generation Homes recently raised money from US private equity firm Starwood, with earlier backing from Pacific Investments -- the buyout firm founded by British entrepreneur Sir John Beckwith, uncle of socialite Tamara Beckwith.
The sums raised from investors are thought to be in the "tens of millions". The funding relates to specific transactions and development projects.
Property sources have also indicated that Pat McDonagh, Ireland's most successful software tycoon, is also involved. However, Kavanagh declined to comment on other investors in the venture. New Generation is advised by Grant Thornton, William Brennan & Co and Copsey Murray.
"We have no bank debt. Everything is funded in cash," Kavanagh said.
"We'd our own money. It was a mixture of equity and investors. People were keen to invest," New Generation chief executive Mark Elliott added. "There was a good appetite for people to invest in the Irish residential property story."
"We just knew it was a sector to plough into as hard as we could. There was no competition in residential house building so we could buy up a lot very quickly and that's what we did," Kavanagh said.
In an incredibly gutsy move, New Generation sealed its first property deal at the start of 2011, just weeks after Ireland was forced to enter the Troika bailout.
Market sources have told the Sunday Independent that the builder has inked more than 50 deals to buy sites in the greater Dublin area and has plans to build "thousands" of houses. It has bought land at Knockcree in Carrickmines, Belmont in Stepaside, two sites in Knocklyon, a large site in Sutton, Westmanstown Cottages in Lucan and the Boulder site off Rochestown Avenue near Cabinteely.
"We have acquired enough sites to keep us busy for the next couple of years," Elliot added.
The company is sitting on major paper profits already on some of its land deals, as prices for sites have risen strongly over the last year with investors flooding back into the market. One site, thought to have been purchased for €13m last year, may now be worth over €30m based on current values of up to €100,000 per unit.
New Generation sold over 100 newbuild homes last year, according to Kavanagh, with prices ranging from €280,000 to €630,000.
The company is currently building on six sites, working on the construction of up to 500 new homes. One of these, Belmont in Stepaside, has space for 350 units. Planning records show that the companies associated with New Generation have received 13 grants of planning permission with another six applications still live.
"Right now our bias is to get homes built. We want to get more staff. We want to be more active on sites and we'd hope to at least double our output next year," said Elliot.
"Next year we'll probably do 300 to 400 houses," added Kavanagh.
However, Kavanagh told the Sunday Independent that it is no longer in the market to buy sites as prices have risen dramatically over the last year.
"We're starting to exit because the value is diminishing -- and what people are paying doesn't stack up," he warned.
Super-rich are starting to buy Irish property once again
FEW people will have heard of Greg Kavanagh. The Arklow man is now the face of what could be the biggest domestic gamble on the Irish economic and property market recovery.
The low-profile 28-year-old doesn't crop up on Google searches much. He has deliberately stayed out of the limelight. Over two interviews in the offices of his solicitor William Brennan and in the Merrion Hotel in DuBlin, Kavanagh outlined how his hunch that Ireland would recover would make him, and his well-heeled backers, an absolute fortune.
Many of the traditional home-builders in Ireland have either gone wallop, like McInerneys, or have shifted their focus abroad. This has meant that only a fraction of the homes needed to satisfy demand are being built.
The ESRI estimates that around 20,000 net new households are created each year, with a large proportion of those wanting to live in Dublin. The raw fear experienced by consumers over the last six years, coupled with a lack of mortgages from the banks, has meant that demand has been almost non-existent since 2007.
But it couldn't stay like that forever. And that's at the core of Kavanagh's €100m gamble.
Kavanagh told the Sunday Independent that he knew the market would turn because of "debt graphs" and studying "the movement of capital" back in the darkest days of the economic crisis.
So far, he's been bang on the money.
His New Generation Homes has hoovered up prime sites around Dublin over the last two years and is preparing to build thousands and thousands of houses. Already, he's in profit as the value of those lands has soared.
But Kavanagh isn't the only ballsy investor to take a punt on the Irish property market coming back from the dead.
Big US buyers such as Kennedy Wilson, Franklin Templeton and George Soros have put money directly or indirectly into the property market here.
'The feel-good factor has been fuelled
by estate agencies and land professionals -- confidence is key, they say'
Irish buyers have been few, but that's all changing.
Beef baron Larry Goodman splashed out over €43m to buy the Bank of Ireland headquarters on Baggot Street in December 2012. He's spending another €35m on doing it up.
A blue-chip client like Facebook or KPMG signed in on a long lease with give Goodman a dynamite yield -- better than money in the bank.
Increasing capital values will also boost the family bank balance. Goodman's Parma Investments is also behind a major new retail and residential development in Newry to capitalise on cross-border shopping.
Also back in the market with a bang are John and Bernie Gallagher, the dynamic duo behind the spectacular deals to take €1bn hotel group Jurys Doyle private in 2005 before clearing the transaction debt by selling the Burlington, Jurys Ballsbridge and Berkeley Court to cash-crazed property developers during the boom. Last year the Gallagher family spent €25m to buy the River Lee hotel in Cork from Nama developer Owen O'Callaghan.
Last February, they bought Dublin office block Temple Chambers, Number 3 Burlington Road, which had a price tag of €13.3m.
Galway's Comer Brothers have also been acquiring as many apartments and apartment blocks as they can lay their hands on.
The brothers, former contract plasterers who made a fortune in the UK property market in the 1990s before investing in Germany, have also made a vast bet on the recovery of the Irish property market.
The Monaco-based brothers, who sponsor Galway United FC, have sold large chunks of their extensive German property portfolio -- which includes 30 shopping centres, office blocks and hotels -- to fund a seismic investment in Ireland.
The brothers plan to spend €200m on Irish property. So far, they have inked 35 separate deals here, including the buyout of ghost estates in the midlands to a skyscraper in Sandyford.
The brothers bought the Veterinary College site in Ballsbridge for €23m, spent €11m on Falcon's Tower in Blanchardstown and bagged the half-finished Sentinel Tower in Sandyford for just €1m.
Other deals saw them buy the €75m Gemini portfolio of 640 apartments in Cork and Dublin, which was sold by Ulster Bank. They also bought Jim Mansfield's Palmerstown House, which is their new Irish base.
Domestic and international investors also steamed into two Real Estate Investment Trusts (Reits), which floated on the Irish stock market in the second half of the year.
Stephen Vernon's Green Reit and the Bill Nowlan Hibernia Reit, were both established to provide a tax-efficient way of investing in the Irish property market.
The largest domestic buyer of commercial property IPUT was also on a buying blitzkreig in 2013, snapping up several high-profile office blocks in the IFSC.
The feel-good factor in property has been fuelled by estate agents and land professionals. Confidence is the key, they say. Estate agents have been falling over themselves to predict how much property prices will rise in 2014, on the back of an 18 per cent increase in prime parts of Dublin last year.
While more desirable parts of Dublin city and county experienced frenzied demand for family homes, the rest of the country didn't -- with prices dropping in the less chi-chi parts of the country.
But while the savviest investors have been in and made their money early, others arriving later to the game may not be so lucky.
"We are starting to exit because the value is diminishing, what people are paying doesn't stack up," Greg Kavanagh added.
"There are auctions that we haven't attended now because there's a herd mentality and people are just ploughing in."
Now that sounds somewhat familiar.