Irish

Thursday 31 July 2014

Kingpins of former Tiger speculators still prowling

Some former lieutenants of boom-time developers are running mega operations. Others have turned vulture, writes Roisin Burke

Published 17/02/2013|04:00

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Their bosses have gone under or been ousted, but the closest associates of former big developers, the executives who helped run huge property empires, still have skin in the game.

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Driven to reinvention by necessity, they are managing billions in assets built up by their erstwhile overlords – former Celtic Tiger titans like Johnny Ronan and Richard Barrett, Derek Quinlan, Liam Carroll and Bernard McNamara – but also touting for new business and, in some cases, seeking to lead audacious new acquisitions.

One such group, Avestus Capital, is chasing a piece of the new Irish distressed asset action, bidding against giant US and British investment funds on behalf of institutional investors with whom it has teamed up, for high-end commercial property plays.

It is understood that Avestus – set up by ex-Quinlan Private kingpins Olan Cremin, Peter Donnelly, Thomas Dowd and Mark O'Donnell – bought out the asset management contracts of Quinlan Private from creditor banks and now has €2.5bn of assets under management.

Over the past six months, backed by institutional and wealth fund capital, Avestus is believed to have been actively bidding on the swathe of cut-price, high-end Irish commercial property loan portfolios coming on to market.

So far it has been outbid, but it is focused on winning upcoming big transactions this quarter. Past Avestus investment partners include GE Capital, Aviva and Middle East sovereign wealth funds.

Avestus is building stuff too – but not in the moribund Irish market. Backed by US and German investor capital, it is active in Eastern and Central Europe. In Poland, the 15,500sqm Enterprise Park office block in Krakow was launched in October and is fully leased to tenants including computer giant Cisco. Ground has been broken on phase two, another build of the same size. A recently completed office building in Warsaw is 100 per cent leased.

'There's nothing in the least bit cosy about this – they had to pitch like everyone else to run legacy Treasury assets'

A large shopping centre in the Czech Republic is 90 per cent leased, with tenants including H&M. Planning has just been granted for a 'big box' retail park in Bratislava, Slovakia, with development due to start in 12-18 months.

Avestus has been selling down prestige office, retail and hotel assets bought during Quinlan's splurging tenure. In the last two years, close to €1bn of legacy Quinlan assets have been offloaded, many co-owned with big sovereign wealth funds and institutional investors, some in which high-profile Irish figures – bankers, legal counsel, listed company bosses and more – have invested.

For some time last year, the sale of the British 42-hotel Marriott portfolio was being sought by an administrator for the debt-owning RBS bank, price tag circa €750m.

An informed source says that all Avestus asset loans are currently being fully serviced. Assets which Avestus retains for its investors include a large shopping centre in Barcelona where Primark is a tenant and a West End of London office block, a 50/50 joint venture with Aviva. There's also the Jurys Inn Group and a Four Seasons hotel in Prague. In Ireland, there is Eircom's headquarters, which is leased to the telco for around €8m a year.

Following buyer approaches, the Prague Four Seasons, a top-performing hotel in the region, was put on the market last year with circa €80m being sought, but prospective buyers struggled to raise debt to finance a buy.

Former Treasury Ireland chief John Bruder's Burlington Real Estate (BREL) is the newest asset manager on the block. Redundancy slips were issued at Treasury's Dublin office following liquidation proceedings in October. The following month Bruder and fellow directors Niall Kavanagh and Niall O Buachalla decided to find a way to stay in the game and formed BREL.

BREL had to fight along with everybody else to win tenders from receivers and liquidators to continue to run legacy Treasury assets, a source said.

"There's nothing in the least cosy about this, they had to pitch like everyone else."

Now BREL is duking it out for new business from Ireland's arriviste property kings: vulture capital funds like Kennedy Wilson, Apollo, Northwood Investors and Canyon Capital, which need on-the-ground expertise to manage the Irish assets they're snaffling up.

Effectively, BREL now competes for its bread-and-butter with the estate agents which it used to hire to do its bidding during the boom years.

Other prospective clients are the big accountancy firms with receivership business handling sunk assets – PwC, Grant Thornton, Deloitte and KPMG.

BREL is also competing with the inner circle people who formerly ran Liam Carroll's domain. Carroll's former financial director, John Pope, along with David Torpey and Noel Murray, steers a company called PAMES (Property Asset Management Enhancement Services, "a mouthful, I wish I'd thought of something shorter" Pope says). It controls €1bn of former Carroll assets with a rent roll north of €50m, according to Pope.

Traditionally, high-end asset management was lucrative enough. Operating a trophy office building meant a piece of the action, a percentage of rent roll or asset value. So a glittering well-situated block with a €10m a year lease could yield €250,000 in annual fees. But not any more, it seems.

Pope says business is flat-fee rather than commission based, and cutthroat. "We're out there tendering at the moment. It's competitive, a glut of people are seeking the same stuff."

Another asset manager, who says his company is "in survival mode", relates, "There are people bidding below cost to win business, hoping to pick up extra fees downstream, perhaps a chance to manage the biddings and sale of the property later to subsidise loss-making asset management. Competition drives everything and keeps margins down to the finest level."

BREL operates in excess of €1bn of property portfolio that includes the Stillorgan Shopping Centre, Bank of Ireland's Dublin headquarters, KPMG's Dublin offices and Central Park in south Dublin, adding to a €65m annual rent roll. It is actively seeking to add business beyond this ex-Treasury stock.

PAMES won Kennedy Wilson as a new client after the US investor bought the State Street building, with its €8m-a-year lease, from an O'Carroll receiver and retained PAMES's services.

It also manages over 50 properties, mainly ex-Liam Carroll company stock overseen by receiver Deloitte. There's Bloomfield Shopping Centre in Dun Laoghaire, Bank of NY Mellon offices near the IFSC, the DPP's offices in Smithfield and the Anglo HQ building that the Central Bank is due to close sale on next month for €7m.

Its biggest project is the 400-acre Cherrywood site where online gambling company Pokerstars and Ben Dunne are main tenants and Ikea, if permitted by the local council, wants to set up shop.

While BREL is believed to have absolutely no interest in property development, John Pope is raring to get back to building stuff.

"I could build houses there and sell them tomorrow," Pope says of the Cherrywood site, where PAMES is battling with Dun Laoghaire Rathdown council for development plan changes.

Meanwhile, further afield in Africa, former McNamara director Jack Butler is running a company called McNamara Nigeria, believed to have contracts worth over €50m. Butler is majority shareholder along with a local partner.

Irish Independent

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