Friday 16 November 2018

Earthquake planning £276m UK shake-up

Tom Lyons

IRISH property investment group Earthquake, formerly the Niall J Mellon Group, looks set to shake up the UK property market with the ongoing roll-out of a range of projects worth over stg£275.5m.

The Rathfarnham-based group's recent additions to its developments span hotels, apartment blocks, office space and a BBC regional headquarters.

Earthquake is also combining with a Scottish partner to build a 35-storey mixed-use £100m skyscraper that will be the tallest building in Glasgow if it receives planning permission.

Its development team has been named the preferred bidder for the hotel, office and apartment project that will also include space for Glasgow Council offices.

Chief executive Niall J Mellon said of the group's approach: "Traditionally, fund managers have not wanted to get their hands dirty with property at a very early stage.

"The vast bulk of them have used property funds to buy completed buildings. What I am trying to do is shake up that attitude towards investment and take a much more pro-active role."

Mr Mellon claimed that after each stage of the development cycle, from getting planning permission to completion, value is added. By getting investors involved as early as possible in that cycle additional gains can be earned.

Currently in the UK the group's focus is on Nottingham, Bristol, Hull, Cardiff, Glasgow and Hull, with two of three other cities in the pipeline, the company said.

In Nottingham Earthquake has just completed a 160-apartment project worth £22m. In Bristol the group has this year completed over 120 apartments in two projects collectively worth £31.5m.

A £20m office building is also being developed in the city half the funding for which is coming from Irish property developers.

The new home for BBC's regional office and 110-apartments are under construction in Hull in a scheme valued at £14m. Earthquake is also involved in an £8m series of luxury apartments near the Millennium Stadium in Cardiff.

In Glasgow, in addition to the £100m skyscraper, Earthquake is involved in a £30m 175,000 sq ft residential scheme and a three-year 300,000 sq ft office building programme which has recently received its first tenant in the £50m project.

Mr Mellon said Earthquake was primarily an investor-led firm that was also benefiting from ongoing declines in the stock markets.

"A lot of investors are tired of equities and of hearing every time that they open the newspapers that their shares have gone up or down. We believe there is a long-term interest now among people to balance their portfolio with a reasonable amount invested in property. We would see ourselves to the forefront of offering such opportunities."

Earthquake employs a core team of approximately 25 people including three full-time UK acquisition managers.

Mr Mellon said that he expects Earthquake's turnover this year will be in excess of £100m.

"Thankfully, because we are not a plc we are not under any pressure to boost turnover levels or keep shareholders happy. It very much depends on a case-by-case basis as to what projects we are doing. I would expect that our turnover level will certainly be in excess of £100m, and beyond that it really depends on what projects we are doing."

Earthquake is in the process of recruiting one or two European acquisitions managers. Mr Mellon said this would place mainland Europe very much on the company's future agenda and it would also be looking at opportunities further afield.

Earthquake is involved in a property development fund since 2001 in conjunction with Irish Life which has raised ?15m from investors allowing it obtain gearing for an additional ?15m. The fund has a minimum entry fee of ?65,000 and operates on a 'no foal no fee' basis.

The fund charges only one fee at the end of five years which is 25pc of all profits. This fund supports only the Glasgow £30m 175,000 sq ft residential scheme at present.

Mr Mellon said the fund should yield a 10pc return for investors over the last six months and that he hopes to further develop Earthquake's relationship with Irish Life.

Mr Mellon, 35, initially worked for Lombard & Ulster for a year after leaving school in Coláiste Eanna in Rathfarnham. At 19 he joined his father working in a small personalised investment brokerage which introduced him to the basics of handling investor's funds. In 1992 he set up a mortgage company and was elected the inaugural president of the Independent Mortgage Advisers Federation.

By 1995 Mr Mellon said his property interests were increasingly taking over, primarily via the Niall J Mellon Group and he began to invest in the UK market.

In the last month Mr Mellon's various interests have been consolidated under the name Earthquake Property Partners. He was also involved in managing money for investors in the IFC-based Mellon Financial Services.

The property developer has also extensive interests in Ireland. "I am extremely interested in playing my role in the growth of the Celtic Tiger in Ireland. I invested some of my profits made overseas back in Ireland by building a number of hotels in Ireland. I wanted to repatriate some of my profits in a positive way in Ireland."

Mr Mellon built the Charleville Hotel and Tramco in Rathmines in the late Nineties with his friend builder Paddy Kelly. A traditional music fan, he is also behind the Irish themed thatched roof Taylor's Three Rock Hotel in Rathfarnham and the Henry Grattan pub on Baggot Street. He is also involved in building the ?5m Castleknock Marina Hotel due to be completed in April.

In recent weeks Mr Mellon donated ?1m in conjunction with 'Habitat for Humanity' as part of a project to build 450 houses in the Imizamo Yethu township in Cape Town.

He has assembled a high-profile team to complete the project, including builder Paddy Kelly, Patrick Linders of Linders of Smithfield, Peter Coyne of the Dublin Docklands Authority, Jim McBride of Century Homes, Michael Galvin of Cisco Systems, James Byrne of ezhome and Tony Porter of PMI Mortgage Insurance Company.

Mr Mellon said the ?4m project evolved from meeting with local Cape Town community groups. He said Habitat's ethos was based on sweat equity which means each person must offer 4-500 hours of free labour before receiving a house.

"It is staggering how you can build houses using the same materials as you would in Ireland with concrete floors, brick and a traditional roof for ?4-5000. You can build the equivalent of 40 houses for the price of one average house in Ireland.

"The people there have had aspirations for over 20 years to buy a house and I'm trying to involve Irish people in achieving this in three years. In this programme we've set a very ambitious target and if we're going to do it, we're going to need a lot of Irish help to get there."

Sports broadcaster Des Cahill will lead over 100 Irish volunteers to work in the township in 2003.

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