Tuesday 24 April 2018

Cairn Homes, Lone Star to buy Project Clear for €503m

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Click to view full size graphic
Michael Cogley

Michael Cogley

House-builder Cairn Homes and private equity giant Lone Star are set to buy Dublin-based loans portfolio Project Clear, which includes the Adamstown landbank, in a deal worth €503m.

The loans portfolio, which is being sold by Ulster Bank, is segregated into three areas, with each area consisting of so-called "landmark" sites.

The first consists of Adamstown, a large landbank in west Dublin, where some 7,000 homes can be built. The other key assets in the portfolio are a nine-acre site at Cross Avenue in Blackrock as well as an 80-acre site in Portmarnock.

Cairn Homes will pay €378m for its share in the portfolio which would leave Lone Star paying the remaining €125m - about a quarter of the portfolio.

Cairn chief executive Michael Stanley said the sale was one of his firm's "key strategic targets".

"This transaction will unlock the most significant land bank available in Ireland. Cairn's share of the portfolio will provide the opportunity to build over 14,000 new homes, with an expected net development value in excess of €2bn."

The sale frees up some of the biggest landbanks available in the Greater Dublin Area. While the sale raises the prospect of more badly needed housing development, construction work is still years away.

The land will have space for over 14,000 homes, but Davy Stockbrokers' analyst Colin Sheridan said it will be a long time before Cairn builds anywhere near that amount as the company looks to ramp up to its target of building 1,000 homes a year.

"There's existing planning permission on a lot of those assets and the company would have been able to get an idea of what kind of number of units you would be able to build on each of them.

"It would have been relatively familiar with what land assets are there and would have been able to estimate how many homes they would put on them.

"Ultimately Cairn is only likely to build between 3,000 and 4,000 homes in the next five years. It needs to ramp up to that 1,000 unit-a-year target which is probably going to take it until 2019," Mr Sheridan said.

"A lot of people were looking at this as one of the parcels of land Cairn would have been targeting from the very point of its initial public offering (IPO). This would have been on the company's radar the entire time since it came to market.

"Given that the company had both announced a debt facility last week and then subsequently raised capital as well it would have been seen as a bit of a signal that the company would have been confident in deploying that capital relatively quickly," Mr Sheridan said.

Cairn Homes will pay €378m for its share in the portfolio which would leave Lone Star paying the remaining €125m, which equates to just under one quarter of the entire portfolio.

Mr Sheridan said Lone Star - one of the biggest buyers of loan portfolios in Ireland since the crash - was known to be interested in the portfolio from an early stage. "Lone Star was seen as part of that bidding process from very early on. What may well have happened is that each company's resources individually may not have been enough to secure the entire portfolio.

"Potentially, neither one wanted the entire portfolio either. Cairn would have definitely been stretching its balance sheet to bid for the entire portfolio on its own so it may have made more sense for both of them to join up in a way," he said.

Over 90pc of the portfolio lands are located in Dublin and the surrounding commuter belt, representing around 20pc of the available residentially zoned land in the Greater Dublin Area.

Cairn's share in the portfolio is said to be around 75pc and it gives the company the ability to build over 14,000 new homes with a development value of over €2bn.

The deal will free up a significant amount of land for house-building which ultimately will have a positive effect on the current housing shortage.

On that issue, Mr Sheridan said: "One of the bigger problems that has been identified, particularly in relation to housebuilding, is that there just hasn't been a supply of land into the hands of people who are looking to build. This is a stepping stone towards going to a place where there's enough land in the market to build the amount of homes that we need.

"Over the last few years we just haven't seen enough transactions in the land market.

"It will be stimulating to housing supply and it will be good for both parties," he added.

In numbers


Cairn Homes' stake in Project Clear


How much Lone Star is expected to pay for its share


The overall development value of the portfolio

Irish Independent

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