Thursday 22 March 2018

Ronan looks to build for the future as he shuts the Nama door

One of Ireland's most dynamic developers is set to return after he was burnt by the property boom, as plans progress to pay back loans to the state bad bank

Build it and they will come: Johnny Ronan. Photo: Steve Humphreys
Build it and they will come: Johnny Ronan. Photo: Steve Humphreys

Nick Webb and Niamh Horan

Maverick property developer Johnny Ronan is sitting in the Nama exit lounge having agreed a deal with UK financiers Development Securities (Dev Sec) which will see all of his personal loans held by the state bad bank fully paid off.

"This will be the first time a guy has paid back everything at par," according to one source close to the developer. Last month Cork builder Michael O'Flynn saw his loans leave Nama as US private equity giant Blackstone bought the €1.8bn "Project Tower" loan portfolio at a discounted €1.1bn. Ronan's €400m in loans associated with his own personal property portfolio are set to be paid off in full. Paddy McKillen has also refinanced all of his loans due to the former Anglo Irish bank – but they had never been transferred to Nama – after a High Court ruling in his favour.

"That'll be the end of it with Nama in a couple of months' time. Maybe two or three months. It'll all be agreed then. But until the cheque has been written it's not over. Negotiations are still going on and Dev Sec is still doing due diligence on the loans," according to one source. "They will start rebuilding. Treasury Holdings, Battersea and China are all gone, so he's starting from scratch with all his personal assets. But he's paying back all of his loans and getting out of Nama."

This will see the return to the Irish property market of the dynamic developer, who had dominated Dublin's skyline for the best part of two decades. Ronan and his partner Richard Barrett were behind some of the capital's most iconic buildings including the National Conference Centre and the Google buildings in Silicon Docks. But the ambitious projects ultimately sank Treasury under a mountain of debt, when the markets turned. It was zapped by Nama who were owed €1.7bn out of total debts of €2.7bn.

Treasury's collapse put Ronan under severe pressure, as he had clocked up €400m in borrowings for his own personal property investment outside of the Treasury business. These loans had come from Bank of Ireland and AIB during the boom, before being transferred to Nama in 2010. These loans were primarily secured against Ronan's own property assets in Ireland. Sources have told the Sunday Independent that there were no personal guarantees associated with the Treasury Holdings borrowings.

The taxpayer will make a return on the loans if Ronan and Development Securities can get the Nama deal over the line. Ronan's borrowings will be paid back in full, despite having been transferred to Nama at a discount.

"They were all well funded. His properties weren't worth less than his loans because they had been conservatively financed," according to a source. "Nama will get 100 per cent of the money because the gearing was so low. The loan to value on the assets was just 30 per cent. Most of the other developers were about 70 per cent or more."

Ronan has been restructuring his own property and investment portfolio in recent months, as he sought to raise funds to pay down his Nama debts. He has generated over €100m from the sale of assets, which has been used to pay back Nama. Ronan's property group lists some high-profile assets spread from Dublin city centre to Wicklow and Paris. This includes the Bewley's building and two other Grafton Street properties as well as Kilmore House in Spencer Dock, which is the Fortis bank headquarters. The Ronan Property group also lists assets including Connaught House on Burlington Road, Kingram House in Dublin 2 and St James House, as well as a number of other city centre offices.

In Paris it owns the BNP Paribas private bank headquarters. The company also has a raft of development assets including lands in Cabinteely, Delgany, Enniskerry and Dublin city centre.

He offloaded the former Matheson Ormsby Prentice office block on Herbert Street, Dublin 2, to Irish Life for €25.5m, and also inked a deal to sell his 66.6 per cent stake in an office block on Dublin's Percy place for around €11.5m. The developer also netted €13.2m when selling the Eugene F Collins offices on Burlington Road to hotel tycoons John and Bernie Gallagher. He also sold out his interests in Chinese property group Forterra to Nan Fung.

Ronan teamed up with FTSE listed property investor Development Securities plc, which is close to finalising a deal to buy his remaining €300m of Nama loans at par. It is believed that Ronan was approached by Matthew Weiner's Development Securities last November. "He got a phone call out of the blue," according to one source. "There were between 15 to 20 people looking to help get him out of Nama to use his expertise and skills in the Irish property market." It is believed that a number of international investors including Hinds, Macquarie and JP Morgan had been interested in buying out Ronan's Nama loans. "There were a number of big hedge funds looking at it as well," the source added.

"Since the financial crisis started in 2007/8, now over six years ago, almost no new developments of any scale have been started in Dublin," according to the blurb on Ronan's property firm Ronan Group Real Estate. Employment and output have started to rise again and, in certain sectors and locations, there is growing demand for new property. Ronan Group Real Estate intends to reinvigorate this moribund landscape."

Ronan will now work with Dev Sec on a project by project basis. The UK company has "first refusal" on any projects that Ronan is developing. Under this new partnership Ronan will get a stake in any joint venture project once certain benchmarks have been reached. "They need to get a return of 15 to 20 per cent and then the promoter gets a share," according to one financier.

Things are moving fast and Ronan is working on a pipeline of potential deals. Last week, the high-profile developer spent €40.25m buying a site on Dublin's Burlington Road. The site had been put together by Bernard McNamara during the boom and was financed by Bank of Scotland (Ireland). Ronan is planning to develop a massive office block on the site, which will house as many workers as the Google buildings in Silicon Docks. "It's about creating jobs and getting the economy back to work," said one source.

The deal was co-funded by Dev Sec and US private equity group Colony Capital. Colony Capital is already active in Ireland, having bought €800m worth of Paddy McKillen's loans from IBRC last March. It opens up the intriguing possibility of McKillen and Ronan, the only two developers who paid back all of the money borrowed from their banks, working together. Previously the pair had developed the Treasury Building in Dublin 4, which serves as Ronan's nerve centre. And Nama's own headquarters.

"The reason Dev Sec is looking at Ireland is that opportunities are getting scarce. They wanted to get Johnny Ronan out of Nama and get him back developing," according to one property source. "Development Securities are interested in his assets in Dublin. They want to get him to develop them and that's why they need him out of Nama."

Ronan and Treasury Holdings were the biggest developers of office blocks in Dublin during the boom. The supply of prime commercial real estate in the heart of Dublin is running dry, with a very small number of new projects under way, including Denis O'Brien's Canada House redevelopment on Stephen's Green and Larry Goodman's refurbishment of the former Bank of Ireland HQ on Baggot Street. "There will be a shortage of prime office space in Dublin because Treasury Holdings was taken down. That's what will create a mini bubble because supply hasn't been met. It takes three years to bring a project to fruition and that's what the problem is," a source said.

With Ronan now getting back in the saddle, it brings his previous projects into sharper focus. Treasury Holdings was effectively sunk when Nama decided to exit its mega project at Battersea Powerstation in London, which Ronan and Barrett had been trying to develop for a number of years. Nama offloaded control of the project to Malaysian group SP Setia, which looks like generating major profits, having ploughed billions into developing the scheme. Nama shied away from bankrolling the project as it thought it would have to pump billions into Battersea.

However, Treasury disputed this. "Setia had agreed a joint venture with Treasury and were bank-rolling the landmark project and Nama were not required to invest one penny, one former Treasury director told the Sunday Independent. "Battersea could have paid back the Treasury Holdings stuff 10 times over if they had allowed it to proceed," a source argued. "It is a bitter pill to swallow to see Setia making billions for the Malaysian taxpayer."

Battersea was Treasury's master plan to avoid the crippling market crash in Ireland.

"Alarm bells went off in 2005 and 2006 and Treasury sold off about €500m worth of assets. Land was sold for €20m an acre in Sandyford and they purchased Battersea for €10m per acre.

"They thought that Ireland was overheating and decided to get out to concentrate on Battersea, which is starting to make serious money. Treasury thought they could have made €8bn out of Battersea."

Big numbers and big ideas, the return of Johnny Ronan can only help to stimulate the Irish property market again.

Sunday Indo Business

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