Newly-formed Howard Eurocape is focusing on emerging markets, writes Barry O'Halloran
Not long after Howard Holdings bought three city blocks in the centre of Cape Town three years ago, its chairman, Frank Gormley, received a letter from South African journalist Ben Trovato.
The letter, signed "proudly South African", pledged to resist what it called this wave of Celtic colonialism, and warned that the locals would not tolerate lots of binge drinking and "homosexual tap dancing".
While Gormley admits that he was initially a bit fazed, he saw the joke pretty quickly. Trovato (a pen name) writes a column for the Cape Times newspaper and, as a sideline, has published books of similarly off-beat letters written and sent to prominent people, largely to wind them up.
Gormley has just had his letter framed and it's set to join a range of personal and business mementoes on the walls of his office in Clonskeagh, Dublin. The fact that Trovato thought he was a legitimate target says something about the impact the Irishman's business has had in South Africa.
Frank Gormley is best known as one half of the management of Howard Holdings, the other being Greg Coughlan. But after 20 years that have seen them take it from being a London-based shell company to a property player with deals in places as diverse as Cork, Poland and South Africa, they are dividing their assets and going their separate ways. Gormley's business is about to become Howard Eurocape. It will have property assets worth up to €2 billion in Dublin, northern England, South Africa and Poland under its management.
In addition, it is forming a new association in London with former Ireland and Munster rugby legend Keith Wood in a business called Touch Wood International. This will be involved in putting together new deals and marketing projects like the one in Cape Town.
Greg Coughlan and Howard's other backers, Brian Madden and Brendan Murtagh - the Kingspan founder whose other investment, Smart Telecom, is also in the news - will continue to trade as Howard Holdings.
The split was friendly, Gormley says, and came about because a natural division had developed in the business as it stretched beyond the original operation he and Coughlan began in London.
"Over the last number of years, I came back to Ireland and set up the operations here. Greg stayed in the UK and there was a natural geographic split, in that he handled some areas and I handled other areas," he explains.
Broadly speaking, Coughlan operated between London and Cork, while Gormley looked after Dublin and the north of England. His business now consists of an office in Dublin and one in Cape Town, with 20 employees in each. The original move to South Africa was sparked by Gormley's interest in emerging markets, and a huge gap between property prices here and there testifies to the potential value available.
Howard's original investment in South Africa ran to about €40 million. "It would have cost us about €500 million to put it together here," he says.
In addition, it has the attraction of tax incentives for urban development, not unlike those introduced in the Republic for the same purpose in the 1990s, which lit the initial spark that led to the property boom.
They are not unlike the incentives introduced here because Gormley and his staff advised the South African parliament on the legislation.
His own background as an accountant meant he was able to get on top of the laws that operated here and provide information to the South Africans.
The three blocks the firm is developing include Mandela Rhodes Place (it includes the offices of the Mandela Foundation, which Eurocape does not own) and the old South African Reserve Bank building.
The developments are located bang in the centre of Cape Town and the deal, when it was done, was regarded as one of the most significant in the region for some time. And, as is common with these things, some people thought Howard was mad to take the risk.
But the company sold three-quarters of the 160 apartments in Mandela Rhodes Place while it was still under development, and let all the commercial units. Irish investors bought a number of the apartments. Local businesses took up the commercial units with one exception: Cafe Mao, an Irish chain that operates restaurants in Dublin, took one unit.
Closer to home, Howard Eurocape is continuing to do deals in the Republic and England.
Its biggest live project in Dublin is Fingal Business Park, a €200 million joint venture with local authority Fingal County Council.
It has another €500 million worth of developments around the capital.
In England, it bought West Riding House, the tallest building in Leeds, for €100 million last year. "We're looking at doubling the size," he says. The building is a mixed commercial and retail development.
Because of the division between Howard Holdings and Howard Eurocape, Gormley's operation has many assets in the north of England, while Coughlan is focused mainly on London.
Howard Eurocape has properties in Leeds, Newcastle and Manchester, and Gormley believes the region offers plenty of opportunities.
"Manchester is a fantastic city, and there's a good steady market throughout the area," he says.
"We are still very keen on London, but anything we'll be doing there will be done in conjunction with the Howard Holdings people."
It's clear from talking to him that Gormley is looking abroad more and more. He points out that all property markets are cyclical and says that while the Republic's boom has defied all predictions of a fall-off, some sort of correction is inevitable.
Poland is now very much on his radar. "We see it as a tremendously attractive market," he says.
"It's linked to the EU, there's rapid growth and lots of opportunities. There are very strong links to Ireland and both have similar ideals. It's very much where Ireland has been for the last 20 years, with a young, energetic workforce, and the business dynamics there are very good."
In eastern Europe, he has also looked at both the Czech Republic and Hungary, but decided against them, largely because he felt that neither had the same dynamism as Poland. He also suggests that much of the value available in the Czech Republic has been snapped up.
But he has plenty of other options in terms of possible locations and he's hoping to join forces with some international big guns in the near future.
Howard Eurocape recently signed heads of agreement with Japanese player Toyoko that will initially see them working on joint ventures in the UK.
It has lined up two other partners in Tata, an Indian operator that does €20 billion worth of business a year, and US player MMA, one of the biggest builders of social and affordable housing in the world.
"So we have partners in India, Japan and the US," he says. "They are three world-class companies - MMA, Toyoko and Tata - and we're in partnership with all three of them."
FACTFILE
Name: Frank Gormley
Position: Chairman of property developer Howard Eurocape.
Background: Born in Leitrim, his family moved to Wexford, where he was educated by the Christian Brothers in New Ross, before going on to study at University College Dublin.
He qualified as an accountant and worked in Cork before going to London in the1980s.
There, he joined forces with Corkman Greg Coughlan and took over Howard Holdings, a listed shell which became a vehicle for property deals in the UK and later the Republic.
The company has since gone on to do deals in South Africa, Poland and other locations. Its backers include Kingspan founder Brendan Murtagh.
Family: Married with three children.
Hobbies and interests: Sport of all kinds. He has a Leinster schools hurling medal, and played rugby and golf for UCD.
He is chair of marketing for the Irish Hockey Board and is incoming president of Pembroke Hockey Club.
His son plays hockey for Ireland.
Why he is in the news: He and Coughlan have agreed to split the company and Gormley is now leading a new entity called Howard Eurocape, which manages a portfolio of properties in Ireland, England and South Africa worth up to €2 billion.
