Building company denies retail and property sell-off signals downturn is biting. Barry O'Halloranreports
BUILDER AND developer Bernard McNamara has been the subject of a lot of unwelcome speculation recently. Over the past few years, he's been one of the most prolific investors in the country, amassing a portfolio that includes everything from a sportswear chain to industrial land (see panel).
Now that the economy and property market have turned, observers are pointing out that he's got a bigger exposure than most, and must be feeling the pinch.
This week's news that his building business, Michael McNamara Co, is not going ahead with a series of public-private partnership deals with Dublin City Council was taken as the latest indication that he's retrenching.
The projects were meant to regenerate a number of inner-city Dublin areas, and would have seen 1,800 new homes replace ageing flat blocks. The builders, McNamara and Castlethorn, were to fund their end of the deal by keeping about 800 units and selling them. The council was to use the rest for social and affordable housing.
The received wisdom was that, with property prices 20 per cent down since the beginning of the year, and still heading south according to some sources, the private operators could not have made money.
However, McNamara itself says that it did not, in fact, pull out of the projects. Instead, the company says Dublin City Council told it that, because the process had not concluded, the local authority wanted to go a different route of procurement.
"Our letter in response to their press release did point out that these projects had become unviable because of increased sizes required by new regulations and also the energy requirements which were not required when the bids were submitted, as well as the difficult housing market," the company said.
A letter from McNamara himself to assistant city manager Ciarán McNamara (no relation) states planning was only granted for one project, Infirmary Road.
There was no project agreement signed in relation to St Michael's Estate and Dominick Street. In the case of O'Devaney Gardens, it says that McNamara and Castlethorn signed a project agreement with the local authority, but new rules governing apartment size, and energy guidelines, meant they had to revise their planning application for the scheme.
McNamara also has figures showing that the new rules would have increased the sizes of the apartments by between 22 per cent and 30 per cent. This means that the companies would have to build fewer units, and thus have fewer to sell at the end of the day.
In addition, Infirmary Road got planning permission for 162 homes, against the 225 originally proposed. Dublin City Council says there is a remedy built into contracts to compensate private operators in cases where the planning process reduces the number of homes in a public-private scheme.
McNamara also says there are four similar public-private partnership schemes, involving a total of 3,000 new homes, that could potentially run into the same problems for the same reasons, and argues it's time that their status was also questioned.
The company says the two biggest schemes, consisting of 2,000 units, were tendered for in 2004 and 2006, but they have not gone ahead. No one from Dublin City Council was available to comment on these specific projects yesterday. However, the council says that a scheme in Inchicore, being built by Bennett Construction, which is covered by the new rules, is going ahead.
The Dublin City Council deals are not the only reason that McNamara has been in the news. He recently sold his 14.5 per cent holding in grocery chain Superquinn, which he and a group of other investors bought under the banner of Select Retail in 2005 for €450 million.
McNamara also directly owns 9.8 per cent of the Champion Sports chain, bought by the PCP One consortium in 2006. There's some speculation he is going to sell this, although neither he nor his company have indicated one way or the other. "Something like Superquinn or Champion Sports is a trading business, so they could be easier to sell than property at the moment," one observer says.
Once again, the Superquinn sale was interpreted as a sign that he was drawing in his horns. "Not so long ago, he seemed to be involved in almost every deal you heard about," one source says. "And they all involved high levels of borrowing and little equity."
The consequence, they say, is a high interest bill. Some of the estimates say that it runs into seven figures a month. And it would have increased by around 0.6 of a percentage point since August, as commercial loans are tied to Euribor (wholesale) rates, which have gone up over the last nine months. However, property deals are generally structured to ensure that the risks and costs associated with them are ringfenced.
McNamara has put three properties in Dublin on the market. Two of them are the adjoining Richard Alan and Zerep shops on Grafton Street, which are valued at a total of €42 million. The other is the Ormond Hotel on the quays, which has a €15 million price tag. He owns these through special purpose companies in which he is the main shareholder. The company says these premises are for sale, but not because it needs the cash.
"Grafton Street was acquired as a swap for another property, which did not proceed and is now surplus to requirements because of this. Ormond Hotel was acquired to do a deal with a hotel group who did not go ahead."
Asked if the sales are a sign that his empire is overstretched, or in trouble, the company bluntly says no. "We have always been buying and selling properties and sites every year for the past seven or eight years, as part of our ongoing strategy." It adds that the circumstances in each case determine what it is going to do.
Overall, these amount to a very small part of the McNamara portfolio. It has just finished a €450 million development at Elm Park in Blackrock, Dublin, in which the group has a direct ownership interest. Similarly, it has stakes in the Webworks Offices and Coach Station in Galway and Longford Shopping Centre.
The building company itself has a turnover of over €600 million a year. Its main business is contracting, which means it works for other clients, including the State and various public bodies.
It is building the new prison at Thornton Hall in Co Dublin and it says that, like other big players in its business, it intends to bid for big public projects under the National Development Plan and Transport 21 as they come up.
McNamara's portfolio: some of his interests
Hotels:
- Shelbourne Hotel, Dublin
- Burlington Hotel, Dublin
- Conrad Hotel, Dublin
- Tara Towers Hotel, Dublin
- Parknasilla Hotel, Kerry
- Radisson Hotel, Galway
- Kilkenny Ormond Hotel
- Mercer Hotel, Dublin
- Ormond Hotel, Dublin
- Site of Ballybunion Beach Hotel, Kerry
London:
- 1 Park Place, Canary Wharf, London
- Finsbury Dials (JP Morgan), London
- Great Minster House (Department of Transport), Victoria, London
- Kinghtsbridge retail portfolio (with Quinlan Private)
Property:
- Carrisbrook House and other sites on - Pembroke Road, Dublin
- Allianz Building, Burlington Road
- Retail units on:
- Chatham Street, Dublin
- Charlemont Place, Dublin
- Castle Market, Dublin
Development Land:
- Irish Glass Bottle site, Ringsend, Dublin
- Meakstown
- Finglas
- Navan town centre
Industrial land:
- Hundreds of acres in Dublin at Ballycoolin, Blanchardstown near Dublin Airport
Developments:
- Former Sisters of Charity site at Elm Park, Merrion Road, Dublin (mixed)
- Harcourt Square, Dublin (offices)
- Bishop's Square, Kevin Street, Dublin (offices)
- Barrow Street, Dublin (mixed)
- Infirmary Road, Dublin (residential)
Others:
- Champion Sports
- Bank of Ireland branches at Merrion Row/Stephen's Green, Upper Leeson Street and Arran Quay, Dublin
- Ballinascorney Golf Club, Rathfarnham, Dublin
- Hibernia College
Involved as a contractor:
- Co-located private hospital at St James's Hospital, Dublin 8
- Demolition of Lansdowne Road,
Dublin:
- Thornton Hall prison, north Co Dublin
- Ennis County Council office, Co Clare
