They may be perceived as ego-driven, predatory and canny, but developers get rich by taking risks and diversifying, writes Frank McDonald, Environment Editor
Property developers are not popular - it goes with the territory. In terms of social appreciation, they're right down there with estate agents, lawyers and recruitment consultants. They are perceived as predatory, profit-driven, ruthless and prepared to walk over anyone, or anything, that gets in their way. This perception is coloured by the unscrupulous actions of a few in bribing councillors to rezone land that was never intended for development - with results that we are still living with today. But mostly it's prompted by fear of change being wrought by unseen forces with seemingly unlimited resources.
A few months ago, a friend was coming into town in a taxi. Passing over Ringsend Road bridge, his driver pointed to the towering concrete core of Alto Vetro, on the edge of Grand Canal Dock. "D'ye see that? There was only a two-storey house there before. It just goes to show that in this town they'd build on your big toe if you let them."
People think it's easy to be a developer. You buy a site, hire architects to design a scheme for it, get planning permission in the bag and then go ahead with construction. But it isn't so simple, most of the time. There are huge risk factors, mostly to do with the money at stake, but also site conditions, public opposition and the state of the market. "It's not for the faint-hearted," one experienced adviser said. "The planning process is more fraught and high-risk than ever because of Nimby-ism and local councillors who only have their eyes on the next election. Money is cheaper, but it's still expensive. It's a high-risk, high-reward business. If it was low-risk, everyone would be doing it."
BUT EVEN DEVELOPERS can lose the run of themselves. That's what happened to the late Patrick Gallagher in 1982, just before the property empire he built collapsed like a house of cards. And with the market more uncertain these days, the possibility of a similarly spectacular fall from dizzying heights cannot be ruled out.
It's nearly always the case that property development is financed by debt rather than equity; very few developers would dream of placing their own nest-eggs at risk. And the banks who put up the money behave just like the market itself - "they over-lend when it's up and close when it's down", as one leading developer said.
Seán Dunne has about €600 million racked up on the purchase of three major sites in Ballsbridge - Jurys (now closed) and the Berkeley Court hotels, and the AIB Bankcentre, including its landscaped forecourt. The then record prices he agreed to pay in 2005 were gambles, in the classic sense, with no guarantee that he would win.
Dunne must have formed the impression that Dublin City Council's planners would go along with the high-rise, high-density scheme he has in mind for the combined hotel sites. Certainly, he spared no expense in commissioning big-name architects to flesh out his vision of transforming Ballsbridge into the "new Knightsbridge" of Dublin. However, as another developer acidly observed, "in the real Knightsbridge, you don't have 37-storey towers". And in the case of Ballsbridge, a draft local area plan that was meant to provide a more liberal framework for development was thrown out by the city council last June, and there is no indication when, or if, it will be revived.
But the high prices paid for land in the area by Dunne as well as Bernard McNamara, Ray Grehan of Glenkerrin Homes and others assumed a massive increase in density - and it came as something of a shock to them when the councillors voted down the plan. Now, all they can do is try their luck with planning applications and see if these will "fly".
Grehan, who bought the UCD veterinary college site for €171.5 million, was the first to try his luck with a scheme that would include a 15- storey apartment block ("Number 1 Ballsbridge"), flanked by eight and nine-storey office blocks around a new square. But this was trumped by Dunne's more audacious plans.
Although his Danish architects, Henning Larsen, would never get away with it in Copenhagen, what they have proposed for this critical Dublin site includes an apartment tower 12 metres higher than the Spire and seven other buildings ranging in height from 11 to 18 storeys. What Dunne has done is to throw down the gauntlet to city planners.
As political lobbyist Frank Dunlop declared after losing a crucial rezoning vote many years ago, what you need in the property business are "a spine of steel and balls of iron". By definition, if you're to be a tycoon, you also need to be driven. "You can't have 'work/life balance'. There's a price to be paid and these guys pay it," as one who knows them well said.
It's a world of meetings and conference calls, of walking sites and taking flights to discover new opportunities - in your own helicopter, if you have one. There were only 34 helicopters registered here in 1995. But by last June, the number had risen to 146, and some of them are in the hands of developers such as McNamara and Seán Mulryan.
Mulryan, who runs Ballymore Properties, often flies to London in his executive chopper to inspect progress on his developments, including the Pan Peninsula towers now under construction near Canary Wharf, or to clinch deals to buy yet more land to add to his huge portfolio. And for this former stonemason, God is in the details.
Most developers have made so much money during the boom years that they barely know what to do with it all. With cash sloshing around in their bank accounts, they've had to find new outlets for investment, often overseas - in Britain, the US, central Europe, Scandinavia, Russia and China, to name some of the places where they've popped up. Ireland is simply too small to absorb billions of euro in private funds. The flight of capital was highlighted by an Irish swoop on London in 2004, when a consortium headed by financier Derek Quinlan's Quinlan Private snapped up the Savoy Hotel group for €1.13 billion and, though the Savoy itself was later sold on, the Irish flag still flies proudly over Claridge's.
Last April, Garrett Kelleher of Shelbourne Developments secured planning permission to build the world's tallest residential tower in Chicago, looking out over Lake Michigan. Designed by Spanish architect-engineer Santiago Calatrava, the Chicago Spire - standing 600 metres tall - would be five times the height of the Dublin Spire, with 1,200 apartments on its 150 floors.
The best developers are now commissioning top architects. Take the tenders to build the U2 Tower in Dublin's south docklands: Ballymore Properties hired Norman Foster; Treasury Holdings engaged Baghdad-born diva Zaha Hadid while the Riverside group got Rafael Viñoly, Uruguayan designer of the proposed "Walkie-Talkie" tower in London. Treasury Holdings, which is run by Richard Barrett and Johnny Ronan, has lined up Viñoly to draw up a master plan for the 38-acre site of Battersea power station in south London, which they bought last November for £400 million sterling (€573 million). They've also got a growing stake in China, where Treasury's flagship project is a €1.2 billion "eco-city" on Chongming Island, north of Shanghai.
Barrett first went there in 2002 and was amazed by what he saw. The 88-storey Jin Mao Tower, China's tallest building, was already finished and there were dozens of other skyscrapers being built in Shanghai. Like a latter-day Marco Polo, he thought: "How could all of this be happening and we don't know about it?"
He now has a home in Xintiandi, a trendy part of town, and offices in the swanky Treasury Building on Huashan Road. This summer, Treasury raised €383 million for its publicly-quoted vehicle, China Real Estate Opportunities, with Barrett predicting that it would become "the largest western real estate company in China" by the end of next year.
Mulryan is busy with a massive development on the banks of the Danube in Bratislava and with other significant schemes in Budapest and Prague, while Menolly Homes, run by Seamus Ross, is about to redevelop a disused power station in Warsaw, and the Cosgrave brothers have been buying up commercial property in Britain. Paddy McKillen, who started out with DC Exhausts before diversifying into Beshoff's fish-and-chip shops and Champion Sports, was among the first to discover Vietnam, where he owns several investment properties. Developer of the Jervis Centre, he is also involved with U2's Bono and The Edge in plans to redevelop the Clarence Hotel.
In general, property developers are reluctant to break new ground. "Nobody wants to be the pioneer in the West who gets shot by the Indians. They want to be second - that's the pole position," one leading architect observed. "This is fed by risk-averse consultants, the oracles who've been wrong for so long, but it keeps the banks happy."
WHAT DRIVES THEM? In some cases, it's pure, unadulterated greed. "They're no different to clothing manufacturers," according to a leading consultant who knows the business. "Very often, they'll try to dress up a scheme as 'world class' or a 'great contribution to the city', but in fact they just want to sell homes, offices or shops and make a profit.
"You could divide them into two categories - the ones who came from nothing have a more obvious financial push in their activities, whereas the ones who came from a more privileged background would have different impulses. They'd see something others mightn't see, and go for it even if it was less commercial than other options, such as offices."
Some do it just because they can, even for the vanity of it. "Sometimes it's ego," one developer admits. "People do build trophy buildings, going round saying 'I own such-and-such', but it's not so much about individual buildings, more often it's about what you intend to do with a site - the kind of mix you might get, and what value it'll have."
But few are consciously building monuments to themselves. Most developers recognise that buildings are ephemeral - what counts in the end is the value of real estate. Several Dublin office blocks built in the 1980s have been demolished to make way for better ones, such as the building on Tara Street in which The Irish Times is now housed.
Who else but developers build us what we need - housing, workplaces, leisure and shopping centres? Some of them, such as Sutton-based Gerry Gannon, have become major wholesalers of land, while dabbling in development. But the notion they "hoard" land, at the risk of missing out on the boom, is probably misplaced.
Deals are everything. The art of making them, and getting what you want at a good price, gives developers an adrenalin rush. And though many of them are on friendly terms with each other, they are fiercely competitive - particularly when properties come up for sale by tender. How they figure out what price to bid is a fine art in itself.
When the Bank of Ireland sold its Baggot Street headquarters last year for €200 million, the successful bidders were Quinlan Private along with Paddy Shovlin's Landmark Developments and two of his partners, who had made a fortune redeveloping part of the Sandyford Industrial Estate. They beat off competition from McNamara, Kelleher, Green Property and Treasury Holdings.
There's also a pecking order. A developer can build thousands of homes, but will win acceptance among his peers only when he goes commercial - building office blocks or shopping centres. "It's about status," said one. "Having a varied portfolio also helps to spread the overheads and you get more respect from the banks." For example, after years of producing high-quality housing schemes such as Mount St Anne's in Milltown, Michael Cotter's Park Developments diversified into commercial property with Fashion City in Ballymount, a retail warehousing park beside the M50 in Carrickmines - sold for €100 million early last year - and a shopping centre in Leopardstown. Castlethorn Construction, run by Joe O'Reilly, also established a first-class reputation for its housing before O'Reilly turned his attention to major commercial schemes such as Dundrum shopping centre, a new retail development on the former Eircom site in South King Street and the mid-2005 purchase (for €125 million) of 50 per cent of the Ilac centre which runs between Henry Street and Parnell Street. Last year, Castlethorn bought the Pavilions shopping centre in Swords for a whopping €575 million, with plans to extend it over the site of Ray Burke's infamous house, Briargate. Even more ambitious is O'Reilly's retail-based scheme for the Carlton site in O'Connell Street, which will include two new streets linking it with Moore Street and Henry Street.
Cash-rich Liam Carroll, who has built more apartments in Dublin than any other developer - his best-known vehicle, Zoe Developments, became synonymous with shoebox flats - is hitting the headlines these days as a fearsome corporate raider, building up major stakes in companies such as Greencore and Irish Continental Group.
THERE ARE LOTS of others playing the property game, such as David Daly of Albany Homes, Michael Whelan of Maplewood Homes and Joe Moran of Manor Park Homebuilders as well as long-established players such as McInerney Holdings, the Abbey Group, Bovale Developments (run by Mick and Tom Bailey, of planning tribunal fame) and John Byrne, who is still at it in his 80s. It would be impossible to profile them all. So we've selected six developers (see panel, left) based on their track records, the scale of their operations and the wealth they have accumulated.