Irish builder gambles €100m on property market revival; is the recession nearly over?

IvaBigWun

http://www.independent.ie/business/irish/irish-builder-gambles-100m-on-property-market-revival-29888570.html

Irish house builder New Generation Homes has spent "over €100m" buying up a vast land bank around Dublin to build new houses in one of the biggest gambles on the property market recovery ever seen. The company is headed up by 28-year-old Arklow man Greg Kavanagh.

It is understood that New Generation Homes recently raised money from US private equity firm Starwood, with earlier backing from Pacific Investments -- the buyout firm founded by British entrepreneur Sir John Beckwith, uncle of socialite Tamara Beckwith.

The sums raised from investors are thought to be in the "tens of millions". The funding relates to specific transactions and development projects.

Property sources have also indicated that Pat McDonagh, Ireland's most successful software tycoon, is also involved.


"We'd our own money. It was a mixture of equity and investors. People were keen to invest," New Generation chief executive Mark Elliott added. "There was a good appetite for people to invest in the Irish residential property story."

"We just knew it was a sector to plough into as hard as we could. There was no competition in residential house building so we could buy up a lot very quickly and that's what we did," Kavanagh said.

In an incredibly gutsy move, New Generation sealed its first property deal at the start of 2011, just weeks after Ireland was forced to enter the Troika bailout.

Market sources have told the Sunday Independent that the builder has inked more than 50 deals to buy sites in the greater Dublin area and has plans to build "thousands" of houses. It has bought land at Knockcree in Carrickmines, Belmont in Stepaside, two sites in Knocklyon, a large site in Sutton, Westmanstown Cottages in Lucan and the Boulder site off Rochestown Avenue near Cabinteely.

"We have acquired enough sites to keep us busy for the next couple of years," Elliot added.

The company is sitting on major paper profits already on some of its land deals, as prices for sites have risen strongly over the last year with investors flooding back into the market. One site, thought to have been purchased for €13m last year, may now be worth over €30m based on current values of up to €100,000 per unit.

Is this one of the strongest signals that the recession is nearly over? Is it just the Indo doing its usual exaggeration of the Irish property market?

Or are New Generation Homes simply following the adage that "when there's blood on the streets buy property"? (while there hasnt been "blood" on Irish streets there has certainly been enough protests and a massive increase in homeless)

Either way it'll go down as either one of the most foolish Irish business decisions ever or one of the most astute. I have a feeling it'll be the latter

WilyCoyote

I've read of this fellow. He seems to have done the background etc and if I had dosh to invest, wouldn't mind putting some in his vehicle. It's got to be at the bottom and there is quite a bit of money floating around.
So I see no reason to stymie his sales.

strandroad

An interesting read about one of these estates

http://touch.boards.ie/thread/2057022087/

WilyCoyote

If the electric connection was not there ......... it would be contained in the prospectus

So this question seems to come from a time waster/tyre kicker

IvaBigWun

mhge wrote: »

An interesting read about one of these estates

http://touch.boards.ie/thread/2057022087/

Its 12 pages long, could you summarise it?

Phill Ewinn

WilyCoyote wrote: »

I've read of this fellow. He seems to have done the background etc and if I had dosh to invest, wouldn't mind putting some in his vehicle. It's got to be at the bottom and there is quite a bit of money floating around.
So I see no reason to stymie his sales.

You'd like to some what in his bottom? What kind of vehicle does he have?

feargale

Here we go again. Nothing learned from the crash. Before it's over all some can think about is creating another bubble. The state can step in to rescue broke developers, ( Nama etc. ) but couldn't dream of controlling the price of realty. No, that would be interfering with the free market. So off goes the roller-coaster again. The gamblers will justify their obscene profits on the basis that they're taking risks. But when the house of cards falls down they'll scream for help from the government, No help though for young couples who will spend their lives paying for this obscenity,

WilyCoyote

Phill Ewinn wrote: »

You'd like to some what in his bottom? What kind of vehicle does he have?

His financial vehicle .............. stash

Karl Stein

As long as we don't have to bail them out if they fail they can build a golden mono-rail for all I care.

Phill Ewinn

feargale wrote: »

Here we go again. Nothing learned from the crash. Before it's over all some can think about is creating another bubble. The state can step in to rescue broke developers, ( Nama etc. ) but couldn't dream of controlling the price of realty. No, that would be interfering with the free market. So off goes the roller-coaster again. The gamblers will justify their obscene profits on the basis that they're taking risks. But when the house of cards falls down they'll scream for help from the government, No help though for young couples who will spend their lives paying for this obscenity,

Nothing learned?

You have his debts, he has a spare €100m to piss up against the wall. And, if a "crash" happens again the government will give him another hand-out.

Seems he learned plenty.

WilyCoyote

feargale wrote: »

Here we go again. Nothing learned from the crash. Before it's over all some can think about is creating another bubble. The state can step in to rescue broke developers, ( Nama etc. ) but couldn't dream of controlling the price of realty. No, that would be interfering with the free market. So off goes the roller-coaster again. The gamblers will justify their obscene profits on the basis that they're taking risks. But when the house of cards falls down they'll scream for help from the government, No help though for young couples who will spend their lives paying for this obscenity,

Phill Ewinn wrote: »

Nothing learned?

You have his debts, he has a spare €100m to piss up against the wall. And, if a "crash" happens again the government will give him another hand-out.

Seems he learned plenty.

The capital raised is not "normal" bank lend. Private equity and such like are the backers. These people fall on their swords

Montroseee

To be honest, I'm more interested in how a 28 year old is head of a company that size and how he got to where he was + qualifications.

WilyCoyote

Montroseee wrote: »

To be honest, I'm more interested in how a 28 year old is head of a company that size and how he got to where he was + qualifications.

Have you thought about John Major? Richard Branson?

Mardy Bum

Montroseee wrote: »

To be honest, I'm more interested in how a 28 year old is head of a company that size and how he got to where he was + qualifications.

Seems he was a project manager from as early as 21 years of age according to an article about the Viper intimidating him in the herald. Obviously a talented worker.

Montroseee

WilyCoyote wrote: »

Have you thought about John Major? Richard Branson?

I have, it just stood out for me whilst reading the article as very impressive.

BMJD

You'd imagine a foreign investment lad would piss himself laughing if an Irish builder came looking for cash to build gaffs in Dublin :pac:

MythicalMadMan

Montroseee wrote: »

To be honest, I'm more interested in how a 28 year old is head of a company that size and how he got to where he was + qualifications.

Psychopath, its always a psychopath

K.Flyer

With lands prices pretty much at an all time low it could turn into a shrewd move albeit a slow cooker to sit on and wait a bit.
A lot of the NAMA properties in Dublin are rented out and are being sold off slowly but surely, some in piece meal, others have been sold in bulk.
With land prices so low and an abundance of an idle skilled labour force he could be on to something if his pricing and quality are right.
I would just hope that he provides decent facilities for the new home owners and not have people having to travell silly distances just for milk and bread.

WilyCoyote

BMJD wrote: »

You'd imagine a foreign investment lad would piss himself laughing if an Irish builder came looking for cash to build gaffs in Dublin :pac:

AFAIK there is a shortage of 3 & 4 bedroom houses. We're not talking shoeboxes here

WilyCoyote

MythicalMadMan wrote: »

Psychopath, its always a psychopath

You do mean Cycle-path?

KyussBishop

New property bubble on the way = recession over? People forgetting what caused our current recession?

These developers can not lose with overinflated property prices (which is specifically the bubble they are trying to ride), they have a sure-thing here:
It's the banks that take the risk giving people mortgages (and who then pass on that risk to the rest of the country), not the property developers - the property developers walk away with their money before the bubble even bursts (unless they time their exit badly, and get caught in the burst).

Public + Private debt in this country is still enormously high - a new property bubble is bad news for the whole country, because it means a greater unsustainable buildup of private debt to buy these houses, and then another bust and recession once the new bubble pops - leaving us in the same bad economic situation, but with even more debt (while the property speculators and financiers get to reap Ponzi-like profits from a bubble they participate in creating).

We're not going to have an economic recovery until all that (primarily private) debt is dealt with - stoking a new property boom isn't sustainable and makes that worse.

mikemac1

Property sources have also indicated that Pat McDonagh, Ireland's most successful software tycoon, is also involved.

I thought he owned Supermacs!

Dravokivich

IvaBigWun wrote: »

Its 12 pages long, could you summarise it?

Scandal.

paddydriver

WilyCoyote wrote: »

The capital raised is not "normal" bank lend. Private equity and such like are the backers. These people fall on their swords

They've got plenty invested in Irish bank bonds too... can't lose on those:P

everdead.ie

There is obviously issues getting family homes in Dublin, I just hope these are well built and not the small pokey holes that were being built in 05/06.

whiskeyman

I Property sources have also indicated that Pat McDonagh, Ireland's most successful software tycoon, is also involved.

mikemac1 wrote: »

I thought he owned Supermacs!

He's invested heavily in chips...

dathi

paddydriver wrote: »

They've got plenty invested in Irish bank bonds too... can't lose on those:P

ye you would think that but our local credit union got burned for one million euro for a bond in irbc when the government liquidated it last year. weren't the only cu either . its easy for the modern day carpet bagers to buy property/sites for every 10 million they spend you the tax payer has forked out 30 or 40 already on the same piece of real estate.

SEPT 23 1989

Vultures feeding off the dead corpse

we have reached the bottom alright

anncoates

Have no idea if the current price rises in Dublin are due to a so called cash bubble or the actual bottom of the crash but it's amusing to see so many people utterly determined to believe that property prices will continue dropping in Dublin forever.

Property prices are cyclical. That's why it's called a cycle. Everybody doesn't suddenly wise up and the process stops forever.

Daith

anncoates wrote: »

Have no idea if the current price rises in Dublin are due to a so called cash bubble or the actual bottom of the cash but it's amusing to see so many people utterly determined to believe that property prices will continue dropping in Dublin forever.

I thought it was a supply issue?

I'm more bemused at people believing that the Celtic Tiger bubble prices is what the property is actually worth.

anncoates

Daith wrote: »

I thought it was a supply issue?

I'm not an expert but it's supposed to be a case of people with money wanting a limited amount of family homes in certain parts of Dublin.

That wasn't really my point though. More that people always expect a certain point in a cycle to stay forever and it's usually because if their own interests .

Houses are never worth a 'sensible' price, only what people are prepared or pay.

Daith

anncoates wrote: »

I'm not an expert but it's supposed to be a case of people with money wanting a limited amount of family homes in Dublin.

That wasn't really my point though. More that people always expect a certain point in a cycle to stay forever and it's usually because if their own interests .

That's true for both sides though. The vested interests who want property prices to increase so they make money (sellers, Banks, NAMA, newspapers, estate agents) versus those that want property to be cheaper.

I'd personally just want property to be dictated by the market to be honest.

anncoates wrote: »

Houses are never worth a 'sensible' price, only what people are prepared or pay.

In Ireland for sure. Property can only go up in value.

Rabelais

It was the same on thepropertypin forum a few years back. Went from being a site where people discussed the bubble market to one where loony lefties living in bedsits believed they'd eventually pick up a gaff in Dublin for the price of a Fiat car.

Sleepy

Don't know about the rest but Stepaside and Sutton would both seem like fairly easy locations to develop estates of decent 3/4 bed houses and sell them at a good profit.

mickydoomsux

The recession isn't "nearly over", it's been over for quite some time.

K.Flyer

mickydoomsux wrote: »

The recession isn't "nearly over", it's been over for quite some time.

Ahh... then explain why we Still Have approx 400,000 (12.5%) of our population still signing on.

http://www.cso.ie/en/releasesandpublications/er/lr/liveregisternovember2013/#.UsqkfrtAG2I

mickydoomsux

K.Flyer wrote: »

Ahh... then explain why we Still Have approx 400,000 (12.5%) of our population still signing on.

http://www.cso.ie/en/releasesandpublications/er/lr/liveregisternovember2013/#.UsqkfrtAG2I

The rate is dropping as show in your figures. Evidence that the recession is over. It isn't something that will magically end overnight with 300k-ish unemployed people all of a sudden waking up with jobs in the morning.

Way to torpedo your own argument by not understanding what you're talking about and trotting out the tabloid headline grabbing figures that you don't know how to interpret properly.

moxin

anncoates wrote: »

Have no idea if the current price rises in Dublin are due to a so called cash bubble or the actual bottom of the crash but it's amusing to see so many people utterly determined to believe that property prices will continue dropping in Dublin forever.

Property prices are cyclical. That's why it's called a cycle. Everybody doesn't suddenly wise up and the process stops forever.

Ireland is different(yeh you heard that before )

It really is different this time, sales are being driven by cash buyers rather than mortgage lending. This new Dublin only cycle will fall when the cash buyers run out. There is even a quote in the article of one of the players saying its too expensive to invest now.

K.Flyer

mickydoomsux wrote: »

The rate is dropping as show in your figures. Evidence that the recession is over. It isn't something that will magically end overnight with 300k-ish unemployed people all of a sudden waking up with jobs in the morning.

Way to torpedo your own argument by not understanding what you're talking about and trotting out the tabloid headline grabbing figures that you don't know how to interpret properly.

Whilst there may be a slight drop in figures I do not see them as any great cause for celebration just yet.
If you were to factor out people leaving the country to get work (and those who jumped off it as a result of the new id card scheme) I don't see the drop as being anything substantial.
But your interpretation of the figures will differ from mine, so thats fine, thats life.
But one thing I do not get is that you presume I get my information from tabloid headlines. I have not bought a newspaper in years, least of all any of the "tabloid" type. They are only useful for lining cat litter trays.

Kippure

IvaBigWun wrote: »

http://www.independent.ie/business/irish/irish-builder-gambles-100m-on-property-market-revival-29888570.html



Is this one of the strongest signals that the recession is nearly over? Is it just the Indo doing its usual exaggeration of the Irish property market?

Or are New Generation Homes simply following the adage that "when there's blood on the streets buy property"? (while there hasnt been "blood" on Irish streets there has certainly been enough protests and a massive increase in homeless)

Either way it'll go down as either one of the most foolish Irish business decisions ever or one of the most astute. I have a feeling it'll be the latter

Where would one find the area of ALL land that has been bought up?????

tin79

K.Flyer wrote: »

Ahh... then explain why we Still Have approx 400,000 (12.5%) of our population still signing on.

http://www.cso.ie/en/releasesandpublications/er/lr/liveregisternovember2013/#.UsqkfrtAG2I

I suggest you look up recession and how its defined.


Its a depressed jobs market but its not a recession.


Its kinda like a car crash. The actual crash ended days ago but your neck still hurts for ages.

anncoates

moxin wrote: »

Ireland is different(yeh you heard that before )

It really is different this time, sales are being driven by cash buyers rather than mortgage lending. This new Dublin only cycle will fall when the cash buyers run out. There is even a quote in the article of one of the players saying its too expensive to invest now.

I'm sure it's mostly cash although I personally know of 3 people that have just taken mortgages.

The current state of the market isn't really my point though, more the cyclical nature of property prices no matter who is tinkering with the market at a given time.

The fact remains that people are reacting violently to any suggestion that prices might rise again because they've become addicted to a kind of crash porn (like its mirror component, boom porn) where they think prices will fall forever and the only thing stopping houses in desirable areas costing 70k (while wages magically stay the same, of course) is the damn government/NAMA/cash buyers/banks and whatever.

As for the OP, I would have thought the likes of Sutton and Cabinteely wouldn't be a bad bet for reasonably priced family homes if you had the capital. They built a new estate of houses beside mine (south west Dublin about 10 miles from city centre) recently and the first 2 phases actually seem to be selling.

Not that I care about the market, I should add. I'm not looking to buy/move.

KyussBishop

Saying property prices are cyclical doesn't mean anything - the entire economy is cyclical.

What has been pointed out, is that the rise in property prices minus any change in economic fundamentals (private debt and debt in general, is still sky high), is unsustainable and is going to lead to another boom-crash cycle; if that's allowed to take off, it's going to leave us in a worse position than we are now, with even more debts and austerity (and selloff of public assets, and transformation of our private economy more towards rent-seeking activities).

The primary important part, to see if we really are on the way to a sustainable economic recovery, is to just look at debt levels, particularly private debt - until that is resolved, nothing is going to improve fast:
http://www.telegraph.co.uk/finance/financialcrisis/10548104/IMF-paper-warns-of-savings-tax-and-mass-write-offs-as-Wests-debt-hits-200-year-high.html

smallerthanyou

Yes it means the recession is over. Low prices were the cause of the recession and high house prices mean we're out of it. Definitely clearest signal its over. Consumer sentiment and job creation and all that tosh means nothing compared to house prices. They are key. The more we spend on houses the better for everyone....

keeponhurling

On the surface it seems like good news, but how can we be 100% sure that we won't have to bail out "US private equity firm Starwood" if it is a bad investment?

KyussBishop

Judging by this, we have the second highest level of Public+Private debt to GDP in the entire world:
https://en.wikipedia.org/wiki/List_of_countries_by_external_debt

Here is a more conservative estimate from two years ago:
http://www.davidmcwilliams.ie/2012/01/25/private-debt-so-enormous-that-default-is-only-option

People think more mortgages i.e. more debt is going to be good for us, when we already are one of the most indebted nations (as a percentage of GDP) on the planet? We aren't even going to be able to pay off our existing debts, nevermind have a new sustainable property boom.

I wonder how many of these same people promoting this, think expanding public debt is unsustainable - well take a look at how big private debt is, in relation to our public debt.

mad muffin

https://www.youtube.com/watch?v=6bOy3RNyWME

ringadingding

I know the feller from school, head screwed on, decent network around him.
Made money in the boom, and had enough savvy to not waste or show it off, now has money to buy.

He was raised on the building sites and working his ass off whilst I was out doing hash yoghurts and being a delinquent.

I wish him the best of luck

Montroseee

ringadingding wrote: »

I know the feller from school, head screwed on, decent network around him.
Made money in the boom, and had enough savvy to not waste or show it off, now has money to buy.

He was raised on the building sites and working his ass off whilst I was out doing hash yoghurts and being a delinquent.

I wish him the best of luck

The boom was 6/7 years ago at this stage though, so he would have been late teens/early twenties. Did he make good money at such a young age?

Chazz Michael Michaels

The fact that prices are rising sharply in Dublin is partly due to increased demand and limited supply. It can be argued that the supply is needed. This isn't a housing estate in Leitrim, therefore parallels with the mistakes of the Celtic tiger may not be based on sound thinking.

Captain Chaos

You could pull in €600 a week after tax at 19 on building sites 7 years ago no problem.