O’flynn: Pri­vate house­builders will build homes to help beat cri­sis, not plcs

Devel­oper says Cairn is likely to be only listed builder, writes Ron­ald Quin­lan

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

DEVEL­OPER Michael O’flynn has said it is highly un­likely that Ire­land will see the emer­gence of another stock-mar­ket listed builder such as Cairn Homes to help ad­dress the coun­try’s deep­en­ing hous­ing cri­sis.

While O’flynn told the Sun­day In­de­pen­dent he wel­comed Cairn’s ar­rival to the mar­ket, he said pri­vate house­builders had al­ways “been the bedrock of pri­vate hous­ing sup­ply” in Ire­land, and that this would not change.

“Ob­vi­ously the ar­rival of a PLC house­builder in Ire­land is wel­come, but the prospect of more such builders ar­riv­ing is re­mote,” he said, adding that: “Any idea that con­trac­tors can team up with house­builders to pro­duce hous­ing com­pletely mis­un­der­stands the busi­ness of the pri­vate house­build­ing devel­oper”.

O’flynn, whose com­pa­nies have built thousands of houses across Ire­land over the past four decades, would not be drawn on com­ments made by Cairn Homes CEO Michael Stan­ley at Cairn’s AGM last Wed­nes­day. Re­fer­ring to the hous­ing cri­sis, Stan­ley said it was mainly down to the con­tin­ued lack of large stock mar­ket-listed de­vel­op­ers.

“We can look at prob­lems and we can say it’s land, we can say it’s build costs. But the main prob­lem in my view [is that] we don’t have enough cap­i­talised — eq­uity-led, not debt-led — scaled house­builders,” he said.

Stan­ley’s re­marks came af­ter Cairn raised €51.9m from a share sale, giv­ing it the flex­i­bil­ity to con­tinue with its ac­qui­si­tion of de­vel­op­ment land. The com­pany has now raised a to­tal of €722.5m since its ini­tial pub­lic of­fer­ing in 2015. Stan­ley told those at the AGM of the com­pany’s plans to raise another €50m by the end of 2018 through the sale of sites it con­sid­ers to be ‘non­core’, which typ­i­cally have plan­ning for 20 to 30 homes. Even if those dis­pos­als are com­bined with the up­graded tar­get of 375 to 400 home sales Cairn’s man­age­ment aim to de­liver by the end of this year, it will be some time be­fore the com­pany puts a dent in its land bank, which has the ca­pac­ity for 12,100 homes. While Cairn in­curred an av­er­age cost of €53,000 per site, the price paid in the case of 6,126 sites lo­cated in Clon­bur­ris, New­cas­tle and Adamstown in west Dublin was far lower, com­ing in at an av­er­age of just €19,000 — a mere frac­tion of the amount equiv­a­lent sites in those ar­eas are worth.

The deal saw Cairn se­cure a fur­ther 24 sites in Dublin and the sur­round­ing com­muter coun­ties of Wick­low, Kil­dare and Meath, which it says will form the ‘core’ of its plans to de­liver a to­tal of 11,229 homes into the fu­ture. Cairn pur­chased the cut-price lands as part of its over­all €378m pur­chase of Ul­ster Bank’s €1.5bn par value ‘Project Clear’ port­fo­lio.

But while Cairn Homes may have a land bank to meet a sig­nif­i­cant por­tion of the de­mand for hous­ing in the cap­i­tal and its en­vi­rons, O’flynn warned that house prices are head­ing for a “price bub­ble” due to the on­go­ing short­age of sup­ply.

He said: “Un­for­tu­nately we’ve ended up in this po­si­tion be­cause no­body ap­pre­ci­ated the skills of de­vel­op­ers or the busi­ness of pri­vate house­build­ing when Nama took over the in­dus­try. Build­ing houses is a busi­ness. It’s not a col­lec­tion of as­sets.”

O’flynn wel­comed the fact, how­ever, that skilled de­vel­op­ers whose loans had been trans­ferred to Nama were now in a po­si­tion to at­tract out­side cap­i­tal and con­trib­ute to the re­cov­ery in the house­build­ing sec­tor. “It’s help­ful for a re­cov­er­ing house­build­ing in­dus­try but un­for­tu­nately we’re com­ing from a ‘mi­nus’ po­si­tion due to that be­ing to­tally and ut­terly mis­un­der­stood,” he said.

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