€242m for our richest landlords
State nest egg set up to aid small builders was loaned to international ‘cuckoo’ funds
A GOVERNMENT quango set up to help small builders provide family homes has used taxpayer funds to finance hundreds of apartments being built for a controversial ‘cuckoo’ fund.
The construction of 211 apartments at the Windmill development in Clonsilla was funded entirely by loans from Home Building Finance Ireland (HBFI).
Due to be completed in the coming months, the development of three multistorey apartment blocks is being built by Kimpton Vale Ltd.
However, the entire scheme has been pre-sold to Urbeo – the cuckoo fund which first came to national prominence last year with its purchase of the Carton Grove estate in Maynooth.
An Irish Mail on Sunday investigation has found that finance for the Urbeo
‘Development funded by taxpayers presold to Urbeo’
homes was provided by the taxpayer via HBFI. According to contract and loan documents, the HBFI finance was provided on the basis of guarantees from Urbeo that it had agreed to purchase the Windmill project before construction began. A spokesperson for Urbeo confirmed: ‘We entered into a forward purchase contract with Kimpton Vale which allowed them to secure funding from HBFI to build out the development.’
Once completed the one and two bed units will be rented by Urbeo.
But Urbeo declined to comment on what the rental prices may be.
‘We’re not due to receive these units until this side of Christmas or next year,’ a spokesperson said.
‘Until we get closer to the time of completion that’s obviously when we go out and advertise to the market about rental levels. We haven’t opined on the rental levels for Windmill at the moment.’
The likelihood though - based on figures provided to the Public Accounts Committee (PAC) by HBFI - is that monthly rents average around €2,100 for a two-bed and €1,800 for a one room apartment.
One of the largest institutional landlords in Ireland, Urbeo controls approximately 2,000 housing units worth close to €2bn. It is led by New York-based founding partner and executive chairman, Frank Kenny, who is a former non-executive director of Hibernia REIT.
The Urbeo-owned development in Clonsilla is one of five projects that shared HBFI funding worth €274m. These loans were provided via a contentious and temporary €300m HBFI fund, known as the Momentum Fund. With Government restrictions during Covid, this fund deviated from the original HBFI purpose of helping small builders to construct homes.
Explaining the rational behind the establishment of the HBFI in 2018, then Minister of State at the Department of Finance, Michael D’Arcy, told the Dáil the aim was to help small builders in rural areas.
‘The problem of a shortage of access to supply of appropriate finance has been particularly acute for small development projects and those located outside the major urban areas,’ he said.
‘A unique feature of HBFI will be its ability to fund smaller developments or those outside the major urban centres. These projects are currently underserved by the market where there is a clear preference for larger sites and those within the greater Dublin area.’
According to its last annual report, HBFI’s 31 staff members, who are all seconded from the National Treasury Management Agency (NTMA), cost the taxpayer €3.5m last year – an average of €113,000 each.
CEO Dara Deering – a former EBS and KBC banker – took home a pay package worth €314,000. In contrast, the current salary of the Taoiseach is
‘HBFI boss on €314k, €100k more than the Taoiseach’
€217,000 – almost €100,000 less.
Five years on from its inception, HBFI loans have resulted in a 715 homes being completed and sold with a further 1,783 contracted for sale or sale agreed.
Funding for more than 5,000 further homes in 20 counties has also been agreed. But the role the new quango has played in funding entire developments for cuckoo funds and institutional investors will surprise many.
Earlier this year HBFI told the Public Accounts Committee that some €242 million of the €274 million it lent under its Momentum Fund had gone to such large-scale private concerns. But when asked by the MoS this week to identify the five projects funded by the Momentum Fund, HBFI said the information was confidential.
‘HBFI is subject to similar legal obligations as other lenders, such as banks and credit units, that do not allow them to disclose confidential information relating to borrowers,’ a spokesperson said.
Yet details of the contracts and loan documents for the Urbeo deal – and other HBFI loans – are publicly-available in the Company Registrations Office.
Meanwhile, another recipient of Momentum Fund finance from the HBFI is entirely public about the matter.
‘The Marlet Group is pleased to have agreed a financing facility with Home Building Finance Ireland (HBFI) for €74m for a forthcoming residential development in Dundrum, which will deliver 253 homes,’ the group announced in October 2020.
The Marlet development is the Green Acre Grange project in Dundrum, which is advertising ‘amenities such as a concierge, creche, gym and cinema room, as well as landscaped areas and rooftop terraces’.
At the time of the HBFI loan it was anticipated that the development in its entirety would be bought by a cuckoo fund as part of a wider portfolio being put together by Marlet.
Institutional landlords and funds such as Kennedy Wilson and Blackstone were reported to be vying to snap up the hundreds of homes involved. Kennedy Wilson, an American real estate investor, is already one of Ireland’s biggest private landlords, while Blackstone is the world’s biggest equity firm.
However, since then Marlet has changed tack and intends to rent the Green Acre Grange units itself.
When contacted by the MoS, the firm declined to speak on the record at all and refused to say what rents it will charge. But if estimates provided to the PAC by HBFI are accurate, the monthly rent for a three-bed home is likely to be in excess of €3,000.
When she appeared before the PAC earlier this year, HBFI CEO Dara Deering defended her agency’s decision to launch the Momentum Fund. ‘We saw real challenges with apartment delivery and the financing of apartment delivery schemes so we brought out a product specifically for that,’ she said.
Ms Deering also confirmed the developers with homes pre-sold to cuckoo funds to which HBFI advanced finance were not required to provide any evidence of an inability to secure funding elsewhere.
This admission drew stinging criticism from PAC members.
‘These big developers, who have already got forward purchase agreements with the investment or cuckoo funds, are capable of arranging funding themselves and capable of formulating a business plan and going to the banks to get that because, let us say, they are in a far more comfortable position than a small or medium-sized developer,’ said Sinn Féin’s Imelda Munster
‘In giving that money over, it seems to me the equivalent of the local enterprise office helping out Pfizer. On top of that, there are not going to be any owner-occupier homes out of it, and it is just going to be apartments sold on to cuckoo funds so they can exploit the out-ofcontrol rental market here.’
A spokesperson for the Department of Finance confirmed the decision to approve the Momentum Fund was sanctioned at ministerial level. They told the MoS: ‘In May 2020, following the outbreak of Covid-19, the Minister for Finance approved, on a temporary basis, a new lending facility to allow HBFI to provide finance for larger prime residential projects that were experiencing difficulties in accessing financing through the introduction of a new prime lending facility, the Momentum Fund. This “step-in” fund was set up specifically to help house builders commence large housing developments in prime locations in cases where funding may not have been available.’
The spokesperson added that the statutory mandate of HBFI ‘requires it to increase the supply of new homes by providing finance to house builders on commercial terms identifying and addressing existing or emerging capital gaps across the housing market.
‘A substantial increase in the supply of new homes is the only route to solving Ireland’s housing crisis and HBFI is making an important contribution to increasing the supply of housing in the State.’