The first Ir­ish house­builder to float in two years sees lit­tle chance of Gov­ern­ment in­ter­ven­tion

It ap­pears that the first Ir­ish house­builder to float in two years sees lit­tle chance of Gov­ern­ment in­ter­ven­tion

The Irish Times - - Front Page - John McManus

Ei­ther John Mulc­ahy and his col­leagues are liv­ing in some sort of bub­ble, or they have been around long enough to know how pol­i­tics in Ire­land works

As­tock­mar­ket prospec­tus is a very usual doc­u­ment. It is es­sen­tially the sales brochure for a com­pany look­ing to sell its shares to the public and list on the stock­mar­ket. It con­tains a lot of information about the com­pany’s per­for­mance and the in­dus­try it op­er­ates in. It is also sub­jected to reg­u­la­tory scru­tiny and it is pored over by lawyers.

One of the things that com­pa­nies are re­quired to do by law in their prospec­tus is to set out the po­ten­tial risks – in so far as they can rea­son­ably fore­see them – fac­ing the com­pany and, by ex­ten­sion, any in­vestors thinking of buy­ing shares.

Man­age­ment have to put a great deal of thought into this, as they could be sued if they don’t dis­close all the po­ten­tial risks they are aware of, and a belt and braces ap­proach is gen­er­ally best.

Years ago, when Ryanair floated on the mar­ket, the risks fac­tors set out by Michael O’Leary and his col­leagues in­cluded the prospect of the air­line’s work­force get­ting or­gan­ised. It has taken a long time for that par­tic­u­lar chicken to come home to roost, but it looks like it may fi­nally have done so.

This week a com­pany called Glen­veagh Prop­er­ties joined the stock mar­ket with a val­u­a­tion of ¤700 mil­lion. It is the first Ir­ish house­builder to float in two years, and has been cre­ated through the com­bi­na­tion of Ir­ish as­sets of a US pri­vate eq­uity firm, Oak­tree Cap­i­tal, and Maynooth-based builder Bridgedale. It is run by Justin Bickle, an ex­ec­u­tive at Oak­tree who was in charge of the com­pany’s Ir­ish real-es­tate pur­chases fol­low­ing the crash. He is set to step down from the US firm at the end of the month. The ex­ec­u­tive chairman is John Mulc­ahy, a for­mer se­nior ex­ec­u­tive with Nama and Jones Lang LaSalle in Ire­land, while its chief op­er­at­ing of­fi­cer is Stephen Garvey, owner of Bridgedale.

As part of the flota­tion process the three men – along with their ad­vis­ers – would have had to set out the risks fac­ing Glen­veagh and, by ex­ten­sion, the Ir­ish prop­erty mar­ket. It’s as close to look­ing in­side the belly of the beast as the av­er­age punter is ever go­ing to get.


There are 34 sep­a­rate risks iden­ti­fied and they run to some 20 pages, which is not it­self that un­usual. Many of them are com­mon to any listed com­pany and in­clude fac­tors such as data breaches, man-made dis­as­ters and be­ing sued if its prod­ucts are not up to scratch.

Glen­veagh does, how­ever, have some in­ter­est­ing things to say about the Ir­ish hous­ing mar­ket, the main one be­ing that it is and will con­tinue to be highly cycli­cal. To a cer­tain ex­tent this is just stat­ing the ob­vi­ous and it would be over­stat­ing things to claim they are pre­dict­ing that an­other crash is in­evitable.

But it does run through a long list of things that could push down house prices, from “neg­a­tive changes in con­sumer con­fi­dence and in­come” to “geopo­lit­i­cal and eco­nomic un­cer­tainty, in­clud­ing Brexit”. It also lists things like the avail­abil­ity of mort­gages, un­em­ploy­ment and low pop­u­la­tion growth.

One risk that sticks out with re­gard to prices is “changes in gov­ern­ment reg­u­la­tion or pol­icy”. But be­fore you get your hopes up that Glen­veagh thinks there is a real chance the Gov­ern­ment might ac­tu­ally in­ter­vene in the mar­ket in a sig­nif­i­cant way you have to read on and see that what it is really talk­ing about is “plan­ning and en­vi­ron­men­tal reg­u­la­tions and in­creases in tax rates (in­clud­ing VAT and stamp duty)”.

Sim­i­larly, a bit later on in the doc­u­ment, it warns that “the Ir­ish gov­ern­ment may ter­mi­nate or change the ex­tent of its sup­port of the house­build­ing sec­tor and first-time buy­ers.” But again what they seem to be con­cerned about is the help-to-buy scheme for first-time buy­ers, who are a big tar­get mar­ket for Glen­veagh.

Po­lit­i­cal risk

In fact, what is strik­ing about the risk fac­tors listed in the Glen­veagh prospec­tus is that it makes no ref­er­ence at all to what you might call po­lit­i­cal risk. It doesn’t seem to see any risk that the grow­ing public dis­con­tent about the short­age of af­ford­able hous­ing will ac­tu­ally re­sult in any sort of sig­nif­i­cant Gov­ern­ment ac­tion. Cer­tainly not ac­tion on a scale big enough to af­fect prices to the ex­tent that they should be specif­i­cally warn­ing po­ten­tial in­vestors.

Put an­other way, Glen­veagh doesn’t seem too con­cerned that the State will start build­ing houses on a scale that ma­te­ri­ally af­fects the mar­ket and pushes down prices over­all. This is de­spite it be­ing an avowed pol­icy of every po­lit­i­cal party. Like­wise, the other poli­cies be­ing touted – such as a truly puni­tive va­cant sites tax – is not shot through with loop­holes. Nei­ther is there any men­tion of a change in the law to al­low the Gov­ern­ment to com­pul­so­rily pur­chase build­ing land at a fair price.

Glen­veagh doesn’t seem overly con­cerned ei­ther that the fail­ure of the sys­tem to pro­vide for this most ba­sic of hu­man needs is go­ing to man­i­fest it­self in sup­port for more po­lit­i­cal al­ter­na­tives who might just up­set the ap­ple cart.

There are two pos­si­ble ex­pla­na­tions. One is that John Mulc­ahy and his col­leagues are com­pla­cent and liv­ing in some sort of bub­ble. The other is that they have been around long enough to know how pol­i­tics in Ire­land works and and where the nexus of power really lies.

They know that, ab­sent a very un­likely rev­o­lu­tion, hous­ing pol­icy will amount to lit­tle more than tin­ker­ing around the edges of the mar­ket and a small num­ber of in­di­vid­u­als and busi­nesses – of which Glen­veagh is one – will pros­per. And if this week’s bud­get is any­thing to go by, they will be proved right.

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