‘Construction is the easy part. If we get the money, then we can build houses’
BUILDER EXPECTS TO BE STARTING WORK ON 1,000 NEW IRISH HOMES
CIARAN Fitzpatrick, whose company is building 89 homes in Baltinglass, reckons the construction business he founded just a decade ago to fix up and flip second-hand properties in Dublin will soon be building close to 1,000 homes across the country.
Based in Rathcoole just outside Dublin, Fitzpatrick & Heavey Homes grew out of a partnership between Fitzpatrick, an engineer with a background in construction, and Michael Heavey, an experienced investor with interests in many sectors including IT and distribution, as well as property.
They began by buying, refurbishing and flipping properties in Dublin city between 2014 and 2018 and then moved into new builds.
With a number of new build schemes under his belt, Fitzpatrick now has significant ambitions to build at real scale, and says securing a €20m financing package from Home Building Finance Ireland (HBFI) will be a catalyst for significant growth. Having started out working on a small scale in Dublin’s established suburbs of Blackrock and Terenure, the firm now has a significant focus on house building in the commuter counties around Dublin – but is also active on a scheme to convert a commercial building in Dublin 12 into nine apartments.
They have also made a number of acquisitions in the construction sector supply chain, including buying Eurometals, which supplies metal and plastic construction materials in a €3m deal late last year.
Fitzpatrick says construction of new build houses is very scalable – if finance can be committed.
The firm is currently building at three sites and has 85 units under construction.
The HBFI financing means they can build at full steam at the Aldborough Manor housing estate development in Baltinglass, Co Wicklow, which will have 89 homes and a crèche, including 22 affordable housing units; and the Gort an Locha development in Moate, Co Westmeath, where a scheme of 35 units includes 22 houses offered through an affordable purchase scheme.
Fitzpatrick says financing is the most critical element at the moment for accelerating output in the sector and the toughest to source.
“The amount of time spent on financing – raising finance for developments – is huge. You’d need someone focused on that full time if you want to build up the scale of the business,” he says.
For example, a site might work for one lender such as HBFI but not for AIB or Bank of Ireland.
“Construction is the easy part. If we get the money, we can build houses. Financing costs are high, with interest rates for construction finance in the order of 10pc to 15pc,” he said.
Getting the €20m commitment from HBFI is a major step for the business that will significantly accelerate delivery.
The State-funded lender’s terms are competitive and its team has been excellent to deal with, he said.
Securing large-scale funding had an immediate effect on the way the firm could do business.
“When we got that financing, we went to order on 100 timber frames straight away for delivery this year,” he said.
He now expects to complete around 800 homes this year and is ambitious to further accelerate that, as a growing business is better able to scale.
“We had land to build 125 units, with a mix of social, affordable and private houses on each site. We’ve done deals in Wexford, Offaly and Cork, and are under negotiation for sites across a number of counties.
“We can develop these with a mix of the HBFI money and our own funds. Scaling up production means we’ll be selling a house or two per site per week and that in turn boosts cash flow.”
Land and labour have been easier to source than capital, he says,
“We’ve never had an issue getting tradespeople – our motto is ‘never pay a day early, but never pay a day late’, and that works for us.”
Reputation spreads fast in the sector, he says.
The location and size of projects is also a boost, he explains. The development in Baltinglass, Co Wicklow is the biggest in the area in decades. That made it relatively easy to recruit builders from the area, who’d been commuting into Dublin and elsewhere but are happier to work locally in a scheme that will take around two years to complete.
“There is a lot of land available with planning on it, but a lot of it is for schemes that are not commercially viable. You can build – but they won’t work for home buyers,” he says, citing duplex schemes in midland counties as an example where construction costs will run ahead of the market price.
Managing cash flow is another big focus.
“We are building everything ourselves, so there’s no main contractor and that means we can better control costs and quality.”
The price per home has to make sense too. He says they’ll only be able to sustainably deliver homes to the market at an affordable level by protecting their own margin.
“If you don’t have a margin, you don’t get financing – and in the worst-case scenario, you lose money
“Our model is to have a strong focus on input costs and to charge a sufficient margin.”
Even so, delivering affordable homes at the moment requires Government supports to house buyers to bridge a viability gap, he says. In Westmeath, Fitzpatrick & Heavey is selling new A-rated three-bed houses to first-time buyers for a price that works out at €225,000 once the Government supports worth around €75,000 are taken into account.
The supports mean he sells at a higher price that’s enough to ensure a developer margin while the lower price is affordable for home buyers, he says.
Builders would lose money selling those houses at €225,000, so they wouldn’t be built, he points out.