Sunday 8 March 2009

Brakes are on and plans are on hold, but Treasury says it's in it for long haul

TREASURY HOLDINGS: Even in a recession and with the commercial property market in the doldrums, Treasury Holdings is building two major office schemes in Dublin – with not a single tenant yet lined up

TWENTY YEARS after it was conceived as a project and following three competitions for the tender to build it, the National Conference Centre (NCC) is well under way at Spencer Dock, on a pivotal Liffeyside site controlled by developers Treasury Holdings – and it looks as if the massive building will be completed on schedule by September 2010.

Richard Barrett and Johnny Ronan, who own Treasury and its multiplicity of subsidiaries and who control two publicly quoted companies – Real Estate Opportunities (REO) and China Real Estate Opportunities (CREO) – are old hands at the property game and show no signs of cashing in their chips at this stage; they’re in it for the long haul.

Even at a time of recession and with the commercial property market in the doldrums, they are building two major office schemes – one called Montevetro in the Grand Canal Dock, funded by a 50 per cent pre-sale to a Quinlan Private syndicate, and the other at Central Park, Leopardstown, in partnership with David Arnold and Derek Quinlan. This bullish behaviour is remarkable when

not a single tenant has yet been lined up for either scheme, which will deliver 18,600sq m and 16,700sq m of office space respectively.

As a result, it is likely that No 1 Central Park will be built only to “shell and core” until tenants are found, by offering rental levels 50 per cent lower than in the city.

However, plans for two major golf resorts in the Dublin area are “on hold” – at Milverton, Skerries, where there is full planning permission for a 300-bedroom “green” hotel, 50 houses and two Arnold Palmer-designed golf courses, and Roundwood Park, Co Wicklow (bought for €17 million in 2005) where a similar scheme is being planned.

“We’re bullish by nature but, in this market, we would be absolutely mad to press the button [on either scheme] unless we had pre-takers committed,” said John Bruder, Treasury’s managing director for Ireland. Its experience with the Ritz Carlton Hotel in Enniskerry, which cut rates since it opened in October 2007, has been salutary.

Other major plans are being delayed for one reason or another.

The huge Ballymun town centre, with 60,000 sq metres of retail space at its core, is under appeal to An Bord Pleanála.

One of the appellants is N1 Property Holdings, owner of Northside shopping centre; it is controlled by Brian O’Farrell, who ironically is a partner in the Milverton scheme.

O’Farrell, who is planning to replace Northside with a much larger shopping centre, fell out with Barrett and Ronan over his acquisition of the property, in which REO had a 21 per cent stake. After a case came before the High Court, O’Farrell paid a total of €100 million to buy out AIB Investment Managers and REO, which received nearly €30 million.

Last month, Treasury initiated a High Court action against docklands entrepreneur and impresario Harry Crosbie, seeking to compel him to pay his alleged €3 million share of a €19 million bill relating to the development of Spencer Dock, in which he has a stake. Crosbie counterclaims that Treasury owes him €70 million.

Meanwhile, progress on Ballymun has been slow.

Nine years ago, Treasury paid Sisk Properties €8 million for its 500–year lease on the eight-acre town centre site. It then claimed that it was entitled to acquire Dublin City Council’s freehold title and a further six acres for €25 million. The council held out though and was paid nearly €60 million.

Treasury’s much-revised scheme for Stillorgan shopping centre, which Barrett and Ronan bought in 1996, will not proceed for at least two years, although a local area plan was adopted in late 2007. This plan also covers two other Treasury properties (Blake’s and Stillorgan Leisureplex), which brought its holding in the area to more than 13 acres.

In Sligo, full planning permission for another long- delayed shopping centre was granted last December, but construction cannot get under way until the borough council completes a compulsory purchase order for parts of the site.

“We have sufficient tenant interest that it could start very quick, by the end of this year,” according to John Bruder.

He also said that a planning application for the proposed container port at Bremore in north Co Dublin, would probably be made in the first quarter of 2010. An environmental impact statement is currently being prepared, including reference to the sensitive archaeology of the area, although he believes that this could be “worked around”.

The new deepwater port, a joint venture between REO and Drogheda Port with Hong Kong maritime conglomerate Hutchison Whampoa lined up to develop the master plan, could ultimately replace Dublin Port if the Government was to decide that it should be relocated; one of Bremore’s selling points is its close proximity to the M1 motorway.

It was Treasury’s Chinese connections that led to the acquisition of Battersea power station in London.

Based in Shanghai since 2003, Richard Barrett heard at a dinner party that Hong Kong property tycoons George and Victor Hwang were willing to sell the 38-acre site – and the deal was finally done in November 2006 for £400 million. This equated to almost €600 million at the time – an enormous sum, reflecting the fact that it was close to the peak of the property boom. REO was the vehicle used to acquire the old power station with its iconic table-leg chimneys, availing of a £185 million “debt facility” from HBOS; the bank later lent £110 million to buy adjoining properties.

Uruguay-born “starchitect” Rafael Violy was commissioned to draw up the master plan, unveiled last June, which included a transparent tower 300 metres high. This element of the huge ecologically branded scheme generated strong opposition, even from London mayor Boris Johnson, mainly because of its impact on views of Westminster.

The controversial tower has now been dropped and Violy is recasting his master plan with a view to REO making a planning application later this year.

However, Battersea power station has been the subject of

so many unrealised plans by different developers over the past 20 years that it seems as if some sort of jinx hangs over it.

In the meantime, REO has been revaluing its property portfolio, which was reportedly worth €2.4 billion at the end of 2007. Six months later, net asset values had fallen by 7 per cent and they are bound to have taken another tumble since then.

As company chairman Ray Horney said, REO could not have “remained immune” to the downturn. Neither, it seems, will CREO.

The prospect that China would have immunity to a global economic recession has evaporated, with up to 40 million workers in danger of losing their jobs as the country’s extraordinary export-led boom fizzles out and hundreds of factories close down due to the worldwide drop in demand for their products.

Series concluded.

Irish Times

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