Never a man for the quiet life, veteran property investor Johnny Ronan is back the news after a large chunk of his empire went into receivership. The €130 million portfolio includes the historic Bewley’s café at Grafton Street in Dublin, one of his most prized assets. As the pugnacious badger-haired developer turns 70 in a few days, this is a clear sign of distress. So what exactly is going on?
Ronan is one of the great survivors in Irish commerce, rebounding from the horrors of the financial crash that toppled the Treasury Holdings group he ran for years with business partner Richard Barrett. In the heyday of the Celtic Tiger, they were known as the “terrible twins”, highly driven men with a penchant for litigation.
Barrett once cited their ability to “cause legal chaos” for adversaries. Their imprint in Dublin includes the Treasury Building at Grand Canal Street, the Convention Centre on the north Liffey quays and the former Westin hotel at College Green.
Ronan was always a showman, his well-publicised socialising with models Glenda Gilson and Rosanna Davison occupying as much – and sometimes more – newsprint than his business dealings. But he has long since quietened down.
After his exit from State “bad bank”, Nama, eight years ago with the help of new private equity partners, he returned to deal-making with gusto as the Dublin market recovered. The post-crash turnaround heralded a return to form for the developer, who specialises in gleaming glass and steel buildings so beloved by his commercial clients. They include Facebook, Google, Amazon, Salesforce and Citigroup.
In the Silicon Docks of Dublin, home to the thriving tech sector, his buildings seem to be everywhere.
Although Ronan took the benefit of rapid economic growth, he came to rely on “expensive” private equity money to fund his plans. The rapid escalation in interest rates in recent times to the highest level for decades has compounded weak demand for office space after the pandemic, creating difficulties for office investors to which Ronan is not immune.
“Rents are nosediving,” said one financier, citing damaging “loan-to-value creep” in the wider Dublin office market.
“Office values generally speaking have gone down since Covid because of work-from-home. Another reason for office values to drop [is] the very stringent energy rating requirements. So the loan-to-value ratio increases and that’s likely to be an event of default under loan facilities.”
The troubled Ronan loans were reviewed recently, prompting a “consensual restructuring” with lenders. That points directly to declining asset values, even though Ronan Group Real Estate (RGRE) said the portfolio continues to “perform strongly”. The properties include the nine-storey Connaught House on Burlington Road, AIB Investment House on Percy Place and Kingram House in Dublin 2, home of the Medical Council.
RGRE “invited” Bank of Ireland and AIB to appoint a receiver to refinance them. “He obviously hasn’t lost his enthusiasm for a street fight,” said one property figure who has observed Ronan for years and admires his ability to turn out “first-class” buildings.
The proportion of property in receivership vis-à-vis Ronan’s many other interests remains unclear, as RGRE won’t disclose it.
But he is proceeding on a business-as-usual basis with his other activities, brushing aside questions on whether the receivership has triggered any action to reassure other backers about the financial stability of the group. “There is no need to reassure our partners and lenders on our other projects as they are well-financed and performing robustly,” a spokesman said.
Having largely shunned the residential market during the Treasury Holdings phase of his career, Ronan’s current pipeline includes some 5,900 housing units in planning or pre-planning. RGRE insists the receivership won’t contaminate the rest of the business, adding no other assets were affected.
“The properties sit in a group of special purpose vehicles which are financially insulated from the rest of the group,” it said. “There are no cross-guarantees or cross-collateralisation and the company’s interests in its other developments and other sites are unaffected by this decision.”
Ronan’s big projects right now include the development of the huge former Glass Bottle site at Sandymount. He is a minority partner with Oaktree, Lioncor and Nama in that 37-acre development, which includes more than 3,800 apartments and one million square feet of commercial space, a massive undertaking.
He is also the development partner in plans for a €1 billion port at Bremore, Co Meath, which will concentrate on the offshore wind sector. A planning application is scheduled for 2026 or 2027.
Another big Ronan project is Waterfront South Central at North Wall Quay, near the former Point Depot, a site where he once proposed a 45-storey tower. After planners changed height guidelines recently, the developer may yet get to build a 25-storey apartment tower that would be the tallest building in Dublin. Ronan, who always styled himself as something of a buccaneer, might well see that as a monument to his five-decade property career, a sector he entered as a young accountant after forays into property by his pig farming father.
When Ronan told the Sunday Independent a fortnight ago there was no reason to cower at the prospect of Sinn Féin taking power, he came across as a man looking ahead firmly into the future. “We believe a Sinn Féin government would be pragmatic on housing and, as developers, we don’t feel there is anything to fear.”
It now seems he had more to fear on the immediate horizon. RGRE insists it is in discussions with an “international investor” about refinancing the receivership loans, saying the process is expected to take several weeks and that all parties “are expected to allow the group” time for investment talks. But even if Ronan can strike a deal to regain control of the assets, receivership is still a setback he would rather have avoided.
Whether other developers follow is another question. Although new data suggest Ireland’s labour market participation rates are at the highest level since 2008, the office market continues to suffer.
The Central Bank this week said Irish commercial property prices have fallen more than 20 per cent since the pandemic, with tighter credit adding to “significant” headwinds. “While cyclical forces are contributing to price falls across the real estate market, pandemic-related structural changes to the use of office and retail space are playing an outsize role in these two market segments. Heightened uncertainty remains, with the possibility of a continuation of recent price decreases,” the bank said.
John McCartney, director of research at BNP Paribas Real Estate Ireland, said there were “quite a few” recently-built big office buildings that haven’t yet secured a tenant since coming to completion. “We’re facing into a relatively shallow downswing but one that is likely to have a rather long tail,” he said.
“It’s an unavoidable aspect of every cycle that at end of the cycle, when you reach oversupply, individuals will suffer financial losses.”
Still in the game as his eighth decade looms, Ronan’s office and housing projects are said to have a gross development value in the region of €5.2 billion. After unwelcome office losses, demand dictates that a new concentration on housing might well be in prospect.