Michael Stanley barely hesitates when asked to recall when he concluded that the Irish property market had lost the run of itself before the bubble burst.
“There was one point when we were looking at buying a particular development site in Dublin in 2005 and we went to speak to a bank about funding – and the bank itself went on to buy the site with private clients’ funds,” says the chief executive of Dublin-based Cairn Homes. “We were effectively competing with our bank manager.”
Two years after Cairn became the first Irish housebuilder to float on the stock market since the late 1990s, Stanley has faced questions himself in recent times on whether he's lost the plot after winning the race in June to buy 8.64 acres of land on broadcaster RTÉ's Montrose campus in Donnybrook, Dublin 4 for €107.5 million. He's convinced Cairn investors will make good money on his plans to build 500 apartments and 10 houses on the site, which sold at 43 per cent above the guide price.
"If an opportunity like the RTÉ site comes along, it's a once-in-a-lifetime chance to acquire a site of that quality," Stanley says as we talk in one of the 16 penthouses in his company's apartment-led development, called Marianella, in the leafy suburb of Rathgar in the heart of Dublin 6.
“It was a competitive process with five bidders in the final round. We’re effectively paying a little over €200,000 per unit in RTÉ, compared to €180,000 per unit with Marianella, which we bought two years’ ago. Arguably, in Donnybrook, the apartments will be marginally more expensive.”
Entry to Marianella – a site bought from the Redemptorist Order, which is currently at various stages of construction and where above-average-sized apartments are aimed at the trade-down market – doesn’t come cheap.
Two-beds, which average 97 square meters (1,1044 sq ft), are going for about €600,000. The first two blocks, containing 120 units, are completely sold out, with the exception of a small number of penthouse apartments, which the company has not begun to market yet.
The traditional August builders’ downing-of-tools has been cancelled at Marianella – and at five of Cairn’s other eight active sites – as the company races to meet hard deadlines. The first buyers at the development are due to move in next month.
“People are delighted to be working,” says Stanley, who’s forced at one stage to shut the window behind him to block out the sound of angle grinders and roofers working on a row of 12 three-storey houses Cairn is building adjacent to the apartments. “They’ll all take their two-week holidays over July and August, but it will be staggered in order to keep the sites open.”
Last month, Cairn received planning permission to build 22 homes on the so-called monastery land alongside the apartment blocks, while it also recently received the go-ahead to add roof terraces to some of the penthouses, potentially boosting the price tag when they finally come on the market.
“We left soft spots in the roofs to make provision for the terraces,” said Stanley, adding that these would have been filled in if the late-stage application was blocked by planners.
Housebuilding is in the blood. Stanley’s father, Joe, and uncle Sean founded Shannon Homes in the early 1970s. It went on to become one of the most active builders in Dublin.
"Over the course of 40 years – including when they were joined by Frank Fahy – they operated a pretty prudent model and never overly extended themselves on bank borrowing," says Stanley, who turns 52 on Saturday. "I inherited the approach."
Stanley spent much of his 30s as managing director of Dublin-based National Plastic Packaging, which supplies flexible packaging for food, pharmaceutical and industrial use, before selling his 33 per cent stake in the business in 2003 to focus on property development with his brother Kevin. Their Coastland Partnership worked in the Dublin, Belfast and London markets.
Split in two
In 2005, he returned to the family business, when Shannon Homes was split in two and he became chief executive of one part, Stanley Holdings. This business went on to complete 450 units between 2005 and 2007, during which it sold off a major portion of its land bank in north Dublin to red Ferrari-loving developer Donal Caulfield, whose use of scantily-clad models and celebrities to launch his plans for the site as Belmayne marked, for many, the zenith of the boom-time market.
“The land sale was in order to reduce our bank debt. We weren’t highly leveraged at that stage, but we felt it was a sensible thing to do,” said Stanley, who went on to “mothball” the company in 2008 and rented out the 100 or so completed homes it had at the time to service its debt.
Still, borrowings associated with the remaining 50 acres on the Malahide Road landed the Stanleys in Nama, as the State’s bad bank took over much of the commercial property loans of bailed-out banks between 2010 and 2011.
When the Stanley brothers began to look at restarting the business in 2014 and refinancing the Nama loans, they were offered funding by a couple of private equity partners.
“But, bluntly, I felt there was a much bigger opportunity to build a much more sustainable housebuilder with a long-term capital structure,” said Stanley. “There was a massive opportunity to acquire really high-quality residential development land, because at that point, as a result of happened to developers, most of the land was then owned by unnatural landowners such as the banks, receivers and private equity firms.”
It was at that time that Stanley was introduced by law firm Eversheds to Scottish accountant and serial entrepreneur Alan McIntosh, who helped the company redeem its Nama debts at par and roll the 50-acre site, known as Parkside, into the newly-formed Cairn.
McIntosh, who co-founded insurance services company Pearl Group (since renamed Phoenix Group), pub companies Punch Taverns, Spirit Group and Wellington Pub Group, "has a home in Ireland and is married to an Irish woman – and he saw the opportunity at the same time".
The Malahide Road lands were among the seed assets rolled into Cairn as it floated in June 2015 following a €440 million share sale. Rather than take money off the table at time of the transaction, the company’s promoters – McIntosh and the two Stanleys – were allocated 100,000 founder shares in the company, entitling them to receive 20 per cent of total shareholder return over the seven years following the initial public offering (IPO).
Last month marked the second big payday from the scheme – which is subject to the share price increasing by 12.5 per cent a year – as almost 36.68 million of the founder shares were converted into ordinary stock. The trio received 15.02 million shares last year. All told, the converted stock is worth over €80 million.
Cairn has raised more than €720 million in a little over two years, including the IPO, having tapped shareholders to fund major asset purchases, including a portfolio of residential development loans from Ulster Bank and the RTÉ site.
It also joined the Irish Stock Exchange’s main market last month, having started out life as a public company with only a listing in London. With a €1.1 billion market value, it’s just outside the top 10 Iseq firms.
While the high-end Marianella development and RTÉ land purchases have grabbed the headlines, the bulk of Cairn’s projects are aimed at the first-time buyers market. It aims to ramp up home sales from 105 last year to 1,200 in 2019. Starting prices at the likes of Shackleton Park in Lucan are under €300,000, while the current phase of homes being marketed at Parkside are currently priced in the “low 300s”, having started off “well below” €300,000, according to Stanley.
Central Statistics Office data published this week showed that home prices were growing at a 11.6 per cent pace in June – the fastest in two years – amid claims that inflation is being driven by the Government's help-to-buy incentive for first-time buyers of new homes, as well as an easing of Central Bank lending restrictions for buyers starting off on the property ladder. Both measures were introduced in January.
Stanley insists this is not the case. “Our starter home prices have not moved anywhere close to what’s being quoted as the average increase,” said Stanley.
It’s a point backed up by a recent report from Goodbody Stockbrokers economist Dermot O’Leary, who’s calculated that first-time buyers acquiring new homes accounted for just 2.2 per cent of total transactions nationally in the first five months of the year.
“I think the industry has responded very well to the help-to-buy scheme. If you look at lodgements of commencement notices and levels of large planning applications, they’ve improved substantially. The early indications, certainly from my experience and talking to other housebuilders, is that there’s been a marked uplift in large housing schemes being built – maybe not apartments yet, but certainly houses.”
While Minister for Housing Eoghan Murphy has committed to reviewing the help-to-buy scheme, Stanley says that such uncertainty has a knock-on impact on builders' development plans and their lenders' willingness to finance projects.
He is similarly vocal on Government plans to introduce a vacant-site levy to free up zoned land that is being hoarded, and apartment height restrictions.
“House-builders aren’t hoarding land,” he insists. “We will build on every site that we own or sell the smaller ones.”
And, as for the increasingly contentious subject of height restrictions, he says: “There are numerous office buildings being developed today in Dublin which are heading up to 25 to 30 meters tall and we’ve got a 16 meter cap on residential buildings. I’m not saying we should be building tall residential buildings everywhere, but if someone is allowed to work in a 30 metre-high building from 9am until 5pm, why can’t they sleep in one?”
CV: Michael Stanley
Home: Donnybrook, Dublin 4
Family: Married to Suzanne, with sons Cian and Mark
Something you'd expect him to say: "I think the economic turnaround we've achieved as a small country in recent years is pretty astonishing. We've got to have confidence in our own abilities and our future."
Something that might surprise: He took an interest in start-ups while the building company was mothballed, investing in medical technology company Oneview Healthcare, which floated in Australia last year, and Moocall, which makes devices that can be attached to cow's tails that tell when they're about to calve.