Property players have big plans for Gresham development

Now that the fight is over, property developer JJ Murphy tells Jane O'Sullivan, Markets Correspondent, that fears for the future of the Republic's oldest hotel are unfounded

When the Republic's oldest hotel, the Gresham on Dublin's O'Connell Street, fell into the hands of three property developers earlier this month, some of its loyal fans feared for its future.

Would the trio turn the near 200-year-old hotel, which occupies a prime spot on the capital's main street, into just another apartment block?

The answer, according to Mr John Joseph Murphy, one of the three investors who now own the hotel, is a resounding no.

"The Gresham will always be the Gresham. There will be no change there. It's business as usual," he says.

Wexford-based Mr Murphy, who is better known to his friends as JJ, is keen to scotch fears that the winning consortium are corporate raiders, more interested in the value of Gresham's underlying property assets than in the hotel business.

"We are not going to knock anything down and build apartments," he says, with a laugh. "We do believe in the underlying business and the value it can deliver."

Mr Murphy, who already owns the Hotel Rosslare in Wexford and has other hotel interests in Ireland and South Africa, is adamant that, having won control of the Gresham Hotel Group after a protracted eight-month battle, the consortium now intends to develop the business.

He plans to sit down this week with his fellow investors - solicitor Mr David Coleman and Jackson Homes managing director Mr Bryan Cullen - and have what Mr Murphy calls "a think-in" about the future of the company and its seven hotels.

"We are ruling nothing in and nothing out. We are in a very broad frame of mind about it.

"But we would like to think we are going to add such value to each of the hotels that it will drive up the asset value of the business."

The three investors plan to conduct an in-depth review of each of the group's hotels to see what value they can deliver.

"We are not afraid to invest where we see fit. We are not afraid to acquire more hotels," he says. "But where we see any particular asset that can't deliver, we won't be afraid, if necessary, to dispose of it."

Alongside the flagship hotel in Dublin, the group's interests include the Gresham Royal Marine in Dún Laoghaire and the Gresham Metropole in Cork.

In addition to the Gresham Hyde Park in London, the company also owns three hotels in continental Europe, the Gresham Memphis in Amsterdam, the Gresham Belson in Brussels and the Gresham Carat in Hamburg.

The future of the Dún Laoghaire hotel is likely to be the most pressing issue on Precinct's agenda as the lease on the property, the only one not owned by the group, expires in October.

Precinct will have to quickly decide whether or not it wants to re-lease the property from the current owner, Mr Murphy's fellow countyman, Wexford-based builder Mr Séamus Neville.

Branding and marketing are likely to feature largely in Precinct's plans for the company as Mr Murphy admits the mixed nature of the group's hotels points to the need for re-alignment and re-branding.

Precinct has "no hard and fast ideas" on the European hotels, he says, but alliances with other hotel operators will be up for consideration.

Whether Precinct establishes links between the Gresham hotels and the four South African hotels - two existing ones and two under development - owned by Mr Murphy and Mr Coleman through their investment vehicle, Limestone Partnership, remains to be seen.

"Certainly, we will be looking closely at that. This is the beginning of a process that is going to take some months, maybe three to four months, before the important strategic decisions are made."

Precinct also plans to tackle Gresham's cost/income ratio which is high relative to its peers.

Precinct's first move will be to de-list the company, thereby getting rid of the sizable costs it incurs in being publicly quoted.

But Mr Murphy is keen to reassure staff at the company, which was formerly known as the Ryan Hotel Group, that rumours of job losses are unfounded.

"There are no plans at the moment to shed any jobs," he says.

He also says Precinct has an "excellent relationship" with Gresham's management and both chief executive Patrick Coyle and finance director Robert Bastow will be staying on under the new regime.

The group's bid to gain control of Gresham began last autumn when Mr Murphy, Mr Coleman and Mr Cullen - who is best known for his apartment developments around Dublin - were looking around for an investment opportunity.

"We are all good friends for a long time. Deloitte [& Touche] brought the opportunity to us and said we should look at it."

Attracted by the solid asset-backed nature of the company and undaunted by the presence of 28 per cent shareholder Red Sea on the share register and the company's recent troubled history, they went ahead with an offer for the group.

This marked the beginning of a long saga that saw the bid revised down following due diligence and revised back up again to clinch a deal and bring Red Sea on board.

Along the way, there was the surprise purchase of a 10 per cent block of the shares by a Hong Kong-based businessman, suspicions of concert party activity and a decision by the Irish Takeover Panel to hold a hearing into the issue, which did not come to pass.

But Precinct stuck with the process through the ups and downs to win out in the end. Mr Murphy, who with Mr Coleman owns a third of Precinct while Mr Cullen holds the remaining two-thirds, says the three investors never waivered in their resolve.

"We were steadfast," he says. "We were not going to back off this. The three of us are property players, we saw the assets were worth at least book value, the hotel sector was rising so we decided to take a medium-term strategy," he says.

Now that they have emerged victorious, despite having to pay five cents per share more than originally mooted, Mr Murphy says Precinct is very happy with the value of the assets.

"The business was the right size of investment for us. We liked the feel of the business and the assets - that it was an asset-backed investment.

"We believe it can be a very successful private group."