Quinlan and his firm feel the heat in falling property market

ANALYSIS:Derek Quinlan's departure from Quinlan Private has put the company and its investments in the spotlight

THE RETIREMENT this week of the storied financier Derek Quinlan from the powerful property business he built up since 1989 comes at a moment of acute weakness in Irish and international real estate markets.

Quinlan and his corporate vehicle Quinlan Private were undisputed masters of this terrain when times were good, moving onwards relentlessly from relatively modest Irish transactions to prestigious deals in London, New York and eastern Europe.

With remarkable speed – aided by copious credit and Quinlan’s unmatched access to wealthy clients in the legal, medical and business professions – the firm and its clients spent more than €11 billion building up its international portfolio.

Amid hard times for investors in all asset classes, the present challenge for Quinlan Private and its founder is to navigate the combined forces of recession and the credit crunch.

Although Quinlan himself is a big investor in many of the company’s syndicates, retirement means he no longer has a day-to-day role in the management of its disparate investments. The scale of the portfolio means that the task is not an easy one.

In a very fundamental way, economic turmoil has changed the foundations on which the empire was built. The credit crunch, now approaching its third year, has radically curtailed the flow of bank leverage. The outwork of recession, meanwhile, is drastic cuts to the value of property assets.

Flowing directly from that is a rise in loan-to-value ratios on loans, leading in some cases to a requirement for additional equity to avoid breaching bank covenants. With financial pressure on investors and their banks also in the mix, refinancing conditions are far from ideal. Thus a certain level of strain is inevitable.

According to high-level sources, a large Irish bank recently reviewed the legal title it holds on certain property personal investments it financed for Mr Quinlan.

Company sources say, meanwhile, that it successfully completed cash calls on investors in three syndicates in recent times. The amount of money required in each case was 10 per cent of the original investment. According to company sources, another two cash calls are pending. This is from a total of 120 syndications.

However, these deals include some of Quinlan Private’s biggest. The €1.165 billion Jurys Inn buyout is one. Another is the £1.1 billion (€1.28 billion) Marriott Hotel portfolio in Britain, acquired in joint venture with the Igal Ahouvi Group.

Well-placed sources say cash calls in the present economy are exceptionally difficult to execute. For one thing, banks are unwilling to lend for investments into a falling market. In addition, investors contributing to a cash call must decide, if they can at all, that they will follow their money in the event of another call for equity. Existing investment can be lost if further equity is not forthcoming.

Separately, Quinlan Private’s plush office building in New York is for sale at $32 million (€22.94 million). Mr Quinlan owns the building, it is believed. The original price quoted by estate agents was $37 million.

Elsewhere, property and business sources expect the former Jamahiriya School in the Chelsea area of London, which previously catered for the Libyan community will soon come on the market. Prepartory work for a such a sale is under way, it is understood.

Mr Quinlan and partners acquired this buildling for £25 million in 2004, Kensington and Chelsea council didn’t approve planning permission for a residential scheme designed by architects Foster Partners until last December. Although some sources believe this property could fetch £100 million or more, others say such a target may be unrealistically ambitious in the current climate.

Derek Quinlan never lacked ambition, of course.

A former Revenue inspector, his initial transactions were structured as tax-smart deals for well-heeled clients who wished to reduce their contributions to the Exchequer.

He made his name by masterminding the takeover of the Savoy Hotel group in London by a syndicate of Irish investors. Two years ago he personally invested €700 million buying half of the 42-storey Citigroup building in London’s docklands.

The public execution of these deals and others means that Quinlan’s avid dealmaking would no longer take place in private. Neither will his retirement.

Quinlan investments

• Savoy Hotel chain, London – €1.1 billion. Savoy Hotel later sold for some €300 million, leaving the Berkeley, Claridge's and Connaught hotels in the group.
• Investors included Riverdance founders Moya Doherty and John McColgan, Davy stockbroker Kyran McLaughlin, and developer Paddy McKillen.
• Jurys Inns group – €1.165 billion. Oman Investment Fund, controlled by the sultanate of Oman, later took a 50 per cent stake in the business.
• UK Marriott Hotels portfolio – £1.1 billion. A 44 per cent stake in a joint venture with Israeli investor Igal Ahouvi.
• 50 per cent of Citigroup office tower, Canary Wharf, London – €700 million.
• Personal investment by Derek Quinlan.
• Bank of Ireland building, Baggot Street, Dublin – €212 million.
• Former Eircom building, St Stephen's Green, Dublin – more than €190 million.