Hotels get star billing in Brehon property play

Brehon is seeking to establish itself as a major investment and development group in recovering Irish economy

The Powerscourt Hotel in Co Wicklow

On Tuesday, the High Court gave the green light for the Killashee House Hotel near Naas in Co Kildare to be sold to Brehon Capital Partners and Midwest Holdings for €13 million, securing 182 jobs in the process.

The well-known four-star property had been placed into examinership in May, having been controlled by local developer Jack Tierney.

The hotel describes itself on its website as being “timeless, natural and elegant where we understand space, fun and food”. It heaves with weddings each year, hosting about 160 in 2013.

It is a successful hotel that was burdened by too much debt from the Celtic Tiger era.


Killashee was the fifth hotel acquired by Brehon and its investment partners after the Marker in Dublin’s docklands, Powerscourt (formerly the Ritz Carlton) in Enniskerry, Mount Juliet in Co Kilkenny and Mount Wolseley in Carlow.

It is also on the cusp of buying the Citywest complex in Saggart, Co Dublin, for about €30 million.


All very different properties, with separate brands, targeting different segments of the market.

But they are all key parts of a jigsaw being pieced together by Brehon as it seeks to establish itself as a major investment and development group in the recovering Irish economy.

Kevin McGillycuddy, who heads Brehon, told The Irish Times yesterday that Killashee was a "fine hotel" with good growth prospects.

“It has solid cash flow and also a strong wedding business,” he said. “All the hotels we’re involved in have unique attractions. We feel we can make incremental improvements to them. Killashee is another place where we’d like to make improvements.”

Brehon and its partners are “currently evaluating” the level of investment needed for Killashee. He said the group would invest between €30 million and €40 million in the five hotels that are now part of its portfolio to enhance their product offerings.

While they are stand-alone investments, McGillycuddy said there are potential synergies from working with service providers across the portfolio.

The hotels can also leverage the expertise within Brehon, where Adrian Shanagher, formerly a senior executive with the Capital Bars hotel and pub group that was run by the O'Dwyer brothers, is acting as a consultant for Brehon.

“At senior management level, we have the ability to identify the synergies between the type of providers at the hotels to improve margins where we can,” McGillycuddy said.

McGillycuddy wouldn't comment on the Citywest deal, which could be subject to a legal challenge from the family of the late Jim Mansfield, who developed the complex.

More than hotels

But it is understood that Brehon sees an opportunity to add additional revenue streams at what is the largest hotel resort in the country, with nearly 800 bedrooms, substantial function and convention space, and adjoining golf facilities.

Brehon is believed to be prepared to invest about €10 million in Citywest to upgrade the facilities, if it can close a deal.

Brehon, which has about €400 million in assets under management at present, is about more than hotels. It also acquired the Ulysses Portfolio of 25 properties that were previously associated with Liam Carroll and ended up with the National Asset Management Agency.

These properties largely stretch along the red Luas line in central Dublin from Smithfield down to Macken House in the IFSC. It recently secured UTV as a major tenant in Macken House for its new Dublin headquarters.

Brehon has leased about half of the space that was vacant in Ulysses when it was acquired in December 2013. It has also disposed of some properties in this portfolio, notably Grand Canal House, which was sold for €6 million – about €500,000 above the guide price.

“We are comfortable in the hotel space, but it’s important to state that it’s not our primary focus. We’ve focused on hotels because the opportunities have been there. But we purchased the Ulysses [property] portfolio and . . . will continue to look across all sectors.”

Brehon is an Irish-owned private equity firm focused on real estate investment opportunities. McGillycuddy said it has a “pipeline” of €100 million in equity with its various investors ready to put to work here over the next 12 to 18 months.

“We’re starting to evaluate development opportunities. We continue to look at the value-added plays . . . second generation offices that need refurbishment. And we’ll look at hotels when those opportunities come up. The next opportunity could be in the office or residential sector.”

‘The right assets’

He stresses that Brehon, which started its activities in the summer of 2011, is not running a fund, although this is under consideration.

“The first part is to acquire and get the right assets in place and then to look at the capital markets. We certainly won’t be going to the public markets in terms of a Reit (real estate investment trust). We’ll continue to look at institutional fund structures. There’s no immediate plans at the moment.”

Brehon has already demonstrated its eye for a deal with its reported €30 million purchase of the Marker hotel and residences in Dublin’s docklands.

It sold the Marker Residences (effectively the adjoining apartments) for €50.1 million, which essentially covered the cost of the original acquisition and the fit out of the hotel, which it now holds for free.

“We’re in a very good position there,” is how McGillycuddy characterises the Marker investment.

It is interested in working with Nama on the plan to develop its extensive interests in the Dublin docklands.

McGillycuddy confirmed that it has submitted an expression of interest to Nama for its Docklands plan.

“We’ve looked at the various sites that are available in the north and south docks and would hope to engage with them on one or many,” he explained.

“We would be quite keen to engage with them. We’ve experienced some success in the docklands and understand the dynamics there and we feel we have expertise that we could bring to Nama.”

He believes Nama has “played its cards correctly in the past couple of years”.

How long will Brehon hold its investments?

“It comes down to market forces, but we’re certainly in the Irish property market for the long term.

“We may eventually evaluate long-term fund structures that would allow us to stay in them for longer periods of time.”

Brehon currently employs about 14 staff, but this will grow to 20 in the “next month or so” as the group ramps up its activities.

“We are keen to do more business in the development space,” McGillycuddy said.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times