High flyer still optimistic despite bleak outlook
At its peak, Ballymore had a development plan worth £15bn in Britain, Ireland and Europe
THE CANCELLATION of a lavish lunch for 500 guests at Punchestown racecourse last April – to celebrate Ballymore Properties’ 25th anniversary – was the first indication that even Seán Mulryan was feeling the pinch; some of the company’s staff were being laid off and it just wouldn’t have been appropriate to be quaffing champagne.
Before then, Ballymore was flying high as one of Europe’s largest developers, with a development programme worth £15 billion in Britain, Ireland and central Europe. At the peak of the property boom, it was developing 18,000 homes and some four million sq ft of commercial space in Britain alone; notably in London’s Docklands.
These include such spectacular schemes as Ontario Tower and Pan Peninsula, within walking distance of Canary Wharf. Many of Ballymore’s customers were bonus-rich bankers looking for city pads or “buy to let” investors from Ireland – although many of them are now finding it difficult to complete their purchases due to the credit crunch.
Last November, the Sunday Times reported that Mulryan had sold half of his 50 racehorses, put his two helicopters up for sale and was now sharing his executive jet with Johnny Depp. Earlier, Ballymore had to shelve plans to build Europe’s tallest residential building in Manchester and turn the site into a car park, until the economy picks up.
Exactly a year earlier, after the onset of the banking crisis but long before it turned into a meltdown, Mulryan predicted that 2008 “will not be a year for the faint-hearted”. He also forecast that many investors “might take a back seat and leave it to the people that are in the commercial property business for the long haul” – such as Ballymore.
One of the many irons it has in the fire is the Eurovea complex on the banks of the Danube in Bratislava, capital of Slovakia. The first phase of this huge scheme – Bratislava’s biggest real estate development by far – was launched by Ballymore last March, just as the residential market in central Europe was softening after the hectic boom years.
Within the first month, some 90 of the 254 apartments had been sold at prices as low as €160,000 for studio units. Since then, prices in Bratislava have been falling as credit is squeezed by the banks and one developer, JT Real Estate, was offering 40 per cent discounts last November on “shell and core” apartments in its River Park scheme.
By then, Ballymore had laid off at least 50 of its 400-strong staff, mainly based in Dublin and London. It also implemented a major reorganisation under which David Brophy, who had spent 13 years with Smurfit Kappa before becoming Ballymore’s chief operating officer in 2007, moved up to the newly-created post of group chief executive.
Company founder Seán Mulryan became executive chairman – a move that was designed to free him from day-to-day management so that he could concentrate on identifying development opportunities.
“It does not mean in any way that Seán will be cutting back on his activities,” Brophy said. “He is going to be sticking to what he does well.”
Four months later, it was revealed that two of Ballymore’s directors, Ian Hardy and Tim Farrow, were taking the redundancy route. Hardy, who had been with the company since 1990, was responsible for its acquisitions strategy while Farrow was involved in signing up the US embassy in London to move from Grosvenor Square to Vauxhall.
The US state department agreed last October to purchase the five-acre Vauxhall site – part of Ballymore’s 21-acre Nine Elms holding, assembled by Mulryan for £160 million – for an undisclosed sum. The company is to pay a further £10 million to a firm of luxury car dealers to get them to vacate an industrial unit on the embassy’s target site.
Meanwhile, according to London-based property magazine Estates Gazette, Tim Farrow is suing Ballymore for £4 million (€4.48 million) in compensation for losing his job as the company’s planning director. He claims that his “dismissal” was unfair, that he was not given adequate notice and that attempts to secure fees owed to him were rebuffed.
At the end of October, after a year of tortuous negotiations between the Geranger consortium – Ballymore, developer Paddy McKillen and members of U2 – and Dublin Docklands Development Authority on financial, legal and technical issues, it was announced that the much-vaunted U2 Tower at Britain Quay was being mothballed. Officially “postponed” for a year due to the deteriorating economic environment, the 180-metre tower – designed by Foster + Partners and estimated to cost €200 million – is now unlikely to materialise. As U2 said, a “colder eye” is being cast on this project and the controversial Foster plan to redevelop the Clarence Hotel.
But the news was not all bleak. On the same day that the tower was postponed, Ballymore opened the five-star Kempinski Hybernska hotel in Prague following a €27 million renovation of the 17th-century listed building. It also announced plans to redevelop the Kudamm-Karee shopping centre in Berlin, bought in 2007 for €150 million.
Paul Keogh, Ballymore’s strategy and communications director, pointed out that 90 per cent of the group’s activity was now international. And while every country in the world was affected by the banking crisis and economic downturn, there were some hopeful signs. As a result of the sterling-euro differential, there was now renewed interest in London.
“Ballymore wants to be in a position to take full advantage of the cyclical upswing – whenever that happens,” he told The Irish Times. Although a further 20 staff had been let go and overheads cut in all departments, “I believe we have a plan in place to weather this severe storm and come out the other side a much better company,” he said.
This month saw the appointment of a group treasurer, a position Keogh saw as “vital for our future dealings” with the group’s bankers, which include Anglo Irish Bank.
Ballymore would also be appointing a group sales and marketing director to shift a projected 1,500-plus units a year over the next decade in residential sales volume alone.
Given that new mortgages in Britain last January amounted to only 10 per cent of the £6.9 billion dished out by the banks in January 2008, this must be regarded as a very optimistic projection.