LOANS:O'FLYNN GROUP, the construction business owned by Cork developer Michael O'Flynn, has secured an investment from a US private equity firm to develop a 435-bed student residence near Wembley Stadium in London.
This is one of the first deals concluded by a developer whose existing loans at the Irish banks are moving to the National Asset Management Agency (Nama). O’Flynn is among the 10 biggest borrowers moving in the first wave of loan transfers.
New York-based Westbrook Partners, which has invested $10 billion (€7.3 billion) of equity in property deals globally, is providing the equity for the project, while Royal Bank of Scotland (RBS), the part-nationalised UK lender, is financing the development which the group values at £50 million (€57 million).
RBS has provided loans which have repaid at par finance provided by Anglo Irish Bank, one of O’Flynn’s main bankers, to purchase the site near the College of North West London.
Victoria Hall, an O’Flynn subsidiary, is managing the project, Westbrook-affiliate Clovis Student Housing Group is putting up the equity and RBS is providing senior debt. Construction work begins this month with completion expected in August 2011.
The group said that while the demand for student accommodation had “remained robust” through the recession, construction activity was limited by the shortage of development loans.
In an interview with The Irish Times, Mr O’Flynn said development firms had to look overseas for loans as the Irish banks were refusing to fund new property projects “in the pre-Nama vacuum”. “It is unfortunate that the equity or senior debt have to come from outside the country but obviously there is no appetite in any Irish bank to do anything to do with property,” he said.
Mr O’Flynn said there needed to be a functioning property market if Nama was to be a success and that a more sophisticated development sector had to be created to attract future foreign investment into Ireland, despite the current difficulties in the industry. “We are in a position to already show that in the absolute infancy of Nama there is an industry and there will be an industry but we have to make sure that this country actually provides a platform for there to be an industry,” he said.
He declined to comment on the transfer of his loans to Nama or the level of borrowings at his company. His group must submit a business plan to the State loans agency within a month of his loans being transferring from the participating lenders.
“This is a comprehensive review of everyone’s business, of the management skills and what your plans are to deal with residual debt,” he said. He believes developers must share responsibility for the property losses at the banks but they were only one of many to blame for the financial crisis.
