Kennedy Wilson’s Irish chief building for the long term

"These are the original floors," notes Peter Collins, bending his knees slightly as if testing their strength in an old stable building dating from the 1840s that has been stylishly refurbished as part of Kennedy Wilson's Clancy Quay development.

“It’s amazing that we still have the original timbers. These buildings really were built to last.”

The site in Islandbridge, just a stone’s throw from the Phoenix Park, was formerly a British military barracks, established in 1797 and handed over to the Free State when we gained our independence in 1922.

It was sold by the State more than a decade ago and purchased by Kennedy Wilson in 2013 for €82 million.

Clancy Quay is a flagship residential development in Ireland for the Los Angeles-based property company. Some 423 apartments have already been completed, with 99 per cent of them let at rents starting at about €1,500 a month.

Hundreds more are planned in additional phases as part of an overall €250 million development spend that involves restoring eight listed buildings.

Most other developers would sell the properties, bank the profit and move on to their next gig, but Kennedy Wilson’s model is different.

“The essential difference is that we’re a property company,” Collins says, after we switch venue to its corporate head office on Sir John Rogerson’s Quay. “Our long- term business is in owning and operating properties; in investing in them, in managing them and improving them.

“We’ve further developments down the track and we’ve sold almost nothing. We’ve quite a different business model to some of those other funds and we see ourselves as very different.”

Having entered the Irish market in 2011, its first deal was the co-purchase alongside Fairfax Financial of the Alliance building in 2012 for €40 million, which has 210 apartments. That was the start of its “multi-family or professional rented residential model” here, from which it seeks to generate an annual income yield of 6 to 7 per cent.

We’re joined for this part of the interview by Bill McMorrow, Kennedy Wilson’s chairman and chief executive, who links in via a conference call from Los Angeles.

McMorrow, who can trace his roots to Leitrim, bought the overall business in 1988. In the intervening years, he has built it up from one office in Los Angeles to a listed company in 25 locations across the US, Britain, Ireland, Spain and Japan.

After the property and banking crash here in 2008, he spotted an opportunity to invest in Ireland and other European markets. He came here in late 2010 to assess opportunities, meeting Collins.

“I learned that, when the banking industry gets into trouble, as long as it is in places where you want to be a long-term investor, if you’re patient, you can get very good results,” McMorrow says.

In spite of the deep recession and widespread pessimism in Ireland at the time – the State was in the middle of negotiating its troika bailout – McMorrow says he had few doubts about investing here.

“Ireland and the UK particularly attracted us because there is a rule of law and you’ve got a very honourable culture. There are some places in the world where it’s like the wild west.”

Two other factors attracted McMorrow to Ireland: “The incredible education system in Ireland that was producing some very talented young people, and you had 700 or so US companies that had their international headquarters in Ireland.

“So there was a very real economy that had been hurt by what had gone on in the financial services industry. We’re very value-add, long-term contrarian investors and, whenever we see a set of metrics like that, where’s there’s a solid underlying economy, but there’s a period of time when you’ve got to get the banking system cleaned up, that’s what gets us interested in investing.”

Signifcant change

In late 2010, Collins was running a 14- strong property team at Bank of Ireland, managing clients’ money.

“Clearly the world changed [in 2008] significantly. That business wasn’t going anywhere and, with the consent of the bank, I tried to figure out a solution that would work for everybody,” Collins explains.

“I ended up meeting Bill, who was in Dublin that November 2010. Six months later he bought the business, which was managing a book of €2 billion of assets for third parties.”

That pot of funds has since almost run down to zero, but Kennedy Wilson has spent €1.2 billion of its own money acquiring a broad portfolio of residential, office, retail and hotel assets here. Mostly it paid cash to bypass a chronic lack of bank finance here for property development after the crash.

Properties include everything from the iconic Shelbourne Hotel in Dublin to the Stillorgan Shopping Centre, which celebrates its 50th birthday this year, the State Street office building in the docklands, and a number of residential developments where it currently has about 1,500 apartments rented out, with hundreds more to come.

Collins expects the company to spend more than €500 million developing these in one form or another in the coming years.

Given its assets, Kennedy Wilson clearly has a role to play in helping to solve the housing crisis that exists in the capital. Its schemes are subject to the 10 per cent social housing rule, something that it usually achieves in partnership with an approved housing body.

“There is a problem in the Irish market. There’s a lack of supply, which has driven up rents at all ends of the market,” he says, adding that the establishment of a professionally managed rented sector has to be part of the long-term solution.

“If we [Kennedy Wilson] can create that sector, that can be part of the total solution.”

While Kennedy Wilson produces quality rental apartments, its charges are saucy – ranging from €1,500 to €3,000 a month depending on the spec.

“We provide a premium product and receive really good rents for it, but we’re not pushing the boundaries at all,” Collins says. He cites Manchester as a good comparison for rental charges. “Rents in Manchester and Dublin for the type of product we have are broadly comparable.”

Collins says the result of our general election, which left us with a minority Fine Gael government, hasn’t spooked overseas investors. “A lot of international investors who rang me were focused on the composition of the vote and that didn’t actually change that much. It was just the way it was divided among the parties, which didn’t give a natural winner.

“A lot of people took comfort from that because they were concerned that there would be a shift to the far left or the far right. Investors like certainty and they don’t expect to see major policy shifts from the election result.”

Collins is clearly a clever chap. He graduated with a law degree, before moving into accountancy with Arthur Andersen. Then it was on to work in corporate finance with Dermot Desmond at the fledgling NCB Stockbrokers.

Very charismatic

“That was an interesting place for work for quite a number of years,” he recalls.

What was Desmond like to work for?

“Very entrepreneurial, very charismatic. You couldn’t help but like Dermot and want to work hard for him, because he was a visionary.”

The Sligo native then switched to Gandon, which is now part of Investec, prior to moving to Bank of Ireland, where he spent 17 years before the property team he led at the bank switched to Kennedy Wilson.

The number employed has gone from 14 staff to 38 under its current owners. Collins combines his job as head of Kennedy Wilson’s operation in Ireland with that of chief operating officer for the company’s wider European operation, which includes London and Madrid, and has 90 people in total.

“A lot of our European business is based out of Dublin, so our finance team and operations, and regulatory and compliance are done here.”

Collins closes by reiterating that Kennedy Wilson is here for the long haul, but declines to put a figure on how much the company might spend in Ireland over the next three to five years.

But it has been busy of late, spending more than €100 million in the past three months buying a range of assets, including offices in Blackrock, the Chase building in Sandyford, and an office on Schoolhouse Lane near Kildare Street, where it plans to add 2,000sq ft of space.

“It’s a lovely little asset and it’s a part of Dublin that’s recovering again. It’s good to do something there.”

This spend also included €15 million on buying the Leisureplex bowling alley in Stillorgan, which is directly opposite the large shopping centre that Kennedy Wilson bought in 2013.

Revamp shopping centre

Collins is planning to revamp the shopping centre, which was the first of its kind in Ireland when it opened 50 years ago, and to tie it in somehow with the Leisureplex site, where it is in talks with Dún Laoghaire Rathdown council about a planning application.

It has also earmarked a €4 million refurbishment of the suites and best bedrooms (those with a view of St Stephen’s Green) at the Shelbourne Hotel, and is in the process of upgrading the links golf course and premises at its four-star Portmarnock Hotel.

In addition, it is spending €250 million on developing its site in Capital Dock, directly opposite the Three Arena in Dublin’s docklands. Nama has a 15 per cent stake in the site, which will accommodate two large office blocks and a 23-storey residential tower that overlooks the point where the Liffey meets the Grand Canal Dock.

“In Los Angeles, that would be a very big development,” McMorrow chips in. “We’re very proud of that particular project.”

The message is loud and clear: Kennedy Wilson is here for the long term.

“We’re in this for decades, not one year nor two, as it relates to Ireland,” McMorrow says. If there are opportunities that we think make sense economically, then we’ll be adding to the portfolio over time. We’re trying to build our business.”

And don’t mention the words vulture funds to him. McMorrow bristles at Kennedy Wilson being thrown into this mix whenever some politician or commentator looks to score points in relation to our housing crisis.

“It would make me ill to my stomach if anybody thought that’s what we were about. We’re all about building long-term businesses with fantastic people and becoming part of the country and the community.

“I could give you examples of how we’ve done that in other parts of the world. We understand that if we have success somewhere, we have to be part of giving back to the community.

“I view those types of investors [vulture funds] as carpetbaggers. They fly in to take advantage of what I call a temporary situation and when times are good they leave. You can see from the things we’re doing that there’s zero chance we’re leaving. It’s not who we are.”

CV

Name: Peter Collins

Position: Chief operating officer and head of Ireland, Kennedy Wilson

Age: 54

Family: Married with three children

Lives: Donnybrook, Dublin

Hobbies: Golf (1Top seven Kennedy Wilson's biggest buys in Ireland1 handicap ), exercise, walking.

Something we might expect: He shops at the Stillorgan Shopping Centre, which is owned by Kennedy Wilson.

Something that might surprise: "I'm a Game of Thrones fanatic – I like their approach to dispute resolution!"

Top seven: Kennedy Wilson’s biggest buys in Ireland

€306 million: Opera portfolio (included the Stillorgan Shopping Centre, KPMG's office on Stephen's Green and the Bank of Ireland HQ on Mespil Road), bought in 2013

€112 million: The Shelbourne Hotel, 2014

€108 million: State Street building, 2012

€106 million: Capital Dock, 2012

€82 million: Clancy Quay, 2013

€82 million: Vantage in Central Park, 2014

€62 million: Chase building, 2016