THE FRIDAY INTERVIEW/Deirdre Foley,chief executive, D2 Private:UNDETERRED BY the economic downturn and credit crunch, property firm D2 Private is planning to spend some €500 million on new investments in the London market over the coming months. In only its fourth year of business, such deals would bring the value of the company's portfolio well above €2 billion.

While gloom seems to pervade some sections of the business community at home, D2 co-founder and chief executive Deirdre Foley says conditions are ripe in London for expansion. "We would be deemed to be back in the market now in terms of looking to buy assets," she says.

With Irish money flooding into Britain in the boom years, D2 rapidly established a niche as a repeated buyer of "iconic" buildings in London. Handsome rents from well-funded tenants and solid opportunities for capital appreciation are its thing. Downmarket it is not.

Yet after a breakneck start to business in 2005 and 2006, D2 held back last year because it deemed the London market to be "overheating". The firm returned to dealmaking last January with the purchase for £180 million (€225 million) of a building at 1 Victoria Street. There's plenty more of the same to come, Foley says.

"Your swap rates and your funding was pretty expensive last year given the way sterling interest rates were. We very much would see an opportunity now and towards the end of the year, hence the reason we went back into the market and completed a transaction at the end of January," she says.

"We would like to do another at least half a billion this year and keep growing it on that basis and more."

The chunky valuation on the Victoria Street property was nothing new to D2, a company which has had expansive ambitions from the beginning. Buildings in Savile Row and Knightsbridge are on its books. It achieved rents of £140 per square foot on a property at St James's Square, a sum said to be the highest for an office globally.

In the space of three years - albeit in favourable markets - D2 has built up a portfolio worth some €1.8 billion, mainly in London. It does not disclose its profits, but Foley says "the company has been very successful in terms of profitability".

Foley had been for six years a director at Quinlan Private, the investment vehicle of financier Derek Quinlan, before she set up D2 in 2005 with property developer David Arnold, who she had met through Quinlan. While Quinlan was an influential mentor to her - "I very much bought into the vision that Derek had" - and provided an entry into the elevated world of international property, she wanted to run a business of her own. "I'm the type of person that I always wanted my own business or to run a business or to participate in a business," Foley says.

"Our motivation in going into it was to effectively buy assets on our own account but to actually go after quality assets and bigger assets, better tenants and better locations. And secondly to bring in other people to co-invest with us in those assets. That's basically how it was born."

D2 will open an office in London in May as part of an effort to expand its investor base, composed in the main of a relatively small group of wealthy private clients. Still, Foley dismisses the suggestion that the money available from investors is drying up as the downturn takes hold.

"Well, the way I would look at it is we're no different than anyone else who wants to grow their business and needs to actually develop new customers.

"If you were interviewing Coca-Cola, you wouldn't be asking them why they want to go abroad and attract new customers. From our point of view it's the very same principle. For us to grow our business, we need to develop relationships with new people, we need to expand the existing base of investors that we have. It's good for business all round," she says.

"You have a lot of wealth in Ireland. A lot of it is in the type of assets we buy anyway, traditionally . . . wealth preservation assets, high-quality long-term income, secure, well located. It's in times like this that those are the type of assets that people want, that's our experience anyway."

So where will D2 find new investors? Foley says the company will have "more discussions" with legal and accounting firms and with Irish institutions "who may not necessarily have people on the ground" in London. "We're going to start from there and build on that," she says.

"If the right opportunities come up, there's a lot of investor appetite out there to fulfil those transactions. It's a case of actually finding the right transactions; it's not doing any transactions for the sake of doing the transaction."

So why is the London market so good at present? "Yields have moved out in the UK and sterling rates have dropped back substantially. At one point last year, we were looking at over 6 per cent for five-year swap rates; today we're just at 5 per cent. There is quite a difference there," she says.

"Yields have moved out so you're now looking at buying assets in the City of London at 5¼ to 5½ to 5¾ per cent depending on the asset. There's more value around. Yields last year probably for the same asset would have been around 4½ to 4¾ [ per cent].

"You've effectively got yield shift, you've got interest rate shift and we would very much see that there's an opportunity there to buy back in. There probably aren't as many buyers in the UK market at the moment either, due to the funding crisis."

Still, Foley acknowledges that money is "marginally" more expensive at present - "you don't have the same demand in the securitisation markets" - and that banks in general are demanding a higher level of equity for some transactions. "Again I think to a certain extent it depends on the transaction and the security of the tenant or the term of the lease. It's very hard to say that banks have suddenly decided that this is the model they're going to work to. Every transaction is different and they have to treat it as such."

Nevertheless, she says, funding is available for the right deal. Citing the Victoria Street transaction, she says "a lot of people say it was probably the worst time of year to be trying to do it in first place".

Yet the fundamentals of the deal were right. "You've got a very good freehold asset, you've two acres of land, you have it let to the government for the next 14 years, and it's only off £32 a square foot."

Looking to the future, Foley says D2's aim is to use the expertise garnered in London as "a springboard to the rest of the world". The company has examined possible deals in Paris, Germany and in some Scandinavian countries. The US market and India, in a higher-risk category, are other possibilities.

"We've looked at a substantial number of transactions but like everything else it takes time to build up relationships and reputations in those markets," she says.

"Certainly we would prefer to do something with a partner, a reputable partner, rather than walk into Paris and think we're going to buy the best building in Paris.

"It takes time. It's no different to somebody from Paris coming to Dublin and thinking they're going to buy the best asset on Grafton Street. It hasn't happened too often."

ON THE RECORD
Name:Deirdre Foley
Age:36
Job:co-founder and chief executive of property investment firm D2 Private.
Why is she in the news?
D2 recently won the "Up and Coming" prize at the Property Week awards in London.
Background:Foley is from a farming family in Co Sligo. She did a BComm at University College Galway, trained as an accountant with KPMG and has a master's in accounting from Smurfit business school.
Career to date:After KPMG she spent a year with GE Capital before becoming a director of Quinlan Private, the investment vehicle of financier Derek Quinlan. She co-founded D2 Private with property developer David Arnold in 2005. Assets under management are now in the region of €1.8 billion.
Something you might expect:Given the scale of D2's interests in London, she's something of a frequent flyer to that city.
Something that might surprise:She is learning to rollerblade.