Friday Letter The Dubliners

Irish private property companies – sometimes called the Irish ‘buyaspora’ - have been investing successfully overseas for years. Now these astute investors are gearing up for the next step by forming private equity-style funds. 

Quinlan Private is probably the one Irish property firm most people in the global real estate industry have heard of, and now it has entered mainstream private equity by raising its first closed ended fund.

The Dublin-based company was founded in 1989 by former tax inspector Derek Quinlan and rose to international prominence in 2004 when it bought London’s famous Claridge’s Hotel as part of the Savoy Group for £750 million (€940 million; $1.5 billion) from Blackstone and Colony Capital. Since then it has progressed to accumulate more than €10 billion worth of assets under management in the UK and across Continental Europe, including the Central and Eastern European countries.

Up until recently, it has exclusively operated a very Irish model: buying properties in separate vehicles. Each time it agrees to buy a property it taps its high net worth clients to see who wanted to invest in a fund to buy the asset. The formula has worked well. It has raised significant equity from hundreds of clients on its books. It has also made many people extremely wealthy.

But this format limits capacity, caps ambition, and can be inefficient. When given a tight timeframe to complete a deal, for example, the firm requires significant human capital in order to contact clients. It is also a model that suffers when private clients get the jitters about commercial property. In short: it works very well, but is not the most efficient of models.

However, things are beginning to change. Soon, Quinlan will officially close its first private equity real estate vehicle, the European Strategic Property Fund. It has garnered approximately €400 million of commitments from US investors for the opportunity vehicle. The firm is not ditching its private client base – clients will continue to invest alongside investors in the separate new fund – but the move marks a major step forward in its evolution. It is also a sign of things to come out of Ireland.

A number of sophisticated private Irish property firms are looking to replicate what Quinlan has done by creating private equity –style closed ended funds with value added or opportunistic strategies. Having accumulated considerable expertise over the past 20 years in repositioning assets, developing land, buying operating companies, and asset managing real estate (and ultimately making a lot of people very rich) these firms have a strong enough story to take to the US and elsewhere.

If you are an LP or advisor, don’t be surprised to hear from an Irish property firm soon.

PS: for a profile of Quinlan Private see next month’s issue of PERE magazine.