John Gallagher, the financier who helped Jurys Doyle to realise some of the highest property valuations in Europe from the sale of its Dublin hotels, has said he will not invest in Irish property because there is “certainly no upside” in the market.
Weeks after Jurys Doyle realised â‚¬1.165 billion from the sale of the Jurys Inn chain to Quinlan Private, Mr Gallagher said that the group was unlikely to buy any more hotel properties for the moment because of the spike in valuations in the sector.
"I think the reality is that sensible people - and they are sensible people - will wait for froth to come out of this market. They certainly won’t be buyers into the hotel sector for certainly two years, two-and-a-half years.
“As an asset class, they are incredibly highly valued and they do think that that market will peak, as it always does, and when that happens, there will be opportunities and they see themselves growing that business. It’s a slow, property-orientated business.”
Mr Gallagher is chief of investment firm Crownway, which he controls with his wife, Bernie. A daughter of the late PV Doyle, she and her two sisters and the family of former chairman Walter Beatty took Jurys Doyle private in 2005 for â‚¬1.6 billion, including debt.
The group has since realised a total of â‚¬1.872 billion from the Jurys Inn deal and sale of hotels such as Jurys Ballsbridge and the Berkeley Court to developer SeÃ¡n Dunne and sale of the Burlington hotel to developer Bernard McNamara.
Its remaining hotels have been valued at up to â‚¬750 million, implying a property-driven break-up value of some â‚¬2.62 billion on the group.
While stating that he was not a property specialist, Mr Gallagher said a correction was under way in the Irish market. “People don’t understand that if you’ve got Â£1 million in a Â£10 million property and it drops by 10 per cent, your million is gone. The thing might be worth Â£9 million, but yours is gone,” he said.
"My view on the Irish market is that whether we get a soft landing or a hard landing, definitely the weight of percentage is on the downside as opposed to on the upside.
“I think there’s a correction here and how bad that correction is I don’t know. I don’t really know in relation to that. There’s a whole bunch of factors which will influence whether it’s a soft one or a hard one.”
Asked if there was potential for a hard landing, he said: “There’s certainly no upside that I can see. I cannot see the upside.”
Interviewed today in Business This Week, Mr Gallagher said his company was on the lookout for leisure sector and utility investments in Europe.
“We are going to have a look at what’s happening in central Europe in terms of the utility side because all the regulations that applied on the Irish side will equally apply into those markets and we’re going to have a look in relation to those things. But we’re not in a rush. It may take us another year to get the right deal or transaction,” he said.
“We can do scalable deals now. . . we do fairly scalable deals and we have institutional backing to do scalable deals. We’re not reliant on private equity markets.”
He said he agreed a commercial contract with the families behind the privatisation of Jurys Doyle to organise the deal and to restructure the business.
Key to that was a mandate from the families to do whatever he deemed necessary to execute the transaction and reduce its debts.