At last count, Blacklough Construction was building 363 social housing units at five different sites across the country.
Established by Geraldine Fitzgerald and Tara King back in 2009, Blacklough is currently involved in five large-scale developments for social housing. In each case, its ultimate client is Respond – the national social housing association.
The five sites have a total contract value of €65 million. To date, €31 million of completed works have been carried out to date and many of the units have been plastered and have roofs and windows in place.
On Thursday morning, however, the company dispatched its lawyers to the High Court to seek bankruptcy protection from its creditors. Admitting it was insolvent, the company told the court that it could be salvaged through a scheme of arrangement and the appointment of an examiner.
The cause of the company’s financial distress is inflation. Its barrister Ross Gorman told the court on Thursday that it has been hit by the unprecedented 33 per cent rise in the cost of building materials experienced since 2020.
Gorman said Blacklough would never have entered into fixed-priced contracts for the social housing developments if it could have foreseen the increase in building costs.
Blacklough is a relatively small building company – it had revenues of €22 million in 2021 but this fell to €15 million for the first ten months of this year. And it is operating on small margins. It made a net profit of €205,000 in 2019 and €82,000 in 2020 but suffered a net loss of €237,000 in 2021. To date this year, it has lost €1.7 million.
The spike in building costs has derailed its business model. It owes 270 trade creditors some €3 million, while it has debts to the tax authority of €533,881. The examiner now has a number of months to cut deals with its creditors and secure a scheme of arrangement to save the business – and the future of 363 houses.
Earlier in the week, another property company was before the High Court. Coreet Limited is a special-purpose vehicle linked to developer Bernard McNamara, and it has been working on social housing at Bryanstown Wood, Beamore Road, Drogheda.
Tenants have been lined up to move into the 24 apartments, and the court was told last week that the apartments are “perfectly good homes”.
However, in September, Meath County Council refused to register a Certificate of Compliance of Completion under the Building Control Regulations to the block due to a procedural failure. Essentially, the developer failed to register, on time, a building commencement notice. The refusal could result in the apartment block being demolished, something Coreet is trying to prevent in its court action.
The firm says the local authority accepts that Block D is designed and constructed in accordance with all statutory obligations and standards bar the late seven-day commencement notice and accompanying plans.
Accountant Brian Kilty, for Coreet, told the court in an affidavit: “The State is experiencing an unprecedented housing crisis and demand for housing supply”.
The case was fast-tracked into the commercial division of the High Court by Justice Denis McDonald on Monday morning and is due to be heard in January.
Meanwhile, a short walk away from the Four Courts, there is a site that holds with permission for 578 student beds. However, nobody wants to develop it, as Tom outlined last week.
Originally built in 1984, the Park Shopping Centre in Prussia Street in Dublin 7 is low-rise with a large surface car park. Most of its features are outdated. It houses a Tesco outlet.
Grand Coast Capital (GCC), an American investment group, secured full planning permission to construct 578-bed spaces for students and 32 apartments/townhouses for non-students on the five-acre site of the Park Shopping Centre in Stoneybatter in July 2021.
It also secured permission to build a modern new Tesco store as part of what would be a major regeneration project in Dublin 7.
However, the project has been stalled. The owner can neither raise finance to develop nor sell the site because of a deal it struck with Tesco just after the pandemic started in 2020. Tesco owns its building and surrounds, and part of its contract makes clear that any significant redevelopment of the entire site requires its backing. The developer has been unable to cut a deal with the retail giant (Tesco outlined its position to Tom, last week).
The site of the proposed development is directly adjacent to TU Dublin’s Grangegorman campus, where 10,000 students are based and would be linked to it by a direct walkway onto the campus.
The three stories I have outlined here each have a unique set of circumstances. But, combined, they highlight the impediments and issues around building housing units in Ireland.
We know that the housing crisis is a generational event. But yet, policymakers have yet to grasp the urgency of the situation.
At the time of acute housing shortages, one social housing developer has become insolvent due to a fixed price contract, one has been told it may have to demolish a block of flats, and a prime site is not being developed because no one can make it work.
The system is broken. This is something Sinead and Karl examined in a piece they co-authored last week. They argued that the housing crisis will be heavily impacted by both the global macroeconomy (a looming global recession) as well as the local microeconomy (undersupply and pent-up demand).
In a sobering conclusion, they wrote:
“Despite the complexity of the analysis, the conclusion is simple. The interaction of macro and microeconomic dynamics is such that the Irish property market is facing, and will continue to face, a crisis of epic proportions, leading to humanitarian and social tragedy. The Irish government is faced with a market failure; the private markets, falling under duress, will be unable to solve this crisis on its behalf. The government needs to instate an active management policy that acts where the markets cannot, and is willing to take bold actions in doing so.”
I could not agree more.
Elsewhere last week, Francesca had a fascinating interview with Pat Lordan, who heads up the Garda National Economic Crime Bureau, better known as the fraud squad. He spoke about cybercrime, police tactics, regulation, and the fallout of the banking crisis.
Interestingly, given that financial crime is on the rise around the world, he spoke about resource constraints in his bureau. “Cryptocurrency is a new thing that’s coming at us. We’re currently trying to acquire licenses for cryptocurrency and economic crime. We haven’t got them as of yet. Analysts. I’ve had no analyst in the Garda National Economic Crime Bureau since 2015,” he said.
Leaving the world of mass-manufactured alcohol behind, Karen O’Neill founded a new drinks brand with a modern take on mead. Beekon was going gangbusters, but then the unimaginable happened and she had a decision to make: to fight on or fail. O’Neill spoke to Rosanna.
In the week that Wayflyer shed staff and Meta confirmed it would vacate its Grand Canal Dock HQ early, Stephen wrote about why we need to be calm. He said the tech shock is global, not local and that nothing about our local business environment has changed. “Markets are repricing their estimates of the discounted cash flows of tech companies in response to changes in monetary policy, which has nothing to do with Ireland. Yet, for some strange reason, we are altering our draft enterprise strategy. This makes no sense,” he wrote.
At a recent KPMG Dealmakers event, Andy Cronin, the new chief executive of Avolon, spoke about helping found, float, and take private the aviation leasing giant. He also talked about hiring, the highs and lows of a start-up, and the future of aviation. Tom picked out six lessons from his journey.