A drive along the commuter corridor connecting Kildare to Dublin gives a representative snapshot of the portfolio controlled by Ardstone Capital, one of Ireland’s most active and yet least known property investors and developers.

The trip begins on the outskirts of Naas, in a brand new estate recently leased to the local authority for social housing, with an access road ending in a field where plans for more are suspended due to relentless lobbying efforts by a leading agribusiness family.

Continue along the town’s ring road and you will come across Castle Farm, a picture of semi-detached suburban bliss where young parents push prams among tastefully planted flower beds.

Closer to Dublin, take the Citywest exit to visit the fast-growing new town where any self-respecting Irish property business wants a piece of the action. Ardstone’s chunk is in the shape of the shopping centre at the heart of the campus – a reminder of the firm’s roots in commercial property – with hundreds of apartments planned on adjoining land, not counting those under construction across the road by another developer with Ardstone funding.

Enter the city via Scholarstown Rd to find a mammoth construction site where the home of a former Taoiseach used to stand. It is surrounded by sleek black hoarding bearing Ardstone’s brand and the promise that “the story is about to begin” for the residents of almost 600 apartments.

Closer to the city centre, you will pass the Velasco office building where the Grand Canal meets the docks – an early Ardstone project now home to Google Cloud. A short distance away, the excursion ends at one of the most photographed buildings in Georgian Dublin, which is also the nerve centre of all those deals: Ardstone’s head office on Fitzwilliam Square.

The Velasco building developed by Ardstone in south Dublin. Photo: Thomas Hubert

From there, Donal Mulcahy (59), Donal O’Neill (47) and Ciaran Burns (57), the owners and directors of Ardstone Capital, manage an estimated €2.5 billion worth of assets. Their investors range from wealthy Irish families to global pension funds and property finance multinationals. They have bought land from the likes of Nama and Goldman Sachs, and sold it to Glenveagh or Oakmount.

Investment funds set up by Ardstone have owned office buildings from London to Düsseldorf and commercial projects in Spain, but their focus is now on housing in Ireland. By The Currency’s latest count, they have bought, built or planned over 7,300 Irish homes – and counting. 

The firm’s founders, Mulcahy and O’Neill, are often presented as former executives from Friends First. However, they only overlapped briefly at the life insurer and the idea for their business probably had more to do with O’Neill’s longer experience with institutional investment in property in the UK and the US, at a time when this business was much more advanced than in Ireland.

They started the firm under the name Conerstone Capital Management in 2005 and were joined two years later by Ciaran Burns, who had also spent a short period at Friends First after an earlier career in accounting and finance at KPMG and GE Capital.

O’Neill has now taken the lead as chief executive and Burns acts as its chief financial officer. They were the only three employees of Ardstone Capital last year, sharing €823,000 in directors’ pay and pension contributions from the company. Its subsidiary Ardstone Homes had another 15 employees.

While they declined to be interviewed for this article, The Currency has had access to over 500 documents and to sources familiar with Ardstone’s business. This is the story of the firm over the past 17 years. 

Click to download Ardstone’s corporate map.

Debut deals in Düsseldorf

Cornerstone, as it was then known, first focused on markets outside Ireland.  From the start of 2007, just as the sub-prime crisis in the US was setting the scene for the wider property and financial global crash, Cornerstone began to roll out funds assembled from wealthy individual investors or their family offices.

One of its first formalised funds, Cornerstone Düsseldorf Holdings, focused on office properties in the German city and ultimately acquired 13 such properties. Accounts filed in Luxembourg show that it worked off an initial €16 million in shareholders’ loans, growing to over €17 million by 2010.

The fund was leveraged with €52 million in debt from Deutsche Bank, according to filings by its Luxembourg special-purpose vehicles called New Ross, Mountmellick and Kilrush. With this, they acquired €67.3 million worth of Düsseldorf office buildings in 2007. 

The first disposals took place as early as 2010, when New Ross reported a €1.3 million profit on the sale of property worth €2 million on its books. In 2012, that company was first to complete its task, selling off its last assets with a book value of €1 million and adding nearly as much in gain. Kilrush made another sale that year at no significant profit. At that point, Cornerstone Düsseldorf drastically reduced its leverage and refinanced it with Berlin Hyp.

The fund made more partial exits in 2014 and 2016, when its Kilrush SPV booked total gains of €14.5 million on a series of disposals. 

2017 marked a major shift. After a decade in business, Cornerstone Düsseldorf sold off most of its properties. Mountmellick got out of its €3 million sub-portfolio with a €2.3 million reported gain. Kilrush sold office space worth €26.7 million on its books and posted another €14.4 million profit that year.

It looked like a happy ending for the fund, having generated gross gains of over €30 million and repaid nearly all its bank debt. The Kilrush SPV, however, still owned one building in the heart of Düsseldorf with a book value of €11.4 million – an 11-storey, 1960 office block within walking distance of the city’s main station and its shopping district. With the Swiss hospitality group SV interested in a lease, Cornerstone and a handfuld of its investors decided to re-invest and convert the high-rise into a 242-bedroom hotel.

Kilrush’s balance sheets showed that it retained €5.5 million in bank debt and €3.2 million in shareholders’ loans on its books in 2017, and began ploughing the €21.8 million in cash it had at hand from the sale of other buildings into the works. Over the following four years, it also raised another €9.5 million from Cornerstone’s investors and, towards the end, €15.3 million from its bank to complete the hotel.

Entrepreneurs, lawyers… and Patrizia

Unlike the initial shareholder loans, this fresh funding round was in equity. This meant shareholders’ names began to appear in Kilrush’s filings. They were those of wealthy Irish individuals and families, largely based in Dublin and Waterford. Examples of the larger investors include a vehicle for the family of Waterford-based engineering entrepreneur Eddie Walsh; Ulster Bank’s former chief economist Pat McArdle; and former A&L Goodbody partner Geraoid Stanley. There were also several members of the Crampton family behind the historic G&T Crampton construction business – we will meet them again.

The debt and equity raised represented an additional €46 million of capital injected, though Kilrush also paid out €8.5 million in dividends – this corresponds to the 45 per cent net gain the fund claimed to have achieved for its investors prior to the hotel conversion.

By the end of 2021, the converted hotel’s book value had increased to a corresponding €51.1 million. The German property investment fund Patrizia had agreed a forward purchased deal for the building as early as Christmas 2019. The relationship formed with this buyer would prove useful to Ardstone later. 

In February of this year, after lengthy delays during the pandemic, Cornerstone finally handed over the keys of the hotel to SV and it opened under Marriott’s Moxy brand. Kilrush has since gone into liquidation and the price paid by Patrizia for the property was never disclosed.

To complete the picture on German investments, the firm had also established a Luxembourg vehicle called Cornerstone Airport City in July 2008. The offshore holding structure was set to take a 60 per cent stake in a vehicle for AirportCity Cologne, a joint venture with German construction group LIAG, which held the other 40 per cent. At the time, LIAG touted the project as a €200 million development of 20 office buildings for 5,000 workers near Cologne-Bonn Airport.

However, the new Airport City never came out of the ground and Cornerstone dissolved its dedicated structure after two years.

Fyffes in the City

In parallel to Germany, Cornerstone was also active in the UK. Around the same time in late 2006 and early 2007, it formed a similar group of Luxembourg companies under the holding entity Cornerstone City Developments, with a 37.5 per cent shareholding for the Irish investor group now known as Balmoral International Land PLC. Balmoral was then called Blackrock International Land (before the world-famous, unrelated US investment firm BlackRock forced it to change its name). It was created in 2006 when Fyffes spun off its property portfolio to shareholders.

Cornerstone City Developments and its subsidiaries Ennis, Gorey and Portlaoise deployed around £40 million in investors’ funds to purchase prime London office buildings, mostly under development and due for completion in the following years. The three properties were a 76,000 sq ft block at 1 Bartholomew Lane; another of 56,000 sq ft at 1 Kings Arms Yard; and the third covering 36,000 sq ft at 30 King St, all surrounding the Bank of England in the City.

The transactions took place through limited partnerships in Jersey and their performance is difficult to track but some figures are available. Investment properties worth £23 million each initially appeared on the books of Ennis, the vehicle for 1 Kings Arms Yard, and Portaloise, the one for 1 Bartholomew Lane.

Then everything disappeared from view while Cornerstone saw out developments and leased out the completed properties. Bartholomew Lane reappeared in published accounts in 2011, the year its holding company Portlaoise was taken over by the sovereign wealth fund Korean Investment Corporation. The transaction valued the building at £70 million.

In 2013, Cornerstone City Developments pulled its two other properties out of secretive Jersey partnerships as it lined them up for sale. Gorey’s balance sheet showed a £27.8 million value for 30 King Street, funded by £14.7 million owed to Cornerstone’s investors and £17 million in leverage from Lloyds Bank. Cornerstone ultimately reported selling the office block for £37 million to the BBC pension fund in 2015.

Ennis, meanwhile, booked a £41 million valuation for 1 Kings Arms Yard at the time of its acquisition by French asset manager Amundi in 2015. Before the sale, it owed £25.3 million to Lloyds and £22.2 million on Cornerstone investor loans, suggesting the sale price fell short of expectations.

By betting on uncertain London office developments at the height of the financial crisis and selling them during the recovery before the Brexit referendum, Cornerstone claimed to have returned a 25 per cent net return to investors after eight and a half years, equivalent to a 3 per cent internal return rate (IRR). While detailed accounts are not available to verify this, published figures indicate it is credible.

Irish money in the sun

Some of Ardstone’s initial business with Irish family offices looking for investment opportunities in property around Europe lives on.

Through PMD Finance, a Luxembourg vehicle of Ardstone which last filed accounts to the end of 2018, high-net-worth investors including industrial dynasties such as the Cramptons in Ireland or the Weinstocks in Britain had invested €26 million in a majority stake in development land in suburban Barcelona. There, Ardstone planned to have a masterplan drawn up for 2,000 homes and 100,000 sq m of commercial space and sell the resulting individual sites to developers. The Currency understands this property has now been sold.

Some of the same investors had advanced another €1.4 million to a connected Irish company, Esplugues Ltd. Meanwhile, Ardstone has a 30 per cent stake in a local  joint venture, LJ Ardstone Spain, alongside the London private investment advisory firm Alvarium, which also had directors on the board of its main vehicle for the Barcelona site.

A separate Ardstone company, Elvinyet Investements, has pooled €9 million to date from over 40 Irish investors, again led by the Crampton family. It indirectly owns another Catalan site in the fashionable seaside resort of Sitges near Barcelona with plans for 280 apartments and a hotel.

In France, Ardstone maintains a small portfolio of investment properties for a group of wealthy private Irish individuals, including some overlaps with its Spanish investments. The latest accounts for its two French subsidiaries showed assets acquired for a total of €15 million, with a book value eroded by half as a result of building amortisation. They reported a combined annual rent roll of €1.4 million.

Ardstone meets CBRE

The recovery in UK commercial property took longer outside the capital and Cornerstone, which had changed its name to Ardstone in February 2011, saw the opportunity. As it prepared to exit London in 2013, the firm set up the Ardstone UK Regional Office Fund (AROF), this time with the investment arm of the New York-listed property multinational CBRE. O’Neill’s earlier career in international real estate provided the required contacts. They reported raising £163.1 million for the fund.

AROF picked up 13 existing office blocks at knock-down prices in cities across the UK. Two years later, it started to sell them off, starting with the Citymark building in Edinburgh. Ardstone reported a £43.75 million sale price to Trinova, representing a 23 per cent increase in value. Since then, AROF has sold properties in Bristol, Cardiff and Manchester. It still owns nine others in Edinburgh, Glasgow, Bristol, Birmingham, Leeds and Manchester.

The fund targets an IRR of over 7 per cent by the time it disposes of them all mid-2024. While it was initially due to mature over one year ago, CBRE has agreed to successive extensions. AROF is entirely domiciled in Jersey and no independent verification of its performance is possible.

Outside its formal funds, Ardstone participated in other deals on behalf of individual investors in Europe and the UK, such as Fulwood House in London and an office building on Brussels’  Avenue Louise. Although it has largely stopped investing in Britain since Brexit, it made an exception for the 1 Parkshot office building in Richmond, near London, just one year ago. The firm reported paying £8.175 million for the fully let property, funded by an undisclosed family office. Debt documents show the deal was leveraged with Bank of Ireland.

To scale up this type of deal, Ardstone and CBRE set out to replicate their UK office joint venture in Ireland. 

Ardstone had tested the resurrecting Dublin office market with similar small once-off transactions, starting with the purchase of 85 Pembroke Road, then leased to AIB, mid-2013. After negotiating an end to AIB’s lease, Ardstone sold the building three years later at a reported gross gain of €3.5 million to Finance Ireland, which turned it into its head office.

To scale up this type of deal, Ardstone and CBRE set out to replicate their UK office joint venture in Ireland. In November 2013, they announced a similar commercial property fund with a €100 million investment target – this time in Dublin. The fund raised €83.6 million from CBRE’s own Global Investment Partners (GIP) arm. The two firms unveiled the new Ardstone Value Partners (AVP) fund on the occasion of their first acquisition – the 29,800 sq ft Fleming Court office block on Dublin’s Mespil Rd for €9.75 million. The price represented an initial yield of 7 per cent. 

Fleming Court received a €1 million makeover, which was in the mid-range of further investment the AVP properties would receive before being flipped in a buoyant market in 2016 and 2017. The fund acquired other properties maintained in their existing state, such as the retail floors of two historic buildings in the summer of 2014 – Morrison Chambers on the corner of Nassau St and Dawson St, and the Crampton Buildings facing onto Temple Bar and the quays.

It also bought two larger, modern office blocks in October that year – one in the IFSC at 2 Harbourmaster Place and the P2 block in the Eastpoint business park. Again, those did not see significant works. The portfolio assembled at that point allowed Ardstone to raise €21 million in leverage finance from Barclays for a final, more intensive phase of the AVP fund.

Its last two deals were for deeper redevelopment. In December 2014, the fund acquired a 26,000 sq ft office building at 100, Lower Mount St from the US vulture fund Lone Star. Then one month later, it bought Kestrel House alongside the Grand Canal. Each was reported to be worth around €10 million.

Hardwicke, the firm of veteran office developer Mark Kavanagh, came in as a contractor (and symbolic co-investor with small debt funding) to revamp the properties over the following two years. The Mount Street building saw a €6 million investment before Credit Suisse bought it for €20.5 million in 2016.

Kestrel House, meanwhile, was demolished to make way for the larger and bolder Velasco building at a cost of €20 million. Irish Life bought it before completion with a €45 million down-payment in December 2016. By the time the developer handed over the keys in March 2017, final funds were released totalling €52.7 million. The AVP fund had virtually doubled the investment ploughed into the purchase and rebuild of the old Kestrel House, making it one of Ardstone’s most lucrative deals to date. The eight-storey Velasco building is now home to the cloud division of Google in Dublin.

A very personal office investment

Every day, busloads of tourists stop by 48, Fitzwilliam Square in Dublin to photograph the record-breaking Virginia creeper growing over the façade of the historic Georgian building and its neighbours’. The wonderful plant is neatly clipped to keep an understated Ardstone nameplate visible next to the front door.

The firm was already renting space for its head office in the building when it came up for auction in 2018, guiding a reported €2.75 million. The winning bidder was a company named Double24Square Ltd – after the property’s address, cryptically. Documents have since revealed it to be owned by Mulcahy, O’Neill and Burns separately from Ardstone Capital. They paid €3.1 million for the period office building: €1.4 million out of their own pockets, and €1.7 million borrowed from Bank of Ireland. 

Double24Square reported collecting €174,538 from Ardstone in its first 17 months of operation, equivalent to an annual rent of over €120,000.

In its final accounts mid-2018, Irish Property Value Fund PLC, the main vehicle for AVP, reported distributing a total of €125.8 million to its shareholders during its two years of asset disposals. In 2016, the company booked net gains of €20.4 million realised on the sales of Morrison Chambers, Harbourmaster Place and 100 Lower Mount Street. The following year, the Crampton Buildings and East Point’s block P2 netted another €4.9 million gain. The sale of Fleming Court occurred before the period covered by published accounts but can be deduced to have resulted in a net gain of around €9 million.

“The fund’s portfolio has exceeded all performance expectations, delivering an IRR of 22.74 per cent,” Irish Property Value Fund PLC reported. Its initial target was 10 per cent. 

Ardstone’s remuneration came in through a complex fee and carried interest structure detailed by the PLC. Through the AVP fund’s four years of operation, the firm was paid 0.75 per cent of its adjusted net asset value plus 1 per cent of the income proceeds during each year. This came to a total of just under €1 million in the last two years covered by the fund’s final report.

The real reward for Ardstone’s team, however, was through the final carried interest payable to “a partnership made up of certain key investment executives of the investment adviser”. Ardstone director Ciarán Burns was the only named member of this partnership because he was also a director of the PLC. The carried interest was made up of a 1 per cent portion of net capital proceeds, and a “performance interest” equal to 20 per cent of the excess net value achieved by the portfolio above its initial 10 per cent IRR target. This excess value turned out to be €34.9 million. When all was said and done, Ardstone executives shared at least €7 million.

The so-called “promote” slice of excess profits has been at the centre of a bitter High Court battle between Ardstone and its former executive John Daly, who sued after his dismissal in 2015 and claimed a 10 per cent share of this sum. The company has robustly denied that Daly had been promised such a cut of the profits. The parties have failed to settle ever since, leaving the case ready to go to trial soon.

“There has been a notable sectoral shift in investor appetite over recent months with focus on the build-to-rent/PRS sector becoming increasingly evident.”

Note to AVP’s final accounts, 2018

In a final note to the AVP Fund’s closing accounts signed off on August 3, 2018, directors noted: “Considering the strength of both the domestic economy and occupational activity, demand for core real estate investment opportunities in the Irish market remains strong although there has been a notable sectoral shift in investor appetite over recent months with focus on the build-to-rent/PRS sector becoming increasingly evident. Looking ahead we expect favourable investment conditions to continue.”

Within Ardstone, this strategic shift towards housing was already under way.

Tomorrow: Part 2 – €2.5bn in assets, 7,300 homes and global capital’s gateway to Irish housing

Office sites before and after Covid-19 – a Sandyford case study

Before turning to residential property full time, Ardstone had one more office job to complete. In 2014, the Dublin firm had been hired by the US finance house Sherman Capital, who wanted to become the latest vulture fund to own a bundle of Irish property-backed distressed loans in the great post-crisis sell-off. They called their joint vehicle Ardstone Special Opportunities Fund (ASOF).

In January 2015, they completed a deal for two properties in Dublin’s transforming Sandyford business district, where older buildings were to be demolished and replaced with gleaming office blocks. 

They paid €6.9 million for Highfield House, a large warehouse surrounded by parking space and leased to a wine trading business – formerly a Panasonic facility in the 1990s. They acquired the other warehousing site, a short distance away along Blackthorne Avenue, for €7.3 million. 

The following year, they obtained planning permission to redevelop both sites. Highfield House was to make way for a multi-block office complex totalling 300,000 sq ft. The Blackthorne Avenue building, meanwhile, was set to be replaced with an even larger office development covering 450,000 sq ft across five buildings and dubbed Eden Plaza. 

For a few years, Ardstone and Sherman sat on the sites and their planning permission as commercial property values in Dublin recovered from the crash – all the while collecting modest rents from existing tenants. Then they put them on the market.

Eden Plaza was first to find a buyer in Oakmount, allied to its US backer Core Capital.  Paddy McKillen Jr’s firm is now building out the project under the Via Verde brand. ASOF booked €14.9 million in proceeds from the sale and returned it mostly under the form of tax-efficient intercompany debt transactions. 

Highfield House, meanwhile, had not been sold when Covid-19 hit. It remained on the shelf until last autumn, when it was finally acquired by a vehicle controlled by Paul, David and Niall Molloy. The three men are directors of Aldgate Developments, which is already behind two adjacent Sandyford office projects – the completed Termini building and the planned Leopardstown West complex on the site of another derelict warehouse around the corner.

ASOF Highfield House had no other significant assets than this property. It had a book value of €9 million on its last balance sheet at the end of 2020, based on its acquisition cost plus the 5 per cent annual interest accrued since on shareholder loans used to fund the deal. When the company went into liquidation following the sale in September 2021, it had just €10.2 million in assets, suggesting a sale price of around €10 million.

The €5 million gap between the two sites’ valuations illustrates the changing fortunes of office redevelopment properties during the pandemic. In the same location and with similar planning permission added, the Blackthorne Avenue had more than doubled in value when Ardstone and Sherman sold it weeks before the first cases of Covid-19 were detected in China. After a year and a half of successive lockdowns, however, Highfield House returned them around 45 per cent instead.

Of over €10 million in ASOF gains, Ardstone received half a million through its 5 per cent stake and collected another €600,000 in fees reported by project subsidiaries. This €1.1 million total does not include any potential undisclosed final bonus.

Part 2: €2.5bn in assets, 7,300 homes and global capital’s gateway to Irish housing


Further reading

4,000 Irish homes, over €1bn in assets and a direct line to Wall St: under the hood at Avestus Capital Partners

The Comer brothers’ Irish empire: 80 companies, €1.2bn worth of property, 4 offshore jurisdictions