A 10-year association with one global partner, doing over €2bn of cross-border investment deals in the past five years, and awards for best local business three years running from that partner are impressive statistics for a firm. But they were not enough to stop US giant CB dropping Dublin firm Hamilton Osborne King this June in favour of smaller rival Insignia Richard Ellis Gunne.
But what CB did not want after its agreement to merge with Insignia in February, Knight Frank was more than happy to pick up. After wooing HOK, it finally signed an association with the firm on 1 September.
Being wanted by Knight Frank was good news for HOK, one of Ireland’s top agencies known for its strength in the investment and residential markets. But from a professional stance being dropped by CB was a blow, and it also hit home personally. Paul McNeive, 41, the newly appointed managing director of HOK, who stepped up on Wednesday, says it was “disappointing”. “The alliance was working fantastically well. We had handled €2bn worth of property over the past five years, which is phenomenal.
“Ironically, we were the star performers in CB’s worldwide group. Its US headquarters presents an annual award to the office that generates the most cross-border investment business and HOK, Dublin, has won that award for the past three years.”
Taking it personally
In comparison with events in his personal life McNeive lost both legs in a car crash 20 years ago the breaking of the CB connection may not seem that important. But it was the thought of getting back to his career with HOK that got him out of his hospital bed in 1983. As a result, he takes seriously anything that happens to the firm he credits with helping him both physically and psychologically after the accident.
The CB-Insignia merger had to cause ructions in Ireland because CB’s UK partner Hillier Parker had been linked with HOK, while Insignia’s Richard Ellis had been with Gunne since 1997. McNeive puts the merged giant’s choice of Insignia RE Gunne down to Insignia’s 10% stake in Gunne, while the HOK/Hillier Parker link “was an association”.
Jonathan Hull, formerly of Hillier Parker and now CBRE senior director of European investment in London, says this was a factor, but that CBRE also went with Gunne because it was “a young, growing business, and the leading firm in the corporate and office sectors”.
McNeive is keener to talk about the outlook for HOK’s alliance with Knight Frank than dwell on why HOK was dropped. When he and his colleagues knew they would lose the CB connection to their main competitor, they went into negotiations with the other big UK agents.
HOK has 165 staff in three Irish offices, and made a net profit of £3.5m on fees in excess of £15m (€21.6m) to the September 2003 year-end. Investment, and particularly overseas investment, is a big part of its income over 20% of its business this year was out of Ireland. Concentrating as it does on the European investment market, HOK was looking for a partner that was strong in that area. It talked to FPDSavills, Cushman & Wakefield and King Sturge.
“What won the day for us was Knight Frank’s strength in Europe,” says McNeive. The bonus is that Knight Frank is strong in both commercial and residential. “Hillier Parker was just commercial and we had a strong residential link with Savills, but Knight Frank is both.”
What’s more, Knight Frank “bowled us over with its enthusiasm”, says McNeive. “While we were travelling to London to meet other groups, Knight Frank kept sending groups from all over Europe to us armed with investment opportunities.”
Peter MacColl, head of Knight Frank’s investment division, says his company was looking for an Irish connection for some time. “If we were going to have an association with somebody we wanted to make sure it was the right fit. HOK is strong on investment, which was crucial for us and we got on well with its guys.”
McNeive boasts that, in the first month of their alliance, on behalf of Irish investors, they already have under offer a London property and a regional retail centre, have looked at a dozen others and done a significant land deal in an EU accession country. They are also engaged to find £750m worth of property.
Key to keeping the investments coming is London-based Irishman Kieran Cotter, a former national hunt jockey. In the past four years, he has been involved in more than €500m of acquisitions on behalf of Irish investors. “Kieran has an extraordinary track record,” says McNeive.
When HOK was still with CB, Cotter was seconded to Hillier Parker in London with whom HOK shared £2m of fees this year, before the split. When CB made its decision over Ireland, there was the question of where Cotter would go. In the end, he plumped to stay with HOK.
With Cotter and the Knight Frank alliance in place, McNeive now has to think about his strategy as MD, as he takes over from Aidan O’Hogan, who is going back to working with commercial clients. McNeive made his name in the industrial market, and says he was elected because he has “a track record in achieving record prices year after year selling commercial and acquiring property.”
Overcoming his disabilities
He is also impressive for overcoming his disabilities, to the extent that he is the only known disabled helicopter pilot. He recounts the story of his car accident in 1982, when he was 20, in a matter of a fact way. “It was the burns which caused all the damage,” he says, rubbing his scarred hands, “but my legs got the worst of it. There was no skin on them and there were months of unsuccessful skin grafts before I lost them. I was in hospital for over a year, in an isolation unit and spent six months in traction.”
Eighteen months later he was back at work for HOK, which he joined in 1979 as a trainee. “I don’t invite any great credit for coming back. Yes, I had the strength and confidence to do it, but I was doing it for myself, not for anyone else.”
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Paul McNeive |
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Born 16 May 1962, Dublin 1979 Joins Osborne King & Megran as trainee surveyor 1985 Qualifies as chartered surveyor and member of the Irish Auctioneers and Valuers Institute 1988 Appointed associate director of Hamilton Osborne King 1990 Appointed director of Hamilton Osborne King 2000 Takes overall responsibility for business space departments at Hamilton Osborne King Sep 2003 Appointed managing director Lifestyle Lives in Enniskerry, Co. Wicklow, and is married to Barbara, with children Megan, 12, Killian, 11, and Michael, 7. Enjoys flying, playing awful golf, music and playing the guitar. |
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Why young Gunnes won the CB connection |
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CB Richard Ellis Gunne’s managing director, Pat Gunne, admits that he thought he might lose out to HOK. “Round about MIPIM we knew we were the underdogs because HOK had been doing a lot on the investment side over the past seven years. Whereas we had set up an Irish desk only six months previously.” So why does this relaxed 31-year-old think the decision went his way? “It was a business decision over how much money they could make over the next 10 years as opposed to the past 10 years. We are a young company , where the average age is mid-30s. The best years are ahead but we have a big hill to climb in the meantime.” “Another advantage we might have had over HOK was that we had integrated all our business lines into the Insignia Richard Ellis network. We had integrated our hotels team with the international hotels team and our office and consultancy teams had done a lot in the UK. So our tentacles were all over the organisation. We weren’t purely reliant on the investment side in terms of where we were going to build the business going forward,” adds Pat. The Gunne Group’s turnover is €15m. About €8m was generated from the 70-staff commercial business, a figure which has tripled since 1998. Pat’s eldest sibling, Lorraine, is part of the Gunne Residential management team. It is branded and operated separately, but is now looking at ways of working with CBRE partner Hamptons International, particularly with clients seeking to buy houses abroad. But Pat says the firm’s main priority is to double the commercial fee income to €16m by 2006. CBREG’s investment team is being revamped to beef up the challenge to HOK. This week, Caroline McCarthy started work as director of international investment. McCarthy previously was in charge of property acquisitions for Bank of Ireland, and is a former UK-based King Sturge investment agent. Other agents describe her as a “key asset, who knows the UK and European market very well”. She will join Pat’s brother Andrew, who has returned to Dublin to handle European investment after a stint with the City of London investment team at CBRE (formerly Insignia Richard Ellis). In CBRE’s West End office, the other Gunne brother Niall is going head to head with HOK heavyweight Kieran Cotter, now on permanent secondment to HOK’s new affiliate Knight Frank. Niall is supported by West End investment agent Rob Hayes, while fellow CBRE agent Simon Bowder has been tasked to find suitable properties in the UK regions. “Niall is finding product in London for Irish investors,” says Pat. “We are focusing on 20 investors – syndicators, private banks and high-net-worth individuals. Many of them will be the same people being approached by Kieran. Their only allegiance is to whoever is providing them with the right product.” There are rumours that HOK did not help its cause by rebuffing CBRE’s attempts to take an equity stake in its business. HOK’s affiliation with Knight Frank does not involve an equity share. Pat will not comment on this speculation but confirms thatCBRE has a 10% stake in Gunne: “And an option to acquire another 20%.” CBRE has two directors on the eight-man CBREG board Mark McAlister, formerly of IRE, and Jonathan Hull, formerly of CBHP. “They are highly influential in the direction and running of the business. Board meetings are as much about generating business as about managing it,” says Pat. This hunger for business pervades CBREG’s office in Ballsbridge, Dublin. Pat suggests the buzz is down to the fact that 50% of the firm’s profits are floated each year. “The 50% float is coming down to who’s performing, and generating business. Whether secretary or director, that is where the equity goes.” Staff instead say that Pat is the dynamo that charges up the office, “always encouraging everyone” and “not taking himself too seriously”. Chief executive of CBRE’s City team Robert Evans agrees that there is something in the “Gunne family twinkle”. He says they have a sense of mischief that is hard to resist but that they are also focused and driven. The dramatic transformation of Pat’s firm mirrors the evolution of the Irish economy from agrarian backwater to Celtic tiger. The company was founded in 1956, by Pat’s grandfather, also called Pat, as a cattle market and auction house in Carrickmacross, Monaghan. However, it was his son, Fintan, who drove the business forward by opening residential estate agency offices, and then moving the family down south to Dublin, and launching Gunne Commercial in 1983. He also agreed a 50/50 joint venture with what was then Richard Ellis, to create a Belfast office in 1997. Pat, meanwhile, had been working as a surveyor with Richard Ellis in its Glasgow office, specialising in property management, industrial agency and investment since 1995. As the eldest son, it had always been his ambition to head the firm, but he took over earlier than anyone expected when Fintan died suddenly in 1997. Pat was just 25. Industry doubts that he was too inexperienced to take over were silenced rapidly. In 1999, he put together a €38m acquisition for Dunloe Ewart of a 50% stake in 160 acres of land at Clonburris in west Dublin, the vendor being Canadian multi-millionaire Harry Dobson. This land was subsequently rezoned from agriculture to offices and residential, multiplying its value by as much as 10 times. “I was lucky when I took over that we were coming into the biggest boom ever in property. Dad was my total role model. Everything I’ve learned or aspired to was Dad. It would be a compliment to say I was a chip off the old block but I’m not as good. But give me another 20 years.” Pat knows he has his work cut out to double turnover in three years. “We are going to be bulking up on good people in investment, corporate real estate and retail. We are looking to boost our presence in Belfast and aim to open offices in Cork and Limerick.” On the consultancy side, the firm employs 15 people to cover valuations, rent reviews and rating. But it is seeking to increase its rent review and portfolio valuation work. CBREG is also hoping to leverage off CBRE’s reputation on the corporate real estate side, particularly with inward investment from the US. Retail growth is another major ambition. “Retail was billing €250,000 three years ago, it is now doing €750,000. We are looking for a shopping centre expert from one of the UK retail specialists to head shopping centres in Dublin. We are looking for others who might want to relocate from the UK too. The labour pool here is small and we are all trying to pinch off each other. Our strengths are our age profile, enthusiasm to win and quality of people. “This is a good company. We all want to do well and we’ll work hard for it but we’ll have a few jars along the way as well,” he adds with a grin. Robert Gibson |
