Justin Bickle, formerly a Managing Director in Oaktree’s European Principal Group, tells Property Chronicle how turning around English National Ballet gave him the confidence to set up one of Ireland’s biggest housebuilders.
Justin Bickle is a risk taker who seizes opportunities. You might think this unremarkable for a restructuring lawyer turned distressed debt investor at Oaktree, one of the world’s leading credit fund managers. However, his story is not the conventional one of a hard-nosed investor. He also has a softer side.
Having turned around a leading arts organisation in his spare time, as chairman of English National Ballet, which was quite a surprise for a West Country sports fan, he moved to Dublin in August 2017 to head up one of the biggest property start-ups in Europe, Glenveagh Homes.
Within three months the company became the second Irish housebuilder, after Cairn Homes, to float on the Dublin Stock Exchange, raising €350m to develop land built up by Bickle’s former employer into residential units for private and public owners as well as institutions looking to get into the sector.
Bickle is at pains to say that he was not just lofted in by Oaktree, where he had been Managing Director in Oaktree’s European Principal Group for 12 years. Glenveagh was the outcome of a lengthy eight-year process from both Oaktree and himself looking at European real estate from all angles.
Bickle first started looking at Irish opportunities in March 2010, months before the country was forced to seek help from its eurozone counterparts and the International Monetary Fund after it faced a debt repayment crisis following a disastrous bail out of its banks.
“I got a call from Goldman Sachs looking for a white knight for McInerney Homes. I flew in to take a look. Both property and banking were completely frozen and Nama [National Asset Management Agency] had just been established,” says Bickle.
Ultimately Oaktree did not proceed with the McInerney workout but the seeds of Bickle’s interest in the Irish real estate opportunity were sown.
“I didn’t have a network on the ground and no clear path to invest. In hindsight it was a bit early but I had a thesis that residential would recover and over time it would become institutional quality,” he says.
Before then, most housebuilding in Ireland had been carried out by individual entrepreneurs backed by banks, unlike in the US and UK where funds were willing to back public companies.
Bickle and Oaktree instead proceeded to build a network in Ireland at the same time as buying land that could be developed from the banks and other sources.
Oaktree’s strategy was to build platforms, setting up start-ups in real estate subsets such as student accommodation, later living and serviced apartments in various countries around Europe. Some developments were also undertaken in Ireland.
“We were one of the few to take risks and were among the first to put up cranes doing commercial office developments,” says Bickle. Throughout he was confident the economy would eventually recover.
“The crisis was extremely difficult for people living through it but they were resilient and there were no riots on the street. The economy bounced back much more quickly than people anticipated.”
During this period Oaktree was busy building offices, such as AirBnB’s European headquarters in Dublin’s docklands. “It was risky and counterintuitive. We were buying non-income producing land in the docks where tech guys were congregating,” says Bickle.
“Underwriting rents at €27 per square foot didn’t make sense in an excel spreadsheet but then rents recovered to the mid 50s or early 60s. It was distressed debt investing 101. Rule one: there is an economic cycle. Rule two: remember rule one.”
As well as offices, Oaktree developed student accommodation and serviced apartments. But Bickle was keen to get back into residential development. “The market remained frozen between 2011 and early 2014 but then we tried to see if there was a way of investing in the asset class.”
One problem was that there were no opportunities to buy distressed companies as a base to build on, as most reasonably sized housebuilders had been wiped out. Bickle instead chose to back a younger entrepreneur in the sector, Stephen Garvey, to become a co-founder of Glenveagh.
“I courted him for six months. That’s not something private equity tends to do. He was a good builder and financially literate. He was not high profile before the crisis but that meant he had no financial issues. I was keen to find a way we could work together.”
Bickle proposed that Oaktree would provide equity to buy land and Garvey, through his business Bridgedale Homes, would build on the land. “We would underwrite together and see where we went. We could give vendors certainty in a market that was yet to see green shoots.”
A key deal was completing the development of the Greystones marina village, a public-private partnership project that had been mothballed for a decade after only the first part, to build a new harbour, had been completed. Bickle and Garvey came in and managed to complete the PPP.
In return the local council agreed that the duo could then build houses and apartments beside the new harbour. Shortly after that success Cairn Homes, backed by financier Alan McIntosh and local builder Michael Stanley, floated on the London Stock Exchange in 2015.
Garvey and Bickle wondered if they could scale Bridgedale and continue to invest in other opportunities. “We got to the view that there was space for a second housebuilder after Cairn in a very fragmented market where the supply side was largely shot,” says Bickle.
To achieve this, the duo needed equity and decided raising permanent capital was the way to do this, since private equity was reluctant to take on development risk. So they created a company to achieve this, helped by John Mulcahy, formerly of Jones Lang and Nama, as chairman.
The lack of bank finance at the time inadvertently helped the project. “The two pillar banks, AIB and Bank of Ireland, were certainly reluctant to lend at 4% or 5% to new developers given what had happened. There was a structural advantage to being a plc,” he says.
“With Oaktree, through private equity structures I could access 9% funding but as a plc we could attract money at 3.5% to 4%.”
At the time there was dislocation in the UK property finance market too but the problems were magnified in Ireland. “The market was smaller with significantly fewer builders to back. Most had left the market entirely as they had gone bankrupt or been wiped out.”
The moment came for Bickle to make the leap in early 2017 from Oaktree. “It was a buyout of the lands that Oaktree had built up. I asked the firm if they would back me to create this new vehicle and I resigned to pursue it. If the IPO had not succeeded I would have been out a job,” he says.
On a personal level the venture was a big change of direction for Bickle too, relocating from his self-proclaimed “fancy life” in London. Most notably he stepped down as chairman of English National Ballet after a six years stint in which he had helped turn around the company’s fortunes.
“I knew nothing about ballet ten years ago. A business contact, John Talbot, ex head of restructuring at Arthur Andersen, was chairman of English National Ballet at the time. He invited to me to watch a rehearsal. I didn’t know that was code for would you like to join the board and write a cheque.
“It was very different for me and a bit leftfield but I was blown away by the physicality of the dancers and fell in love with the artform. I was asked to join the board and was very flattered. The company’s mission – to bring classical ballet at affordable prices where it is not usually seen – fitted with me too.