Posted on Wednesday 18 November 2015 by Ulster Business
Frank Cassidy, Paul Henry and Martin McDowell in Osborne King's Belfast boardroom
“Challenge us,” Martin McDowell says as he ushers me into the boardroom of Osborne King’s Belfast headquarters, “we want to be challenged.”
This is good news, not least because I’ll be spending the next hour or so in the company of three commercial property consultants and there is nothing worse than a three-against-one interview where the participants clam up at the merest hint of a nasty question.
“How badly was your business hit by the departure of your former employees to a rival firm?”
Now, before you think Ulster Business is so crass as to embark on such a question from the off, we warmed up with some coffee, a bit of “how’s business?” chat and a very detailed appraisal of Belfast’s bus lanes beforehand to dull the impact of the grenade question.
Not that it really rocked the OK boardroom (that’s an abbreviation of Osborne King, not an appraisal of the boardroom), nor did it make them clam up.
Quite the opposite in fact.
“The impact of the guys leaving was realistically negligible to us because the market they wanted to operate in was a market we couldn’t achieve,” Martin said. “We probably couldn’t get into the very large multinational deals with multinational clients because of the presence of international brands here.
“Their aspiration was to do business in an area in which Osborne King wasn’t realistically pitching.”
With one of the elephants in the room dealt with (another is the bus lanes in Belfast City Centre, but we don’t have the room to deal with that issue here), it was time to move on to the more touchy-feely business of Osborne King’s recent merger with what had been an apparent competitor Ardmore Commercial.
What was that all about?
“The merger brought together complementary skill sets and allowed us to form a large independent indigenous company within the property market at a time when the vast majority of companies are connected to international organisations,” was Martin’s reply, one which was echoed by fellow director Paul Henry.
“The experience that Frank and his team have, the fact they’re very well respected in the market, have excellent clients and are very hands on meant it was a perfect fit to the Osborne King way of working,” he said. “It was a meeting of minds.”
So it was a marriage of convenience, rather than necessity?
Yes, said Martin.
“Both companies were profitable in their own right but, with the business climate the way it is, it helped both parties to merge costs, particularly because we represent similar but diverse clients.”
Paul said it was a “merger of client services” to provide a broader skillset, but what does Frank Cassidy, the former managing director of Ardmore and now a fully blooded Osborne Kingite say?
“It was simply two very viable and profitable businesses coming together to provide property services,” he said. “One of the most important aspects is that it is easier dealing with the financial institutions when you’re a member of a bigger organisation such as Osborne King and that’s already been a help.”
And with the commercial property market picking up pace, the merger seems to have come about just at the right time.
Paul Henry, who is an accountant by trade, explained that activity is increasing as the private equity funds - most of which are US-based – which bought up large portfolios of (often distressed) banks loans are beginning to sell down their assets.
They are being bought in smaller chunks by mezzanine funds, which have a higher risk appetite than a bank would, and in time they’ll look to exit their investments and head to other regions.
By that stage more traditional forms of banking will have emerged and that will allow the local investors to re-enter the market having been frozen out in the aftermath of the financial crisis.
Local investors which Osborne King, as an independent agent, specialises in servicing, where its larger multinational rivals favours a bigger brand, according to Paul.
“The big corporate brands are known to the private equity funds, and to the mezzanine funds and still will have three-to-four years of activity. But once the locals return to the market I struggle to see that there will be sufficient business for those global brands to maintain their staffing levels here.”
One of the biggest corporate brands to operate on these shores, Cerberus, has already begun selling down its portfolio, one it bought from the National Asset Management Agency (NAMA), and that process is expected to continue.
Meanwhile, things are looking up from a market point of view.
For instance, Grade A office space in Belfast, a subject which has been bandied about at great length in the boardroom we’re currently sitting, is – wait for it – getting more expensive.
“£17-a-square-foot has been paid this year in an existing building and some new build will go higher this year,” Martin said.
While that is much better than the £15-£16 recorded a year ago and much better than the £10-£12 which was the norm only a couple of years ago, there’s still some way to go before the magical £18-£20 is reached, the level at which is becomes viable for developers to build new stock.
But the upward momentum is growing and while only Belfast Harbour Estate have undertaken pure speculative build of Grade A office accommodation, others are soon to follow.
“It’s definitely coming,” Paul said. “Development finance is there for residential so the next step is for commercial. It’s going to come soon.”
Frank, who is something of a retail expert, said in his sector pension funds are the dominant buyers of space at present but in time local investors will no doubt return to the market.
Whatever happens, he believes that the success of a company like Osborne King is the ability to react to the changing market place and, by broadening the skills base, the merger has helped that.
“The key to this market is to have the capacity to turn your tanker around more quickly so that when it dries up you’re not left sitting on top of a sandbar,” he said.
It’s difficult to top that analogy so, taking Frank’s advice on board, Ulster Business finishes up and moves out, careful not to run aground or to get in the way of an errant bus on Donegall Square South.
It was that kind of day.