Site ‘may be undervalued by €200m’

JURYS DOYLE’S Ballsbridge site is more likely to be worth €400 million — double the price originally envisaged when the Precinct bid for the hotel group first emerged.

Precinct has bid €960m to buy the business, but market sources suggest the true value of the Ballsbridge site could be up to €200m higher than thought. If that is the case, then the pressure on Precinct to come up with a higher bid will mount.

Its original offer of €15.25 per share was rejected outright by the Jurys Doyle board.

Independent sources suggest that redundancy and closure costs of the three hotels on the site would add a further 6m, while any planning permission application would be strongly resisted by locals and possibly An Taisce.

As a result planning could take up to three years to deliver, by which time the rationale for buying hotel chain as a property play could have passed.

It is expected that a huge part of the price will be funded by debt, which is probably manageable at current interest levels.

In three years’ time, however, the cost of money could have risen sufficiently to put debt serving under severe strain, particularly if the planning process becomes a drawn out affair.

It has also been suggested the Jurys Doyle board could take a decision to sell just part of the site as part of the strategic plan currently under consideration.

Concern is said to exist at board level that the hotel chain could be seriously scaled back under new owners.

The Doyle sisters and the Beatty family between them control 30% of the equity.

It has been suggested the daughters of PV Doyle, in particular, are concerned that the hotels he built should be retained.

On the other hand, if Precinct or some other groups were to come in with a significantly higher bid then all that might change dramatically, sources said.

Some analysts have expressed concerns that property investments will soon go the same way as the dotcom bubble that burst in 2000.

Much of the investment taking place is predicated on strong rental incomes and a benign fiscal climate where interest rates and economic growth rates hold at their current benign levels.

But oil prices have remained high since the Iraq War and uncertainty still surrounds the outlook for the European economy.

Fears exists also that the twin deficits in the US will eventually result in further depression in the value of the dollar, which could eventually damage the recovery currently under way in the world’s largest economy.

The fear has been expressed that armchair experts, as well as serious property players, have become involved in a market, and that this could be easily knocked sideways even by a small shift in interest rates or by a downturn in the global economic outlook.

Despite the concerns, those who monitor the sector believe investors have no sense of danger about the inherent risks.

One source warned that sooner or later this property boom will turn into the next serious bubble which will leave enormous damage in its wake.