It will be interesting to see the types of shareholder which invest in Cairn Homes as part of its planned listing on the main London stock market next week.
The listing will be the first by an Irish-based home builder since McInerney. That company’s more than twenty-year tenure as a publicly-quoted company came to an end in 2010 – another casualty of the construction and wider economic crash.
In principle, there’s a significant gap in the market for this kind of equity funding for home building in Ireland. There’s strong demand and pricing for new houses and apartments, particularly in the Greater Dublin Area and insufficient supply because of the battered nature of most of the industry’s main players and the reluctance of the banks to provide the levels of debt finance required.
There’s also the prospect of strong medium-term economic and population growth here, two vital drivers of demand for new homes over the coming years.
As Cairn Homes pointed out in its own statement yesterday, competition in the sector is likely to be relatively muted in the short term and barriers to entry relatively high, due to the still fragile nature of the sector and many of its former key players.
All that notwithstanding, Cairn is seeking to raise up to €400m in London, having just formed last year and without having sold a single new home.
It plans to do so at its Parkside site in North Dublin as early as this month. It also operates within a sector that has a far from unblemished recent financial and corporate governance track record.
In this context, the company’s fund-raising plans seem far more ambitious, for instance, than those of cash-generating forecourt operator, Applegreen, which expects to raise just €70m as part of its forthcoming IPO.
Interesting too, whether it proves overly-restrictive or not, that unlike Applegreen, Cairn Homes cannot yet seek a dual listing in its home market as the Irish Stock Exchange requires a minimum three-year trading record prior to any listing.
It’s true that one of Cairn’s founders, Michael Stanley, has significant experience of the ups and downs of the construction market in Dublin and that the company’s board and management team bring strength and expertise from many relevant sectors.
But it may be that the success of the IPO will depend on the relationships and financial market contacts of the company’s other founder and executive director, Scotsman Alan McIntosh.
As a co-founder of many successful UK-based enterprises such as the Phoenix Group, Punch Taverns and Spirit Group, he is likely to open doors to capital that no representatives of the Irish construction sector could manage on their own.
A consistently generous dividend policy is also likely to prove a necessary carrot, as it has with the REITs that have attracted equity capital to the Irish commercial and residential property markets over the past two years.
The best of luck to Cairn, both next week and in the years to come. We need to build more homes, rapidly, and we need strongly capitalised companies to build them. It will still be interesting though, to see who invests.
