Land Development Agency eyes sites to buy but warns prices must ‘adjust’

Its preference is to purchase lands with planning permission for at least 200 units in higher density development in the five main cities of Dublin, Cork, Limerick, Galway and Waterford as well as the greater Dublin commuter belt.

Its timing is also taking advantage of a softening in pricing for development land.

The LDA’s head of property Phelim O’Neill says that in its first entry into the market last summer a number of the 60-plus responses were rejected because the landowners were unrealistic on prices while others were rejected because they failed to meet its criteria such as the location, lacked potential for creation of sustainable communities, had planning for less than 200 units or the planning permission may not have been viable.

“Many of the sites were overpriced and over valued and wouldn’t achieve any kind of a value for money proposition for the LDA,” he added.

Its largest market acquisition was two adjoining sites in Clongriffin in north Dublin. One of these had permission for over 1,800 units and the overall site probably has capacity for between 2,300 and 2,500 additional units.

The LDA achieved a 24pc reduction on the asking price for 27.4 of the acres at Clongriffin. The state agency Nama had been asking €50m for that lot but the LDA bought it for €38m (€1.39m per acre) after an Irish developer pulled out of a €45m deal for this lot.

Mr O’Neill says the price equates to around €19,000 per unit which he says “is reflective of the market and reflective of the cost and reflective of good value and gives us an opportunity to benchmark other acquisitions as well”.

“That’s a really good example of the kind of site that we are looking to purchase. It’s got a high frequency train station with both Dart and commuter rail, there’s a terminus for one of the Bus Connect routes, all of the services in place, the road network is there…” he said.

One of the first Clongriffin tranches is out to tender for 408 units.

“We hope that this is a template for more acquisitions that we look to make,” he added.

Asked if the market had adjusted on pricing, he said: “I think there is still plenty of land in the market that is overpriced and that vendors believe that they are worth more than they actually are. And I think that reflects why so few transactions have happened in the last 12 months.

“Hopefully more land will come to the market this year but the only way that it will transact is if the pricing is adjusted somewhat.

“We are doing due diligence on a number of other transactions that came through in the first round…and these are reflective of where the market is and that’s why we are progressing them. We think they represent fair value and a good opportunity for LDA.”

While he sees plenty of developer demand for smaller sites with planning permission he says demand is “much thinner” for larger sites with or without permission. He acknowledges that it is seeking to take advantage of the latter “at the right price”.

I think there is still plenty of land in the market that is overpriced

The agency is taking a number of approaches to delivering dwellings. It is acquiring land from government bodies and hiring contractors to build on those sites. It aims to deliver 2,000 units per annum in this way by 2028. Currently there are three of these large sites with a combined 1,000-plus units being built in Shankill, Co Dublin, Cork city and Naas. A further 2,500 with planning permission are expected to be on site by the end of this year.

A further 3,500 plus are being assessed by planning authorities or are about to have planning applications submitted with active schemes in Galway, Cork, Limerick and Waterford as well as the Greater Dublin Area (GDA).

The LDA is also acquiring homes under Project Tosaigh (PT) which is working with developer partners and already it has delivered over 1,000 units through forward purchase from Irish domiciled developers on about five sites, including 650 in the GDA. Most of these will be let on cost rental terms based on the cost of construction. A further 1,500 are either in construction or legal agreement. The overall target in PT is 8,000 units.

The next phase of PT will see the LDA forward fund developers so the developer and the LDA reduce costs as the developer will not need to raise private funding to cover costs during construction.

While the LDA’s focus is on sites with planning permission, it is also willing to acquire sites without planning permission but which are zoned residential, are serviced and ideally could deliver within five years.