US turnaround expert Ross tips Ireland for recovery

US private equity firm has made “big bet” on revival for Irish market

Wilbur Ross, head of US private equity investor WL Ross & Co, is tipping Ireland to lead other ‘peripheral’ European countries in recovery.

Ross said: “Real estate is a peculiarly local activity. One needs to paint Europe with a very small brush, rather than a very big one.”

Speaking last week at a discussion on distressed investment and real estate finance in Europe, hosted by law firm Jones Day in London, he added: “We’re very keen on Ireland.”

Ross’s firm is one of the world’s leading turnaround groups and has recently been taking big stakes in crisis-hit European banks.

Last year it partnered with Kennedy Wilson and Canadian insurer Fairfax in taking a 34% interest in Bank of Ireland and teamed up with Sir Richard Branson to buy Northern Rock from the British government.

It also owns the largest servicer of US sub-prime mortgages, American Home. “We’re optimistic about Ireland largely because we think the fundamentals of the economy are vastly different from those of the Club Med countries in the south of Europe,” he said.

“Ireland has a young, educated workforce, very good infrastructure and the lowest tax rates in Europe, especially for high-tech companies.”

Ross also highlighted the way the Irish government acted promptly to deal with its budget deficit and set up NAMA to take over bad property loans.

“They have done something to help real estate,” Ross added, pointing to initiatives the government is taking to jump – start the housing market.

“With Bank of Ireland we are trying a new experiment with NAMA,” he said.

The ‘80:20 Deferred Payment Initiative’, being trialled with Bank of Ireland, AIB subsidiary EBS and Permanent TSB, aims to protect buyers from negative equity by underwriting falls of up to 20% of the value of properties bought from NAMA.

The bad bank has about 8,000 Irish homes on its books. Buyers will pay only 80% of the agreed sale price upfront, while the remaining 20% will only be paid after five years if the property’s value does not fall.

If it does fall, NAMA will absorb the difference. To qualify, buyers must have a deposit of at least 10%.

“These are interesting experiments to jump-start the market,” said Ross. “It’s fairly clear that Ireland will be the first in the so-called peripheral countries to come back out. I hope so, because we made a big bet.”