Archive for August 12th, 2010

You could be forgiven for feeling bamboozled by the various twists and turns that have resulted in the Dublin Docklands Development Authority (DDDA) continuing to book large losses on the Irish Glass Bottle site, the 25-acre patch of ground (pictured above) beside Dublin’s port in Ringsend. For a detailed history of the site see here, and for an examination of the difficulties of its current owner, Becbay see here. This entry examines the net loss made by two state-owned companies, the DDDA and the Dublin Port Company (DPC) from dealing in this piece of land whose freehold was owned by the State through the DPC. The freehold and leasehold interests in the land were worth €412m in 2006 and the leasehold interest had been valued four years previously at €20m.

First, here’s the potted history. The state-owned DPC owned the freehold to the site. They leased the site to a private sector company, Ardagh Glass (later renamed South Wharf) in the 1960s. In 2006 the DPC along with South Wharf sold their respective interests in the site for €412m to a company called Becbay Limited. Becbay has three principal shareholders (Bernard McNamara, Derek Quinlan and the state-owned DDDA who have a 26% shareholding).

So this was the transaction – DPC and South Wharf sold their interests to Becbay for €412m. The sellers divvied up the €412m as follows – €138m to DPC and €278m to South Wharf. The buyer, Becbay, paid €412m and the DDDA’s share of that was 26% (or €107m). So at this stage one state company, the DPC has received €138m and another state company, the DDDA has spent €107m so at this point we (the State) are up a net €31m. This was the end of the transaction as far as the seller, the DPC was concerned though whether that company has questions to answer over the split of the €412m is another matter (see here for an examination of that issue).

So now we move onto the buyer. The DDDA’s share of the purchase price was 26% so they have an outlay of €107m. So you would have thought that they was pretty much their maximum exposure if the value of the site was completely wiped out? You’d be wrong.

So far the DDDA have booked €123m of losses relating to the site. And before examining how they managed to accomplish that feat, let’s summarise that at this stage, the State has succeeded in reducing the value of site from €412m to €15m (sale proceeds of €138m in DPC’s books partly offset by €123m loss in the DDDA’s books). Amazing.

So how did the DDDA go from paying €107m as its share of the purchase price of the site to incurring a loss of €123m. In the latest DDDA accounts it is still valued at €50m, so if DDDA own 26% of it (€13m is 26% of €50m), you would have thought that DDDA’s cumulative losses would be under €100m (€107.12m share of purchase price less €13m current share of value). So how come they have booked €123m of losses?

From the date the purchase of the site was finalised in January 2007, there has been expenditure at the site – demolition of buildings, decommissioning of plant and the removal of 2 metres of underlying soil material (remembering that the site had had a mixture of industrial and landfill dump uses for many years). Also there have been some meaty interest payments to the bank which bankrolled the purchase, Anglo.

The purchase of the site was via a €288m loan from Anglo and the remaining €124m came from the Becbay participants. The DDDA provided €32.8m (26% of €124m) in 2007 as its equity in the site purchase. In 2007 Becbay incurred some €17m of development costs and €21m of interest payable. In 2008 there was some major development work in Becbay with costs of €29m and an additional €24m of interest. And in 2009 the latest DDDA accounts reveal that there were operating costs in Becbay of €2m and interest of €17m.

So at the end of 2009 Becbay had run up total costs of some €521m, being the purchase price of €412m, interest charges of €62m and development/operating costs of €47m. At the end of 2009 the site was valued at €50m which means that Becbay has lost €461m and the DDDA’s 26% share of that is €123m.

It is unclear from the DDDA’s accounts whether a contingent liability of €29.1m for a loan guarantee to Anglo is in respect of the other shareholder’s liabilities. The DDDA have recognised losses on their share of the purchase price so it would appear to be possible that the DDDA may have further losses of €29.1m in respect of the other participants’ loan from Anglo, though the DDDA accounts do not recognise this liability. Also there are continuing interest obligations on the loan from Anglo. In 2009 the interest bill was €17m (with the DDDA shouldering 26% of this) – presumably 2010 will be similar.

So the DPC made €138m on the sale and the DDDA had lost €123m to the end of 2009 giving the State a net of €15m from a piece of land that was worth €412m only 3 years ago. To add some balance, the DPC may well have earned some interest on its €138m. But possibly the most important question is why the leaseholder of the site, Paul Coulson’s South Wharf received the lion’s share (€274m) of the €412m sale price when the leasehold interest had been valued 4 years before at €20m.


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The Independent together with property specialist and arguably lead-NAMA valuer, CB Richard Ellis, have compiled the top 20 property deals during the boom. Here is a table compiled on here but based on the information in the article – some of the individual deals are aggregated eg the Bank of Ireland and AIB disposal of their HQs and branches. (UPDATE: it has been pointed out that some of Joe O’Reilly’s transactions are missing from the list and indeed there is no reference to them in the Independent article – the table below has been updated)

Trinity College Dublin professors, Brian Lucey and Constantin Gurdgiev offer commentary on the transactions. A key question is where did the money go? The answer it seems is that it mostly went on to fuel further property speculation which turned sour or to buy shares or disastrous financial products. Notable exceptions are the Jurys Doyle family who sold three hotels at the peak of the market, Paul Coulson of Ardagh Glass who sold the Irish Glass Bottle site, Sir Marc Cochrane who sold a site in Woodbrook(Shankill) and the sellers of the Millennium Park in Kildare, Jerry Conlon and Dermot O’Rourke. As for the rest the money has in the words of Brian Lucey largely “gone like the snows in spring”. It seems it is up to NAMA to restore wintry conditions so that some proceeds can be derived from the loans purchased, most of which are represented in the list above.

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