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Archive for March 25th, 2011

In his presentation to the Licensed Vintners Association earlier this week, the NAMA chairman, Frank Daly said that “it is likely that enforcement action will follow for some of those in negotiation [six developers] as some debtors are making little effort to progress matters and have not yet adapted to the new realities some three and a half years after the property market collapsed.” NAMA, he said, had already appointed receivers in two cases, not specified but understood to refer to Bernard McNamara and Liam Carroll.

Credible sources are claiming that NAMA has today appointed KPMG as  receivers to companies in the Paddy Kelly group. Laois-man Paddy (67) is one of the most high-profile property developers whose loans have transferred to NAMA. In recent times he might have been most associated with the repossession/return/repossession of his/his wife’s black 2003 BMW 7-series but during the boom his companies and those of his children, notably Simon, David and Chris and in particular the Redquartz group were major developers with commercial projects at Smithfield Market and Sir John Rogerson’s Quay and leisure projects which included Tulfarris House hotel and golf resort in Blessington and Carton House golf resort in Kildare. One of the most expensive acquisitions was Burlington Plaza in Ballsbridge. In 2007 it was, according to Paddy Kelly, valued at €350m by NAMA’s Head of Portfolio Management but back then Jones Lang LaSalle supremo, John Mulcahy. It seemed last year that there was little or no love lost between Paddy and his former valuer.

According to Paddy last year at the MaGill Summer School, he was developing projects outside the country in the US, Malta, Canada and Africa. It is unclear what the rest of the family is doing though his son Simon published a book “Breakfast with Anglo” last year and was a contributor to the Sunday Tribune until it folded in January 2011.

NAMA has not yet confirmed the appointment of receivers. It is understood that Savills will be managing the assets under the auspices of the receivers. It is further understood that the receivership will extend to a relatively small proportion of Paddy’s assets but will include the Marriott hotel in Ashbourne, the  three Clarion hotels in the IFSC, Liffey Valley and Limerick, a car park/retail development/gym in Smithfield. This post will be updated later.

Update: 25th March, 2011. RTE is now reporting the appointment of Kieran Wallace at KPMG to a number of Paddy Kelly assets. RTE say that it is a consortium of some 100 investors to which the receivership applies – Paddy has worked with the movers and shakers in Irish society so this list will be of interest. The properties that RTE claims are subject to receivership are:

(1)  an hotel in Ashbourne, Co Meath, operated by Marriott

(2)  an hotel in Talbot Street Dublin, operated by Days Inn

(3) three hotels operated by Clarion, at the IFSC in Dublin, at Dublin airport and at Liffey Valley

(4) an hotel operated by Maldron in Citywest, Dublin.

(5) hotel suites in Maldron hotels in Cardiff Lane Dublin and in Limerick

UPDATE: 26th March, 2011. The Irish Independent features the headline that NAMA has “swooped” on Paddy’s hotels. The facts would, however, suggest that NAMA’s decision to appoint receivers yesterday was some time in the making and Paddy is understood to be philosophical about it all.  “The family understands the need for NAMA to put them into receivership and we support NAMA in their work” says the Independent citing a spokeswoman for Paddy who adds that the relationship between Paddy and the agency is “very civil”. Hmmm.  The Independent does reveal the new information that Savills is actually acting as a “property receiver” (like a conventional receiver, specialising in property management and supposedly far cheaper than a conventional receiver)  in its own right on certain properties as follows:

(1) Smurfit Kappa Headquarters in Clonskeagh

(2) an office block in Blackrock

(3) a medical centre, leisure centre, car park and seven shop units, including two Paddy Power shops and one operarated by Polonez  in Dublin’s Smithfield

The claim by the Independent, presumably quoting NAMA or the receivers is that the only change tenants will see will be to the name of the landlord to whom the rent will be paid.  What the paper doesn’t say is that tenants may find some degradation in the management of the buildings and that repairs/maintenance are not carried out to the same standard by the penny- (or cent-) pinching receivers. The Independent claims that over 1,000 staff are employed at the hotels now subject to the receivership but they are unlikely to be affected since their employers are the hotel management companies which are Paddy’s tenants. There is a further story in this receiveership that will be of much interest and that is the identity of the 100-odd investors in the consortium led by Paddy that was put into receivership yesterday. The Independent names three – former Ireland rugby manager (and NAMA client in his own right with Steamboat Developments) Pat Whelan and his business partner Pat Chesser, a well-known auctioneer and developer in Limerick city. Builder, John McCabe (also in NAMA in his own right) is also named as an investor as are three of Paddy’s children, Simon, Christopher and John and Paddy’s brother, Liam. Simon is said to be “Porsche-driving”  – the BBC (!) reported in January 2011 that NAMA had taken his 1994 Porsche 911 (cost him €14,000) which last time it was pictured last year didn’t look too roadworthy. These days he is understood to be driving a 2001 Land Rover but what would be the point “swooping” on that.

UPDATE: 1st April, 2011. The press release from Statutory Receiver, Kieran Wallace of KPMG, is now available here. It doesn’t really add anything to what has been reported above.

UPDATE: 27th July, 2011. RTE is this evening reporting that NAMA has appointed receivers to a further 16 properties controlled by Paddy Kelly and other unnamed borrowers. The 16 properties are not itemised but are reported to “include offices and a number of pubs in Wicklow, Dublin and Kilkenny.”

UPDATE: 28th July, 2011. There is the usual standard of reporting – that is, missing a lot of detail and padded out with yet another historical review of NAMA – in today’s Irish media on yesterday’s enforcement action (see here and here). Of the 16 properties subject to the action, they appear to include

(1) Grey’s of Newmarket pub in the Coombe area of Dublin

(2) the Chancery Inn pub close to the Four Courts

(3) the Legal Eagle pub close to the Four Courts.

(4) 61 acres close to Mt Usher in Wicklow

(5) a 32-acre site in Co Kilkenny

(6) an office block in Deansgrange in south Dublin

(7) offices in Sandyford

(8) two suites at a hotel in Liffey Valley in Dublin. (Kieran Wallace, KPMG)

(9) site in Trim, Co Meath,

(10) site at Lusk, Co Dublin

(11) A property at Pembroke Road in Dublin

Savills is named as the property receiver of all of the above, save no 8 where Kieran Wallace at KPMG is reported to be the property receiver.

The Irish Examiner, without citing sources, says “almost a dozen other high-profile developers are also being targeted and may have control of their businesses seized over the coming months unless they agree to sell off assets to repay their debts.”

The borrowers subjected to yesterday’s action by NAMA are reported to be Paddy and son, Simon and “about eight other borrowers”

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Readily accepted by all, during the boom, local authorities up and down the country rezoned more land for development than could conceivably be required. The latest estimates from the Department of the Environment Housing and Local Government state that at 30th June, 2008 we had 14,191 hectares zoned for residential development in the State capable of supporting 462,709 new homes with 2,209 hectares/149,020 homes zoned in Dublin alone. Whilst the Construction Industry Federation might claim that there are imminent new home shortages in limited cases, in overall terms it seems agreed by most, that if anything, we have over-zoned land in the State.

Against this background, in January 2011 it was reported that a member of Cork County Council’s strategic planning committee had written to NAMA, which is perceived to be a dominant player in the control of development land in the State. The letter from environmental consultant Declan Waugh (available here) and response from NAMA (available here) set out the challenges of having excessive zoned land, and NAMA’s engagement with local authorities to ensure “sustainable planning”. Of course sustainable planning may financially benefit developers (and their lenders, including NAMA) where they have already secured planning consents, so there may be more to NAMA’s actions than merely supporting the “social and economic development of the State” (section 2 (viii) of the NAMA Act). NAMA says that the estimate of over-zoned land is 25,000 hectares which appears to be at odds with the DoEHLG’s estimates above but both are substantial.

The question of property over-supply is a contentious one with estimates of 30-350,000 units currently vacant. CIF certainly thinks that shortages in specific areas are imminent. But an equally contentious topic is NAMA’s dominant-player status in the property sector where it competes directly with Ulster Bank, Bank of Scotland (Ireland)/Certus, KBC, ACC and National Irish Bank with the management of distressed property loans. NAMA’s overtures towards local authorities need to be watched closely to ensure the agency does not distort property development to the disadvantage of non-NAMA banks and developers.

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