With a group structure that extends to 70 companies and turnover of more than GBP £200m, McAleer and Rushe (M&R), which was founded in 1967, is one of Northern Ireland’s biggest property companies. Its development interests are mostly in the UK though it has some developments in Northern Ireland and the Republic – in the case of the latter, it has been involved in the development of a hotel at Newtown Road in Waterford and the retail park at Trim Road in Navan but the Republic represented just GBP £0.5m of the groups GBP £62m turnover last year. The BBC today reported on its accounts for the year ended March 2010 which were submitted to Companies House last week. The accompanying report confirms that some of the company’s loans are now in NAMA.
The report and accounts show that the year ending 31st March 2010 was a pretty lousy year in which the company made a loss of GBP £11m on turnover of GBP £62m, the turnover was down 45% from the previous year and even extracting out the exceptional costs of GBP £7m, the company was still in the red. Given the claim on the M&R website of annual turnover of GBP £200m, it would seem that these consolidated accounts don’t include all companies in the group. But the company has net assets of GBP £5m, which is no small feat for a property company these days. That said, the auditors did comment on the difficulties in establishing the reliability of the value placed on property assets. The company has paid down GBP £9m in debt last year which meant that at the end of March 2010, net debt was at GBP £58m. The company employed 106 people in March 2010. The highest paid director is recorded as having received GBP £407,993 in that year, up from GBP £287,860 the previous year. NAMA might not be impressed. The company is surprisingly upbeat in respect of its prospects for the construction side of its business and its website reveals a healthy stock of projects under construction. M&R says that it is developing the Favour Royal Hotel and Golf Resort in County Tyrone with fellow Northern Irish property company, Jermon Developments which is presently in administration owing GBP £100m to Anglo and Bank of Ireland.
With respect to the company’s loans, it says that it had, in March 2010, GBP £51m of term loans and a further GBP £10m of overdrafts. All of the loans are said by the company to be repayable on demand which would generally imply there had been a breach of covenant, possibly loan to value covenants. It is not clear what loans have gone to NAMA but the company does say, as at 21st March 2011 (that is, just last week) that it has submitted a business plan to NAMA and is waiting for NAMA to express its views on the plan.
Last year, there was an entry on here that dealt with the disposal by McAleer and Rushe of a property at 2-14 Baker Street in London which was subject to a loan from Bank of Ireland (one of the five Irish financial institutions which is transferring land and development loans to NAMA). The property was reportedly bought for GBP £57m in 2005 and was sold last year for GBP £29m, on the face of it making a nice tidy loss of ~GBP 28m. The question posed on here in the entry titled “Mystery on Baker Street” was what marketing of this property had taken place to ensure the sale price was maximised, because on the face of it, a NAMA-bound loan was being sold at a loss.
This issue is related to the unsubstantiated allegations made by outgoing Fianna Fail senator Mark Daly who has claimed that loans have been sold at below their market value. In the M&R sale of Baker Street, the buyer was property colossus British Land which is unconnected to M&R, but surely there are questions to be asked about the marketing of the loan/property to ensure the sale price was maximised. NAMA claimed to have overseen the sale of €2.7bn of loans in 2010. It may well be time for an investigation into the sale of these assets to ensure that values were maximised in NAMA’s favour. It is worthwhile repeating that although NAMA has a code of practice for the disposal of loans and assets once NAMA takes them over, there was no such code in existence at the banks last year.
Had the loan been transferred to Nama prior to its sale. There was an issue with the banks forcing through sales before their transfer to Nama
@Neil, the sale was reported in April 2010. According to the M&R accounts (which can be viewed in full above), the company had borrowings last year of some €70m which would mean that it would have missed Tranche 1 and 2 because those Tranches only encompassed the really big exposures (average of €1bn). That being the case, the sale on Baker Street would have taken place prior to transfer to NAMA. But the loan was presumably NAMA-bound and NAMA would have benefitted from the sale. But NAMA also had control over these loans pre-transfer and could instruct Bank of Ireland in their regard.
So the question remains : what marketing took place of this property to ensure the sale price was maximised. The loss recorded on the face of it looks huge given that central London (and Baker Street would fall into the West End bit of Central London) emerged relatively unscathed from the 2007-8 financial crisis.
The link is not mine – but is to a YouTube channel featuring this mysterious site. Maybe there’s more than one funny angle on this deal – as McAleer and Rushe are the main contractor on the site working for none other than good old and jolly British Land. Jolly in the sense that this might be, or could be, or mab be a funny old deal – with the Irish tax payer the loser. Big Time! Bells and ‘whistles’ and all that. (wink, wink)
Could this be a case of ‘cash under da table’ – “you scratch my back and I’ll scratch yours – and we’ll both scratch the banks”?
Or maybe it’s a case of scratching each others balls – as they must have BIG balls to pull this off.
NAMA should be in their pants with a knife tearing (or chopping) the whole deal apart. But you didn’t hear that from me!
Me? Did I say me?
No Sir – was not me who opened ma mouth on this one. Not me who da did spill them thar beans.
You know, like?
But when you see a picture you should always lokk closely for the detail. The devil’s in the detail. Get it?
Well, well. All very interesting indeed. In fact, there appears to be a cozy arrangement here between three parties and not two. Portman Estate are also in for a slice of the cake – along with McAleer and Rushe and British Land on the Baker Street site.
McAleer and Rushe are the main contractors in the site. They appear short of cash as they are not fully staffed up and have been cutting corners on the demolition to the disquiet and frustration of the local residents. The site, during demolition was not secured, there was no banksman on the site, McAleer and Rushe staff were not on site – but moonlighting from another development nearby. Asbestos, dust and particulates from the site have been a MAJOR concern to those living nearby. And even Westminster City Council have written of their concerns.
Given that McAleer and Rushe are technically insolvent suggests that British Land knows something about the firm and the’deal’ that is not in the public domain. Part of that is likely to be the ‘deal’ that has been alluded to that gives McAleer and Rushe a slice of the cake once the building is finished. That cake should also involve and include NAMA.
Whilst British Land may be seen to be on the ‘right side of the building trade’ one wonders if they are also on the ‘right side of NAMA’ or whether this deal constitutes a deal done in such manner as to deprive the Irish State of its dues and entitlements. Could the clock be turning back? I thought the days of the Brits ‘benefiting unfairly’ from Ireland and its assets were long over. Wasn’t that implicit in the recent visit of the queen to Ireland’s fair shores?
I strongly agree with Neil. This is not the only deal in London that needs investigating. Below value sales were pushed through by the banks – much to the delight of the London agents and their mates – but NAMA was complicit, by rubber stamping these sales. The loser was the Irish taxpayer.
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At an Analyst event at the British Land Head Office in London in September 2011, Nigel Webb, a member of British Land’s Executive Committee clarified the role of NAMA in their repurchase of 2-14 Baker Street from McAleer & Rushe:
“At 10 Portman Square, which we repurchased for approximately 50% of the value it previously sold for in 2004, we structured a three-way deal to purchase the site from McAleer and Rushe and the Bank of Ireland, with the consent of
Nama” Note ’10 Portman Square is the same building as 2-14 Baker Street – they have renamed it. The transcript of the anlayst meeting can be cound at http://tinyurl.com/7dcfoh4 (British Land’s website). See last paragraph on P.19
There are two additional important considerations in this deal;
1. Property prices in Central London have not dipped between the date McAleer & Rushe purchasing the site for £57.2m and then selling it back to British Land for £29m
2. McAleer & Rushe applied for and were granted changes to the original planning consent for the site. When they sold the building back to British Land at a 50% discount it was with planning permission for a building development 1/3rd larger than the original development plans – and so there should have been a substantial uplift in price and not a reduction.
[…] For more background reading about 2-14 Baker Street (10 Portman Square) please read other posts on this blog and namawinelake.wordpress.com […]