We haven’t heard a great deal of late about the fate of the 25-acre Irish Glass Bottle site in Ringsend, Dublin which is curious, as it is one of the most expensive assets under NAMA’s control by reference to its value in 2006 when it was bought for €412m by a consortium which essentially comprised Bernard McNamara, Derek Quinlan and the state-owned Dublin Docklands Development Authority (DDDA). It is estimated that the site today is worth €50m; there are three feature blogposts on the history and current status of the site on here – here and here and here. Yesterday NAMA announced a deal which appears to wipe out any legacy liability on the part of the DDDA for what has turned out to be one of the dumbest property development gambles in Irish history.
The summary of the relevant history is that the consortium which bought the site in 2006 funded the acquisition in the main through €288m of Anglo loans. And each of the participants, including the DDDA, provided guarantees on the loans. The site has been a disaster for all involved – in addition to the acquisition cost there has been interest payable on the loans and, in addition, at least €45m forked out to decontaminate the site. There is also legacy litigation between the participants – a complete car-wreck of a project. The loans which were originally advanced by Anglo to the Becbay consortium were transferred to NAMA.
The DDDA has new management and its chairwoman, Professor Niamh Brennan, has been keen to draw a line under the disastrous foray by the DDDA into property development, so yesterday’s announcement by NAMA of a deal with the DDDA, to absolve the DDDA from the guarantees given by the DDDA on the loans acquired to fund the purchase, will be warmly welcomed by Professor Niamh.
So what was the deal announced yesterday? The loans owed by the consortium, Becbay Limited, to NAMA remain payable in full. However NAMA has bought out the guarantees previously provided by the DDDA on the loans by Anglo to Becbay Limited.
How much were the guarantees worth? We don’t know but NAMA indicates that there may have been uncertainty and cost in expensive litigation to enforce the DDDA guarantee.
What did NAMA get in return for waiving the DDDA guarantees? A selection of land and retail/office units at the following locations:
(1) Former BJ Marine premises, 81A and 81B, Sir John Rogerson’s Quay, Dublin 2
(2) A retail unit at 15 Irishtown Road, Ringsend, Dublin 4
(3) A retail unit at Unit 2, Longboat Quay, Dublin 2
(4) Former U2 Tower, Britain Quay, Dublin 2
(5) Former Artbrook/Dublin Waste site, Upper Sheriff Street, Dublin 1
(6) Former Readymix site, 5-23 East Wall Road, Dublin 3
(7) Former Jones Oil site, Sheriff Street Upper and Mayor Street Upper, Dublin 1
(8) Lot 2, Riverside IV, Grand Canal Harbour, Dublin 2
(9) Plot 8, Sir John Rogerson’s Quay, Dublin 2
There was no indication in the NAMA statement of the value of the above properties
Was this a wholly commercial transaction? NAMA is not exactly confirming this, but do say that the agreement came after “mediated settlement negotiations” and the Agency also says that it “approached this matter with the DDDA in exactly the same manner and with the same objectives as .. would apply to any other debtor”; but given that the DDDA is state-owned and, as a result, would have its liabilities ultimately met in full by the State, then NAMA may have allowed its primary objective be corrupted if it accepted anything less than 100% of the value of the guarantees. There hasn’t apparently been a Direction issued to NAMA in this matter by the Minister for Finance, Michael Noonan.
We own both NAMA and the DDDA, so why worry if this wasn’t a good deal for NAMA? Whilst it is true that we own the DDDA and effectively own NAMA, so robbing Peter to pay Paul might mean it doesn’t matter to the finances of the State if the deal was a good commercial deal for NAMA, or not. The reason it would matter is that any deviation by NAMA from its primary objective should be carefully considered, otherwise we get a muddying of the waters and NAMA gets an excuse for losses, and may use that excuse to hide losses resulting from poor performance by the Agency in other areas. There is a mechanism in place through the NAMA Act if the Government wants NAMA to deviate from its primary objective – a Direction is issued. That protocol should not be dumped for political expediency by this Government or financial cute-hoorism by NAMA.
Does yesterday’s deal affect the future of the Irish Glass Bottle site? Not directly, it just affects DDDA’s liability on its guarantees given for the loans used by the Becbay consortium to buy the site.
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