LARRY Goodman’s purchase of the old Bank of Ireland headquarters on Baggot St in Dublin — announced last weekend — is a remarkable story.
Here is an Irishman who has about €43m available to buy a landmark office complex and who may have to pay nearly as much again to refurbish the three building 220,000sq ft building complex, which needs reglazing, the removal of absestos, and a new air conditioning system.
So at least it proves there remains at least some substantial personal wealth in Ireland, that all our elite has not gone bust or cannot borrow to buy things. Goodman had to have access to substantial funds because he beat off 12 other bidders, almost all international investors, to buy the buildings. A previous effort to extend them in 2008 was rejected by the planning authorities. He has to work with what he has.
The American property investment company Kennedy Wilson is believed to have been the under-bidder. The other major Irish contender, Green Property, was operating in conjunction with GIC, the sovereign wealth fund of Singapore, and there were other similar bidders in the field.
This tells us a number of things. There remains interest in the purchase of prime commercial Irish property, particularly in Dublin, as long as it is well located and is priced appropriately. There are potential tenants for such office space. There may be less economic activity going on in Ireland but a significant level of business continues to be done. There is speculation that Irish legal and accountancy firms could be interested in becoming tenants, although a major multi-national financial or tech firm could be tapped up. That Irish professionals remain the most likely tenants is very interesting though.
There may be a lesson for the slow-moving state-owned Nama in how receiver Kieran Wallace from KPMG has acted. He priced the building to sell, to raise as much money as possible for Bank of Scotland (Ireland) which had appointed him.
Bank of Scotland (Ireland) is part of HBOS in the UK which took the expensive but pragmatic decision last year to write off its loans to Irish property buyers. This freed it to sell what it had possessed, when borrowers surrendered properties in lieu of repaying their loans.
The building last sold in 2006 for the outrageous sum of €212m to a consortium led by the bling financier Derek Quinlan of Quinlan Private, developer Paddy Shovlin and hotelier brothers Anthony and Patrick Fitzpatrick, with Anglo Irish Bank Seán FitzPatrick among a supporting cast of smaller investors. But there are other reasons why Goodman’s purchase is so significant. Three years ago I devoted a chapter of my book Who Really Runs Ireland? to Goodman, even though his profile had dropped considerably from what it had been 20 years earlier. There were three reasons for my doing so: to show that being embroiled in political controversy or tribunals eventually didn’t necessarily matter a whit to wealthy businessmen; how certain character traits led to many of those who fail financially to redouble their efforts to get what they have lost back; and how the route to recovery has to be hastened by debt write-off.
Goodman was once Ireland’s most controversial businessman, a man whose political links caused outrage. He was the subject of a tribunal — the infamous Beef Tribunal of the early 1990s — but suffered not a whit of damage from its findings. Those findings, it should be said, were somewhat less than they could have been, had all the relevant information that became available at later tribunals — such as the McCracken and Moriarty investigations into Charles Haughey — been available to the late Justice Liam Hamilton at the time. Hamilton’s finding — that there was nothing to suggest that the granting of State benefits to
Goodman’s 1990 crash was a foretaste of what would happen to a far greater number in Ireland nearly two decades later.
Goodman went on a major acquisition spree in the late 1980s, buying vast quantities of shares in two British companies Unigate and Berisford. He suffered vast losses as their share prices sank. He did so at a time when he was owed tens of millions of pounds (as the currency was then) from Iraq for the sale of beef to that country. When Saddam Hussein invaded Kuwait in August 1990, provoking the first Gulf War, the bill had mounted to £170m and Goodman’s chances of being repaid disappeared. Within days the Goodman organisation was on the verge of collapse, owing £510m to 33 banks.
Goodman was saved by the government of the time, which acted with rare speed. While the Trade and Enterprise Minister of the time Dessie O’Malley was a noted and brave critic of Goodman’s business behaviour, particularly in regard to his demands on the State for support, he introduced new legislation with the specific purpose of saving Goodman from collapse.
The Dáil was recalled in an emergency session to bring in the Examinership Act, which allowed a company to stave off receivership or liquidation by getting protection from its creditors for a limited number of days.
In that time the court-appointed examiner drew up a scheme of arrangement: through this agreement creditors were paid a portion of what they are owed, usually through asset sales, the ownership of the company was restructured and, crucially, the company continued to trade.
What happened here was instructive: instead of throwing Goodman out on his ear for losing so much money, the banks allowed him to keep 40% of the shares in the new company while they took the rest. He was also allowed to keep £8m in personal assets. Their reasoning was that they needed Goodman: he had the expertise in beef processing that they didn’t, and his skills in this area were in no way connected with what had gone wrong. The pain for Goodman was the loss of his property portfolio, which was seized and sold.
ONLY four years later, with the help of businessmen in Co Louth, Goodman raised the money to buy out the banks for just £50m — which meant that the banks gave up on recovering about £300m of debts still owed. In this deal, the newly-named Irish Food Processors was allowed to regain total control of Goodman’s beef industry assets; and the banks were given the rights to any cash that was won in ongoing legal actions, such as the action over the revoked export credit insurance.
Ten banks agreed to provide Goodman with working capital for future requirements. IFP went on to establish itself as the biggest beef processor in Ireland and as one of the largest in Britain. Goodman had 35% of the new entity and his friends who helped raised the finance to buy out the banks got 65%. Within four years he bought them out. By the turn of the century he had repurchased nearly all of the Irish property he had been forced to sell ten years earlier. Being in property at the time of the latest crash doesn’t seem to have hurt him unduly, if his latest purchase is evidence. Whether you approve or not of the chances Goodman was given to restore his wealth there are lessons from it all: political influence pays; tribunals are an inconvenience with few lasting consequences for investigated businessmen; no matter what the findings; debt write-offs work for both borrowers and lenders; and every asset has a price as long as the seller is willing to accept its losses against the previous values.
* The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.
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