Far-flung lands prove profitable havens for heavily-indebted developers

Having loans in NAMA is no reason for some Irish developers to stop building, especially on foreign shores, writes John Hearne

WHEN West Cork property developer John Fleming petitioned the Southend County Court in Essex for bankruptcy earlier this month, the historical resonance was hard to escape.

Mr Fleming was one of the good guys. A developer as loyal to his West Cork employee base as he was successful. Two years ago, the Sunday Times Rich List reckoned he was worth €138 million, yet he was famously down to earth.

A non-drinker, he was awarded a long service medal for volunteering with the Courtmacsherry Lifeboat in 2007. Yet here he is, a year later, taking the boat. To declare bankruptcy. Another indigent paddy looking for a new start with the old foe.

The unsentimental reality is that British bankruptcy laws are much more forgiving that our draconian system. Had Mr Fleming initiated bankruptcy proceedings at home, he could have been forced to remain in that state for up to 12 years, compared to 12 months in Britain.

Go bankrupt in Ireland and you lose more or less everything you own. If you try to leave the state, you run the risk of being arrested. The other unsentimental reality is that much of John Fleming’s €1 billion of bad debt will be bought by us — at a knockdown price, yes, but there is no certainty that any of NAMA’s toxic debt purchases will ever come good.

Anglo Irish Bank is owed more than €260m by the Fleming Group, while the debt to AIB is estimated to be in the region of €300m.

While Mr Fleming may be the first big builder to succumb to personal insolvency, he’s not the only one to seek respite from the horrors of the Irish economy overseas.

Long before the property bubble exploded, Irish property tycoons had been clocking up air miles and recycling the profits from Irish investments in far flung places. It is these holdings that now offer many of these tycoons some hope of rebirth.

One man whose rejuvenation does not appear to be going according to plan is Seán Dunne (pictured). One of the biggest developers in the state, Mr Dunne paid €54m an acre for the Jurys and Berkeley Court Hotel sites in Ballsbridge, Dublin, but continually ran afoul of the planning authorities which refused permission for the 37-storey tower he envisaged.

Though of humble Carlow stock, he was one of those developers who wasn’t squeamish about visible displays of wealth. When he married former gossip columnist Gayle Killilea in Thailand, he flew 30 guests, including former Irish Nationwide boss Michael Fingleton, rugby star Ronan O’Gara and fashion designer Karen Millen out for a two-week celebratory cruise on Aristotle’s Onassis yacht, the Christina O.

He drives, or rather is driven about, in a Lexus Hybrid and lives in the only place a man of his taste and means could live — Shrewsbury Road in Dublin. Earlier this year however, Mr Dunne and his family decamped to the US, where the so called baron of Ballsbridge appears set to take up residence in an exclusive gated community in Greenwich, Connecticut.

But now, in an irony that would be hard to accept in a work of fiction, he has raised the hackles of his would-be neighbours over the redevelopment of his property. In addition, local planning officials have actually placed a stop order on the project.

Mr Dunne meanwhile, consistently denies ownership of the property to media. Despite introducing himself to neighbours as a new resident earlier in the year, local newspaper Greenwich Time reported one neighbour as saying he now denies all ownership and threatens to sue if anyone makes such a claim.

The reinvention of one of his former Shrewsbury Road neighbours, Derek Quinlan, appears to be going a little better. A former tax consultant, Quinlan founded property investment firm Quinlan Private over 20 years ago. The company specialised in investment strategies for what used to be called people of high net worth.

Mr Quinlan brokered some of the biggest property deals of the boom years, and used his earnings to embark on what was for a time a highly successful investment strategy.

He was part of a consortium which bought the Bank of Ireland headquarters on Baggot Street in Dublin in 2006 for €200m. Quinlan Private, meanwhile, bought Jurys Inn from the then Jurys Doyle Hotel Group a year later for €1.16 billion.

Today however, he has borrowings of around €600m, owned to Anglo, AIB, Barclays, Bank of Ireland and Bank of Scotland (Ireland), and was one of the first property moguls to be taken under NAMA’s wing.

In response, Mr Quinlan put his €7m home on the market — it’s still looking for a buyer — and removed himself to Switzerland. He still retains business interests in Ireland however. Demonstrating a keen eye for a recessionary winner and an imperviousness to irony, he’s a director of Dublin-based Tazbell. The company recently won a tender from the Department of Justice to manage the collection of overdue, court-imposed fines.

Seán Mulryan of Ballymore Properties may have remained in his Kildare stronghold but the Roscommon developer is now focusing his attention on Britain and beyond.

In the good times, Ballymore was actively developing a staggering 18,000 houses and had a €17.75bn international development strategy.

But with borrowings from Anglo and Irish Nationwide, Ballymore loans were among the first to be transferred to NAMA. In May, Ballymore Properties Holdings Ltd, Mr Mulryan’s British holding company, was warned it would be struck off and dissolved if it did not file overdue accounts.

Last month, losses at Mr Mulryan’s international property operation were up 83% to €119.2m in 2009. But it’s not all doom and gloom. In April, he launched the €450m Eurovea centre in Bratislava, Slovakia, a country where he has been active for much of the last decade.

The development includes 235 apartments, extensive office space, a five-star hotel, and two hectares of prime parkland along the Danube. Nor is this a ghost development: 90% of the retail space is taken up, while 60% of the apartments have been sold.

Slovakia is not the furthest point reached by NAMA tycoons. Irish developers have put much greater distances than this between themselves and the Irish property market.

Treasury Holdings, run by Richard Barrett and Johnny Ronan, owns a wide range of commercial and retail properties not only in Britain but also across Europe, China and Russia.

Mr Barrett is reported to be spending much of his time in China overseeing the group’s extensive property portfolio in Shanghai and Beijing.

Closer to home, the company is the major shareholder in Real Estate Opportunities, which owns London’s landmark Battersea Power Station.

In October, REO stated that the company’s solvency was dependent on NAMA as well as a number of other creditors. REO alone owes NAMA €922m. The wider group, which reported borrowings of €2.7bn earlier this year, was unable to make interest payments due in August, said it does not expect to be in a position to repay loan notes due to mature in May and thus far has had group loans totalling €1.4bn transferred to NAMA.

The group had some good news in November, when the proposed redevelopment of Battersea finally received planning permission.

As you read down through the list of NAMA developers, it’s hard to find one that doesn’t have irons in the fire beyond these shores.

Bernard McNamara is famous for his involvement in the deal of the boom — the purchase of the Irish Glass Bottle site for €412m. It is currently valued at around €50m. Now carrying debts of over €1bn, Mr McNamara is providing property consultancy services in Qatar in the UAE.

Michael O’Flynn, the man behind the country’s tallest building — the Elysian Tower in Cork city — established Tiger Developments more than a decade ago to pursue property opportunities overseas. The organisation has, according to its website, concluded €1.18bn of transactions in Britain and over €200m in mainland Europe.

Earlier this year, Mr O’Flynn secured an investment from a US equity group to develop a 435-student residence near Wembley in London, and in so doing became the first developer to conclude a deal even as his loans moved to NAMA.

Being a NAMA builder, it would appear, is no reason to stop building.

Where are they now?

DEREK QUINLAN

FORMER principal of Quinlan Private, Quinlan brokered some of the biggest deals in the boom, and lead a group of investors to buy the Savoy Hotel Group for €886 million in 2004.

One of the first 10 developers into NAMA, he has resigned from Quinlan Private and lives in Switzerland.

JOE O’REILLY

THE man behind Dundrum Shopping Centre and Castlethorn Property. Most of O’Reilly’s companies are of unlimited liability and don’t have to publish accounts. One of the first NAMA developers.

BERNARD MCNAMARA

ALSO one of the first NAMA developers. Together with the Dublin Docklands Development Authority and Derek Quinlan, he bought the Irish Glass Bottle site for eight times its current value. Early this year, he said that he was broke and was carrying debts of €1.5bn. Yet he has found work as a property consultant in the Middle East.

SEÁN DUNNE

PAID €380m for the Jurys and Berkeley Court Hotels site in 2005, but only managed to secure planning permission for a much reduced development in August. Currently embroiled in a domestic planning dispute in the US.

JOHN FLEMING

THE West Cork developer had a judgment for €25.9 million secured against him by AIB earlier this year and eventually declared bankruptcy in Britain last month.

MICHAEL O’FLYNN

ANOTHER of the first developers into NAMA, he is the man behind the Elysian Tower, and continues to manage to an extensive property portfolio overseas.

He is currently suing Fine Gael TD Lucinda Creighton for defamation over remarks made at a Donegal summer school.

GERRY GANNON

ONE of the disproportionately large number of big developers that hail from Roscommon, Gannon was also one of the first into NAMA with estimated loans of €1 billion. Despite this, he was awarded a €20m storage contract for the National Museum earlier this year.

TREASURY HOLDINGS

TREASURY Holdings’ Richard Barrett (left) and Johnny Ronan (right) find themselves in the curious position of being NAMA developers and simultaneously NAMA’s Treasury Building landlord. Another of the first transferees into NAMA, Treasury continues to manage a large property portfolio in Britain and the Far East.

LIAM CARROLL

ALSO one of the first through NAMA’s doors, Carroll built his fortune on building small, single aspect, architect-free apartments all around Dublin.

His empire came crashing down after a prolonged struggle in the Commercial Court.

SEÁN MULRYAN

ANOTHER Roscommon man and another early admission into NAMA, Mulryan’s Ballymore property company has retained extensive real estate interests beyond these shores. He is the only NAMA property developer to make Britain’s 2010 Estates Gazette Rich List, albeit in 198th place with only €78m.

From boom to bust

* June 2007: The Fianna Fáil/Green coalition assumes power.

* July 2007: Taoiseach Bertie Ahern wonders aloud why those who moan about the economy don’t commit suicide.

* November 2007: Goodbody Stockbrokers predict house prices will fall by 8% in 2008 following a 5% fall in 2007.

* November 2007: The governor of the Central Bank, John Hurley, says the Irish financial system is robust and well placed to cope with emerging issues. A Central Bank report predicts a soft landing for the housing market.

* May 2008: Brian Cowen succeeds Bertie Ahern as Taoiseach. Brian Lenihan is appointed Minister for Finance, taking over from Mr Cowen.

* July 2008: Goodbody Stockbrokers predicts that house prices could fall 30% in 2009.

* September 2008: US investment bank Lehman Brothers collapses.

* September 2008: Following frantic overnight meetings, the Government issues a €440 billion blanket guarantee of the liabilities of six Irish banks.

* September 2008: Ireland becomes the first eurozone country to slide into recession.

* March 2009: Ireland loses its AAA rating from ratings agency Standard and Poor’s.

* January 2009: Anglo Irish Bank is nationalised.

* May 2009: Goodbody Stockbrokers predicts house prices will fall by 40%.

* April 2009: Taoiseach Brian Cowen announces that an entity called the National Asset Management Agency (NAMA) will assume the toxic property loans of the banking sector.

* September 2009: NAMA says it will apply a 30% discount on €77bn of loans.

In a Dáil speech, Finance Minister Brian Lenihan says 40% of the loans that will be transferred to NAMA are cash-flow producing.

* September 2009: DKM Economic Consultants estimates that around 150,000 construction and construction-related jobs have been lost to the economy since 2007.

* October 2009: After a prolonged court battle, a liquidator is appointed to Liam Carroll’s Zoe Developments Group.

* December 2009: The €412m Irish Glass Bottle deal comes to a head when the courts award judgment of €62.5m against developer Bernard McNamara and €98m against one of his companies, Donatex.

* March 2010: NAMA completes the transition of the first tranche of troubled property loans from the participating banks.

* July 2010: It emerges that only 25% of property loans to be transferred to NAMA from the banks are performing.

* August 2010: NAMA acquires the second tranche of property loans.

* October 2010: A report from the Department of the Environment says that there are 2,800 ghost estates in the country.

* November 2010: Developer Paddy McKillen’s NAMA court challenge fails.

* November 2010: The Government confirms that the country requires IMF/EU assistance, and an €85bn bailout fund is announced.

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