AIB ‘part of gold rush buying into London property’

AIB lent property tycoons Achilleas Kallakis and Alexander Williams 12% more than was needed to buy the Daily Telegraph’s London headquarters building, at a time when it was keen to invest in UK real estate, jurors heard at Southwark crown court.

The pair are accused of more than £60m (€74.6m) fraud against AIB and Bank of Scotland. They have pleaded not guilty to 23 counts.

On day five of the retrial, defence counsel for Mr Kallakis said: “AIB was clearly part of the gold rush (of banks looking to buy into the booming London property market)”.

The court heard that in 2007 the bank loaned £224m to a special purpose vehicle affiliated with Mr Kallakis, to buy the Telegraph building, 111 Buckingham Palace Rd in London’s Victoria, from the billionaire Barclay Brothers. However the asset was being sold for just over £200m.

The purported guarantee from Hong Kong developer Sun Hung Kai Properties, bolstered the value of the property to £333m.

In total, £740m from AIB was advanced to firms directly or indirectly controlled by the accused, to purchase 16 buildings in Britain between 2003 and 2008.

Micheal Cooke, a former member of AIB’s team which was based in London and advised Mr Kallakis, said: “In 2001, a decision was made to be a big lender in the UK property market. It had largely recovered from the doldrums of the 1990s. It was a market where AIB had a reasonably significant reputation,” however it was an area where the bank “aspired to build a substantial loan book”.

He also revealed that in autumn 2007, AIB began discussions to start selling down loans of over €200m on its Kallakis books, to reduce its exposure.