Business Irish

Tuesday 25 July 2017

Politician in great peril

Soccer-mad ex-developer holds a high standard of social awareness, though he may find the banks will take a hard line. . .

This week's decision by ACC Bank to appoint a receiver to three of his properties piles the pressure on Mick Wallace, Ireland's most colourful property developer, politician and sports impresario.

On Tuesday, ACC Bank, which is owed €18.4m by the developer, appointed a receiver to three properties owned by Mr Wallace. The developer-turned-politician owes his banks, which also include AIB, Bank of Scotland and Ulster Bank, a total of €42.7m.

While a bank or NAMA appointing a receiver to a property developer's assets is hardly unprecedented, this could be the first such appointment to trigger a Dail by-election.

Under Irish electoral law, undercharged bankrupts are automatically excluded from membership of the Dail.

With Mr Wallace having given his banks personal guarantees, any one of them could if it so chose move to have him declared personally bankrupt, a possibility that Mr Wallace himself acknowledges.

If that happens, then he would instantly lose the Wexford Dail seat he won in last February's general election.

But will one of his banks seek to have him declared bankrupt? Mr Wallace has said that he doesn't expect to be made bankrupt, but it might be a good idea for him not to bet on such an outcome.

Misfortune

It is Mr Wallace's misfortune that his main creditor, ACC, is by far the most aggressive bank when it comes to pursuing the repayment of loans to Irish property developers.

Might ACC be tempted to make an example of Mr Wallace, if only pour encourager les autres? Mr Wallace is doubly unlucky in that only one of his banks, AIB, is participating in NAMA.

While NAMA has been getting tougher with deadbeat developers of late, it is still a pussycat compared to ACC.

If there is such a thing as a typical Irish property developer, then it certainly isn't Mr Wallace. A native of Wellingtonbridge, Co Wexford, he studied history, philosophy and English at UCD with the vague idea of becoming a teacher.

However, after graduating, he went into the construction industry instead, teaching himself the rudiments of block-laying and carpentry along the way.

Teaching's loss was construction's gain. Mr Wallace started out as a small builder doing domestic extensions and attic conversions before later graduating to public works contracts in the greater Dublin area.

As the economy began to boom in the late 1990s he started to buy land, including a site on Dublin's Ormond Quay, where he developed the 'Italian Quarter', a mixed scheme of Italian-themed restaurants, winebars and shops.

Mr Wallace, who has had a passion for all things Italian since travelling to that country to support the Irish team in the 1990 World Cup, runs several of the winebars himself.

The Italian Quarter was one of the properties to which ACC appointed a receiver this week. However, Mr Wallace continues to operate the winebars.

Another one of Mr Wallace's developments was of the former headquarters of the Communist Party of Ireland on Essex Street in Dublin.

Luxury apartments

As the Temple Bar area became trendy, the comrades suddenly found themselves with a valuable asset. Enter Mick Wallace, who, in 2005, built six luxury apartments in the upper storeys, leaving the Communist Party with a bookshop and modern theatre on the ground floor.

Given all that has happened since, one can't help wondering whether the comrades were better capitalists than the capitalists themselves!

Of course Mr Wallace's capitalism is of a distinctly idiosyncratic variety.

Unlike most Irish property developers, whose political opinions, in so far as they have any, tend to be to the right of Genghis Khan's, Mr Wallace has espoused radical opinions down the years.

In 2002, he hung a huge banner on the site now occupied by the Italian Quarter urging a 'no' vote in the second Nice referendum and when Dublin City Council attempted to force him to remove it, he successfully countered by demanding that the huge IBEC banner in the IFSC urging a 'yes' vote be removed also.

The following year he hung another banner attacking the American invasion of Iraq from the same site.

Maybe the shocking pink shirts which are his favoured attire provide a clue to his political opinions!

While most of Mr Wallace's properties, which apart from the Italian Quarter also include the Behan Square apartment complex close to Croke Park and a development site in the Dublin suburb of Rathgar, are in the capital, he retains close links with his native Wexford.

A self-confessed soccer nut, he is the founder and main backer of Wexford Youths, which plays in the first (ie, second) division of the FAI's Airtricity League.

Wexford Youths are unique in the Airtricity League in only playing local players. Mr Wallace served as Wexford Youths' manager for their first three seasons in the Airtricity League.

Wexford Youths represents only part of Mr Wallace's involvement in soccer. He also acts as agent for Kevin Doyle, the Wexford-born Republic of Ireland and Wolves striker.

In 2009, Mr Wallace negotiated Doyle's £6.5m transfer from Reading to Wolves, who had just been promoted to the English Premier League under the leadership of former Republic of Ireland manager Mick McCarthy.

One of the conditions of the transfer was that Wolves agreed to play a friendly against Wexford Youths, a fixture that guaranteed the Irish club a full house. Is there any limit to Mr Wallace's talents?

While Mr Wallace is a far more sympathetic, articulate and socially aware individual than most of his fellow property developers, his business, like virtually all of the others, was built on foundations of sand.

Ireland's property bubble was a product of the seemingly infinite supply of cheap credit made possible by our membership of the euro. This allowed Mr Wallace and others like him to borrow vast sums on the assumption that Irish property values would keep on rising.

Unfortunately, when that supply of cheap credit dried up, property values after the August 2007 credit crunch collapsed and developers such as Mr Wallace were unable to repay their massive debts.

The Rathgar site illustrates Mr Wallace's predicament. Bought at the top of the market for €7m, his bankers are reputedly now open to offers of €1m.

In fairness to Mr Wallace, he owned up to his problems early on. Unlike many other developers who desperately clung to the "soft landing" fantasy when it was obvious that we were in the early stages of a serious crash, he let the cat out of the bag when he told RTE's 'Prime Time' programme in February 2009 that he wasn't paying the interest on his loans and neither were most other developers.

Although Mr Wallace's apparent candour is in stark contrast to most of his competitors, there is one issue on which he has been curiously reluctant to comment.

This week's receivership has left sub-contractors who are owed up to €1m by his companies wondering if they will get paid. So far, he has had nothing to say on this subject.

So what does the future hold for the developer-turned-politician? The Dail arithmetic, the Government has a majority 60 over all of the other parties and Independents, does Mr Wallace no favours. The fact that he won his seat at the expense of Fine Gael's Michael D'Arcy further complicates matters.

All of which means that, despite his professed optimism, ACC or one of his other banks could well seek to call in Mr Wallace's guarantees and personally bankrupt him.

If that happens his colourful political career could come to an abrupt end.

Irish Independent

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