Friday 28 November 2014

The low-key developers who ran up borrowings of over €1bn

A little-known developer is fighting repayment of €90m in loans. He's not the only one. Nick Webb and Roisin Burke reveal other highly indebted property players you never heard of

Roisin Burke and Nick Webb

Published 07/07/2013 | 05:00

Former Taoiseach Brian Cowen, left, with solicitor-turned-developer Paul O’Brien
Former Taoiseach Brian Cowen, left, with solicitor-turned-developer Paul O’Brien
Wicklow businessman Kevin McNulty
POSTER BOY FOR WILD LENDING: Monaghan shopkeeper Jim McConnon, who owes €32m to Zurich Bank Ireland
Hotelier Tommy Keane with Seve Ballesteros
Developer Gerard O’Rourke

Low-key Wicklow developer Kevin McNulty is fighting for his future in the courts. The Blessington businessman is challenging orders requiring him to pay about €90m to Nama arising from unpaid loans advanced by Anglo Irish Bank.

It's a stupendous amount of money. For many people, even those in the property and banking sector, the court case was the first time they'd even heard of McNulty. While fallen tycoons Bernard McNamara, Ray Grehan, Sean Dunne, Derek Quinlan and Liam Carroll are household names, there were billions of euro shovelled out to other less well-known developers. But who were they?

A Sunday Independent investigation has pieced together details of loans of more than €1bn from the banks to groups of builders and developers who had flown well beneath the radar during the boom.

In 1998, Anglo financed McNulty's property dealings on Dublin's James's Street, with loans secured against a pub, 40 car parking spaces and other assets in the area. Then McNulty developed major sites on the Fonthill Road in Clondalkin and in Leixlip. McNulty's PA Bello construction firm then made a gamble on developing the €150m Boyne Bridge business park in Louth. The 40-acre development was launched by the then Fianna Fail Justice Minister Dermot Ahern in September 2008 – 19 days before the infamous bank guarantee.

McNulty's business plan – and the plans of fellow developers – were liquidised. His loans were transferred to Nama and, in April 2012, the scale of his borrowings became public as Nama moved against the developer. Nama's case is against McNulty and two of his companies, Ashburton Construction and PA Bello. The case continues.

Monaghan shopkeeper Jim McConnon was in many ways the poster boy for wild lending by the banks. McConnon ran a SuperValu supermarket in the sleepy town of Castleblayney, Co Monaghan. It was a town with a local population of just 2,000 people.

In a moment of utter lunacy, McConnon reasoned that it needed to have a giant shopping centre to serve its tiny population. AIB helped fund his acquisition of some parcels of land as he sought to amass a large enough footprint for his emerging white elephant.

In June 2007, with markets turning, AIB got cold feet. McConnon had already spent €10m on this madcap scheme. Zurich Bank Ireland stepped into the breach, lending McConnon a staggering €32m. It's worth remembering that McConnon was a shopkeeper, not someone with a track record of building retail developments.

Needless to say, the market tanked and McConnon was unable to find tenants for his development. The loans went bad and Zurich took him to court, securing a €32m judgement. McConnon has fought this judgement, claiming that he didn't understand what he was doing and that the bank had been involved in "misrepresentation". Just over a year ago, the Commercial Court dismissed his claim.

During the boom, his two main sites were valued by property "experts" at €30m. During a hearing in March 2011, Judge Birmingham said: "The enormity of the difficulties that the project encountered may be seen from the fact that the defendant has averred that the current value of the Castleblayney Centre is in the region of €1m to €2m." A stunning vapourisation of value.

In 2004, golfers Vijay Singh, Padraig Harrington, John Daly and the late Seve Ballesteros turned up for the opening of the €100m Heritage Golf and Country Club in Co Laois. The spectacular, 100-acre five-star golf and hotel resort was developed by Stradbally businessman Tommy Keane. The development had money showered on it. Unfortunately, it was also in the middle of nowhere, a few miles outside Portarlington. The development company was owned by Keane and his wife Angela.

The hotelier and builder was also involved in the Heritage Hotel in Portlaoise, the Kea Lew Business Park, and had helped develop the Togher interchange, and several other Midland property schemes.

Keane's borrowings from Anglo included a €24.3m loan facility in January 2008 to TK Contract Systems Ltd. Loans of €21.6m were also made to Corrigeen Construction Company Ltd in September 2008 and in 2009.

A further loan of €17.2m was advanced in January 2008 to another Keane firm, Kea-Lew Ltd, with Anglo handing over €10.8m to Killenard Golf Company Ltd in November 2009. These loans were secured by guarantees from Keane.

In October 2010, Keane had a €89.9m summary judgement order entered against him in favour of the former Anglo Irish Bank. At the time, it was the largest judgement against an individual issued by the Commercial Court.

Limerick developer and sailing buff Gerard O'Rourke was one of the biggest housebuilders that you've never heard of. Probably because he was at sea an awful lot. O'Rourke's Chieftain yacht sailed in the Rolex Sydney Hobart race as well as the Volvo Ireland races.

This lifestyle was funded through the successes of his Chieftain construction group, which developed schemes in Ireland, the US, Britain and South Africa before the market turned. These developments were funded by loans from AIB, Bank of Ireland, IBRC, Bank of Scotland and Investec.

In 2011, a receiver was appointed to three of O'Rourke's firms – Chieftain Construction Ltd, Chieftain City Campus Ltd, and Chieftain Developments Ltd – while two others, Chieftain Construction Ltd and Chieftain Construction Holdings Ltd, went into liquidation.

AIB had a €21.84m judgement registered against O'Rourke, which gave some indication of the size of his borrowings. It emerged that his businesses had loans of €101m, against assets of just over €3.7m.

O'Rourke is now based in South Africa, where he is understood to be involved in construction. He also spent time in Libya, managing to escape after being caught up in the February 2011 revolution that ousted Colonel Gaddafi. "Safe in Ireland. Thoughts with the Libyan people," he tweeted on his return.

Limerick solicitor-turned-property developer Paul O'Brien was hit with a total of €70m in Nama-related judgements, according to BusinessPro figures. The number of judgements taken against solicitors and the legal profession rocketed by over 630 per cent last year. O'Brien, a partner with the McMahon O'Brien Tynan law firm, accounted for six of the top 10 judgements against lawyers last year. Another partner at the law firm, Denis McMahon, owes Nama €14m.

The loans were racked up through O'Brien's involvement in the development of not one but five shopping centres across Ireland. These included Newtown Shopping Centre in Annacotty and units at the Racefield Shopping Centre, both near Limerick; the Showgrounds Shopping Centre in Clonmel, Co Tipperary; units at Doughiska Shopping Centre in Galway; and Brasscock Shopping Centre in Waterford. In March 2012, Nama moved against O'Brien seeking to pursue personal guarantees given for loans. Last August, Nama obtained three judgements totalling €59m against O'Brien, with a further €11m judgement registered against him in November.

In a separate court case involving rival developers last year, it was claimed that Mr O'Brien owed Nama in excess of €287m. In Mr Justice Frank Clarke's judgement in March 2012, it was mentioned that O'Brien had assets worth €87m, leaving him in negative equity to the tune of €200m.

Nama is currently in the process of chasing hotelier Michael Finn and his wife Claire through the courts.

Finn was involved in several developments in Galway including the Galway Races after-party favourite, the House Hotel, and the Spanish Arch hotel on tourist haunt Quay Street.

Boomtime buccaneering banks Anglo and AIB both lent millions to Finn, loans that Nama, aka the taxpayer, took over in 2010.

Now the agency is moving against the Finns, seeking a €108.5m judgement. It claims that the couple invested €600,000 in a high-end, second-hand car-selling business while insolvent and transferred shares in the family home to their children.

Receivers to several Finn companies were appointed last year. It's been reported that the couple have moved to Britain.

Almost no one had heard of of a retail developer called Eamonn Duignan until it emerged that Nama's Project Club, a €230m loan book associated with his property debt, had caught the eye of Starwood and other giant vulture funds. Several of them flocked to try and consult with him as they considered mounting bids.

The Navan native and keen horse breeder was connected with shopping centre and commercial developments in the Midlands and developed Navan Shopping Centre with partner David McCarthy. Several hoped for projects like a retail centre in Trim went on hold as the boom got less boomy.

Michael Kelly's plans also went awry as things slumped spectacularly. He bought the landmark Hume Street Hospital building just off Dublin's Stephen Green in 2006, with plans to turn it into a flash business centre. It encountered problems at planning stage, and then the market tumbled.

The beautiful, gracious 18th-century building is now in a sad and neglected state of disrepair. It went on sale last year for €3m – a 90 per cent chop on what Kelly paid for it.

Kelly was the subject of judgements requiring him to repay €60m to AIB related to loans for Hume Street. Through his company Glandore, he runs business centres providing 'executive suites' in the office belt of Dublin 2.

Danske Bank Ireland, formerly known as National Irish Bank, also obtained a judgement against Kelly related to loans on Fitzwilliam Place offices in November last year, for €64.8m. Together with the AIB judgement, it tots up to an almost €125m debt.

Around about now, developer Michael Conway Jnr, one of the many who headed across the Irish Sea to get past his troubles, is due to be discharged from his British bankruptcy. Along with Michael Conway Snr, Padraig Dennehy and Kieran Conway, he formed the Conway Partnership, which was valued at a stonking €500m before property values were demolished in the crash.

Bank of Ireland was owed €60m on loans related to housing and commercial developments in Cork. A further €130m was due to Ulster Bank by related companies and €40m was owed to Anglo.

Conway's partner Dennehy also opted to take the British bankruptcy route. He is now based in Britain and working as a project manager in Surrey.

Back in the day, the Durkans were prolific builders of swathes of houses across South County Dublin, including several public private partnership housing estate projects, and Liam and Neil Durkan were enthusiastic donators to political parties.

In 2011, National Irish Bank appointed a receiver to one site secured with a €37m loan to Durkan New Homes, a related company, and to investors Don and Marian Casey. The Durkans' property development business put up €30m, while the Caseys put up €7m, with the debt secured on a site in Cabinteely which they co-owned.

The Durkans were also associated with a long-running State property swap saga which finally ended in court last summer. The State was ordered by the High Court to pay its own agency, Nama – the holder of the debt related to the venture – €31.2m in compensation for the ill-fated 2006 deal to exchange Harcourt Street garda station for State housing.

Durkan New Homes is in receivership.

Irish Independent

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