Tuesday 25 April 2017

Richard Curran: AIB and Green Property net €151m from fraudster's portfolio

Fraudster Achilleas Kallakis Picture: Will Oliver
Fraudster Achilleas Kallakis Picture: Will Oliver
Richard Curran

Richard Curran

Management at AIB must be wondering just how they could have been so lucky. Executives at Green Property must be wondering how they are going to spend all that money.

The story of how UK-based Greek fraudster, Achilleas Kallakis, defrauded AIB by borrowing over £700m on false pretences is pretty remarkable. But the fact that AIB and Green Property, to whom the bank sold on the properties in 2009, have made around £131m (€151m) on it, is even more incredible.

At least Kallakis bought some good stuff with the money he borrowed from the bank. AIB discovered it had been duped by Kallakis, who had a previous fraud conviction, when it went to sell on some of its loans to him to other banks.

Some background checks by the other banks set alarming bells ringing.

It turned out that Kallakis had forged numerous documents to secure loans to buy the property portfolio.

It culminated in a trial of Kallakis in a London court in 2012 with the Greek, nicknamed 'the Don' landing an 11-year sentence.

But in the grim days of 2009, AIB sold on the portfolio of 16 British properties on which the loans were drawn to Green Property.

Green bought the loans with an interest-free loan from AIB and agreed to pay the bank 30pc of the profit it might make when the properties were sold on.

Green paid around £650m and AIB took a write-down of £56m (€64m).

The last of those Kallakis properties, at St James's Square in London, was sold by Green during the week for £246m (€285m).

Published estimates of the sale prices achieved by Green on other properties in the former Kallakis portfolio show what a great deal it was for Stephen Vernon's Green Property.

Aside from the £246m for seven and eight St James's Square, add on the £265m (€307m) it got for the offices of the Daily Telegraph: the £100m (€115m) it got for Apollo and Lunar House in Croydon in 2015: India Buildings in Liverpool for £17m (€19m); Astral Towers in Crawley for £20m (€23m); 35 Berkeley Square for £19.6m (€22.7m) and Kings House and Queens House in Harrow for £23.8 (€27.5m).

It also sold the former Market Towers site in London to Chinese property billionaire Dalian Wanda in 2013. He plans to build two enormous residential towers there which will become the tallest residential buildings in Europe. According to the Financial Times, this site was sold by Green Property for around £90m (€104m).

Put them all together and you get £781m (€904m) for 11 of the properties. Green paid around £650m (€752m) for them all. This puts Green on track to have made a profit of at least £131m (€151m), assuming it didn't lose money on the others.

Green's share of that profit would be around 70pc or roughly £91.7m (€106m).

AIB would be entitled to 30pc or £39.3m (€45.5m).

Talk about "getting out of jail" on a deal.

Coveney's Greencore pay attracts fresh attention

Greencore chief executive Patrick Coveney took some flak from investors over his remuneration package at the annual general meeting on Tuesday.

Under a new deal, Coveney will be entitled to up to 200pc of his salary.

This annoyed some investors and 40pc of them voted against the new package.

It isn't the first time that Coveney's remuneration has attracted some attention. In 2015 he earned around €3.6m all in.

He has also generated substantial sums from selling shares including the disposal of over €3.8m worth of incentive shares that vested in 2014.

But Coveney has delivered for shareholders. The company has delivered on growth and the acquisition in November of Peacock Foods for €695m should take the business to a whole new level in the US.

The unease about the remuneration reflects a wider discomfort about how bonus or incentive share rewards are structured for chief executives.

It isn't based on the idea that he is simply paid too much money.

There is very little discussion about morality or fairness among institutional investors of PLCs in general.

The issue for them is that executive share rewards may not be hard enough won.

Long-standing shareholders in Greencore might be happy enough based on Coveney's very strong performance in recent years.

But newer investors who have bought into the stock at higher levels might be a little bit more edgy.

There is also a very different clamour about executive pay going on the UK and this is from lobby groups who believe chief executives are paid far too much in the first place. They want to see them earn a certain multiple of the average worker's salary at a firm.

Given that Greencore is in the low-pay lower-skilled end of the food business, it leaves Coveney open to criticism.

Back in 2014, he made the headlines for earning 160 times more than the lowest paid worker at the company.

But some FTSE 100 chief executives are north of 360 times.

It seems inevitable there will be low pay in the food-preparation business compared to other sectors.

For example, there is a job ad on the Peacock Foods website for 'packers and packagers'.

It says you can take a tour of the plant today and start tomorrow. Pay for a packer starts at $9 (€8.33) an hour, but it does offer full-time staff health insurance, paid holidays (two weeks in the first year), a quarterly bonus of $500 and higher pay rates for working in the cold room.

It says you must be at least 18 years of age, able to lift at least 25Ibs, stand on your feet all day and have reliable transportation. It even sounds physically quite demanding: "While performing the duties of this job, the employee is subject to standing for prolonged periods; frequently grasps, lifts, holds, or feels objects, occasionally kneels, crouches or crawls."

I'm sure Coveney doesn't have to do any crawling in his job.

Sweetener helps Ryanair Israeli expansion

Ryanair's decision to launch 14 new routes to Israel was interesting, but it won't lead to a major bonanza.

Israel's tourism industry is not exactly booming. Security concerns are one big obvious issue. In 2000 Israel had 2.4 million foreign visitors. In 2015 the figure was 2.8 million. Revenues from tourism, including air fares, were $5.7bn in 2007 but just $3.47bn in 2014.

Ryanair seems to have set relatively modest targets for passenger numbers on the routes which include flights to Ovda Airport near Eilat from Baden-Baden, Berlin, Brussels, Frankfurt, Milan and three Polish cities.

There are also new routes to Ben-Gurion International Airport in Tel Aviv.

According to Israeli media reports, the Tourism Ministry has been offering airlines a €45 subsidy for every tourist flying in through Ovda, in an attempt to boost Eilat. Now that does make it sound a little more worthwhile.

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