€30m value put on rural site 'like €10bn deal in capital'
Published 18/02/2011 | 05:00
A SHOPKEEPER who claims he was offered a "colossal" €32m bank loan from Zurich Bank to develop a shopping centre had previously been refused finance for the project by two major banks.
Yesterday the Commercial Court heard that Jim McConn-on (40), the owner of a shop in Castleblayney, Co Monaghan, had been refused funding by AIB because it was not viable.
Bank of Scotland (Ireland) also refused to back the centre. Castleblayney has a population of 3,000.
In 2007, estate agents CBRE put a €30m valuation on Mr McConnon's shopping centre site behind his shop on the main street of the small country town.
Mr McConnon claimed yesterday that the huge valuation was equivalent to justifying "a single development in Dublin of over €10bn".
"There has never been such a development contemplated anywhere in the world," he said in an affidavit.
His decision to proceed with the development, which is built but only partly occupied and now worth between €1m and €2m, was based on the €30m valuation, he said.
It was perfectly reasonable for him to assume Zurich and CBRE knew the property market, he said. He claims the bank made an unsolicited approach to him in April 2007 and, within 24 hours of meeting him for the first time, gave him a term sheet for a €32m loan.
He has no unencumbered assets and his agreement with the bank related to the development of a shopping centre that was expected to yield income that would ultimately repay the loan, he said.
Mr Justice George Birmingham said yesterday he hoped to rule shortly on the application for summary judgment.
Paul Gardiner, for the bank, said nothing advanced by Mr McConnon amounted to an arguable defence to summary judgment.
Despite various "outrageous" suggestions by Mr McConnon, there was no wrongdoing by the bank concerning this project, he said.
Ross Maguire, for Mr McConnon, argued he was entitled to rely on the credence given by the bank to the CBRE valuations.
Counsel also argued the total collapse in property values here amounted to an "unforeseeable and cataclysmic" event disentitling the bank to judgment.
The court heard the Zurich loan was due to be repaid by May 2009 but, while the shopping centre was built, Mr McConnon could not get enough tenants and encountered repayment difficulties.
The bank extended the loan for a period to see if Mr McConnon could come up with a repayment plan but proposals advanced by him in June 2010 were rejected. It appointed a receiver over the property last October.