Taxpayer the biggest loser in high-stakes gamble
Published 26/03/2010 | 05:00
THE mess that is the Dublin Docklands Development Authority (DDDA) is a cautionary tale of a government agency turned property developer.
Central to the story is the 25-acre former Irish Glass Bottle site in Ringsend, which was co-purchased by the DDDA in 2006 for €426.8m in one of the biggest property deals of the boom years.
Based on what the DDDA originally invested in the site, known as South Wharf, the taxpayer has been left with a potential exposure of nearly €100m.
But the exposure could be much higher. The 25-acre site is heading into the taxpayer-funded National Asset Management Agency (NAMA), while reports released yesterday also question the financial viability of the DDDA.
The site was purchased by the Becbay consortium, made up of the DDDA and businessmen Bernard McNamara and Derek Quinlan, for a staggering €17m an acre. It is now worth just €50m.
It was purchased from a consortium of investors headed up by financier Paul Coulson, and the co-owner of the site, Dublin Port Company. Mr Coulson also had a business relationship with former DDDA chairman and Anglo Irish Bank director Lar Bradshaw. The two men are investors in a development in Sandyford together with former Anglo chairman Sean FitzPatrick.
The other beneficiary was Dublin Port Company, which is owned by the State.
While the DDDA paid €109m for its share in the site, this 26pc stake is worth €13m today, leaving the taxpayer with a €96m loss on its investment.
Agreements signed by the DDDA and private investors at the time of the deal sought to limit the authority's exposure to the project at €35m. But this was before the site became subject to a number of litigations involving the investors.
The DDDA, which has racked up losses of €200m, is also facing annual interest bills on its bank borrowings of €5m a year.
And the DDDA has written down the value of its 26pc in Becbay to 'nil', adding that these crippling interest payments will continue as long as the company is in existence.
Late last year, the authority told the courts it would require financial assistance from the State as a result of its involvement in the Irish Glass Bottle site.
One of the big questions surrounding the deal is how a state agency set up to regenerate the docklands got involved in such a high-stakes property gamble. But its incestuous relationship with Anglo answers that question in the main.
Anglo lent Becbay €293m to help fund the purchase of the site. And Mr FitzPatrick and Mr Bradshaw participated in the board meeting which approved its involvement in the deal.
As the site heads into NAMA, this can only mean more exposure to the already-burnt taxpayer on what was clearly an ill-advised investment.