Sunday, February 12 2012

Analysis

No love lost as old friends fall out over property deal

Sean Dunne's row with CBRE gave an insight into the land deals of the heady boom years, writes Ronald Quinlan

Hume House

Hume House

Sunday July 26 2009

IT was 11.51am on January 24, 2007, when the one-line email popped up on the screen of Sean Dunne's PC at his office on Dublin's Merrion Square. "Ronan is meeting Bernard McNamara for a chat tomorrow," it read.

That the Ronan in question was Ronan Webster of CB Richard Ellis, and that the sender of the piece of intelligence was another of CBRE's directors, Willie Dowling, was significant. It was enough to make Dunne sit up and take notice at least.

What was McNamara at now, he must have wondered as he swung around in his chair and looked out across the Georgian Square below the sash window behind his desk. "Chat about what?" he inquired in a return email at 12.22pm.

Two minutes later, Dowling shot back, saying "Charlesland", a reference to the new town Dunne was already involved in developing with Ballymore's Sean Mulryan on the outskirts of Greystones in Co Wicklow.

Later that same day, at 16.33 to be precise, Dowling forwarded another and arguably far more interesting nugget for Dunne's delectation. This email -- marked 'confidential' -- had been circulated three hours previously to all CBRE personnel by the firm's chief, Pat Gunne.

In his communication, Gunne excitedly informed his staff of the news that CBRE had just been appointed by John and Bernie Gallagher of the Jurys Doyle Group to handle the sale of the Burlington Hotel, a property he described as "clearly the best piece of development in prime Dublin".

Obviously enthused by the prospect of the bidding war that was about to get underway, Gunne concluded by saying: "Onwards and upwards, what a great start to 2007!"

Sean Dunne didn't write back to Willie Dowling this time. He knew exactly what the proposed sale of the Burlington could mean for his plans to bring Knightsbridge to Ballsbridge. Another prime site was about to be opened up for redevelopment, and less than a mile down the road from where he hoped to realise his vision of a 37-storey tower cut, as its architect Ulrik Raysse had described it, in the manner of a diamond.

Not that the Mountbrook chief could afford to spend much time thinking about the Burlington. He had enough on his plate already, having splashed out €379m on buying up the Jurys and Berkeley Court Hotels in Ballsbridge in July and October 2005.

But the information about McNamara's meetings and the sale of the Burlington was very interesting for any developer looking to plan their strategy at the height of the so-called Battle of Ballsbridge.

Dunne trusted his contact at CBRE, judging by the details contained in the 34-page witness statement he supplied to the High Court to support his defence against the auctioneers' action for €1.5m in unpaid professional fees against him last week. CBRE's claim, which referred to Dunne's €130m purchase of Hume House in Ballsbridge in 2006, was settled late last Thursday night after three tortuous days in Court 14.

In the end, Dunne handed over €1m he had lodged in court in full and final settlement of both CBRE's fees and legal costs. The withdrawal by Dunne of his counterclaim that CBRE had "advised him to pay over the odds for Hume House" was interpreted by the auctioneers as full vindication of their conduct in the deal.

In a press release posted on their website last Friday, the firm expressed its satisfaction with the outcome of the matter, that "outstanding fees due to CBRE will be paid". CBRE's Managing Director Guy Hollis added: "CBRE is delighted with the outcome of this settlement. All unfounded allegations have been withdrawn which fully vindicates our position."

A statement from Mountbrook Homes took a different view. It read: "Fees claimed of €1,512,500 have not been paid as part of the settlement reached in relation to the dispute. €1m lodged in Court by Mr Dunne has been released to CBRE "to cover all fees claimed and to include all of CBRE's High Court costs in relation to the proceedings, as full and final settlement between the parties". Sean Dunne and the Mountbrook Group have terminated all dealings with and will not be engaging CBRE Ireland or worldwide in relation to any further dealings."

Whatever about love being lost, there is certainly no love left between Sean Dunne and CBRE, when one puts last Friday's statements in the context of the business relationship the developer claims to have enjoyed with CBRE and its directors during the heady days of the boom.

In the course of his witness statement for the Hume House action, Dunne offers a remarkable insight into the lengths he went to in cultivating those he did business with at the auctioneering firm.

The Carlow-born developer highlights his relations with CBRE director Willie Dowling specifically in his statement, noting the "close personal relationship" the two of them enjoyed from the mid-1990s until 2008. In one instance, Dunne claims to have even arranged for a private jet to take Mr Dowling and his bride to be, and their families, to and from the Italian city of Florence.

Outside of chartering private jets to spirit his property agent across Europe, Dunne says the two men frequently attended GAA matches in Croke Park together, with Mr Dowling bringing him to and from his home in Shrewsbury Road. It was a relationship based on "explicit trust", Dunne said in his statement.

Little wonder then that the developer claims to have been comfortable enough to discuss at one point with Mr Dowling the possibility of getting the American Embassy to relocate from Ballsbridge to facilitate his grand vision for Dublin 4.

Whatever about Dunne's perception of his personal relationship with Mr Dowling and with CBRE generally, their professional dealings were at a fundamental level, lucrative.

Documents uncovered in the process of discovery for CBRE's action against Dunne over their fees for the Hume House transaction show the developer being billed for a total of €3.125m.

In contrast, Willie Dowling's account of his relationship with Sean Dunne doesn't go much beyond the figures involved in the transactions. In his nine-page witness statement for the Hume House case, Mr Dowling recalls meeting Dunne for the first time in 1996 while working for Gunne Auctioneers prior to their acquisition by CBRE. There is certainly no mention of the sporting occasions Dunne says they attended together, or even the private jet the developer says he chartered to bring him and his wife to and from Florence.

Rather, Dunne's importance to Dowling is confined to the figures alone. "During 2005/2006, the defendant's work accounted for approximately 50 per cent of my time commitment and there was usually daily interaction with the defendant or employees of his company," he states.

In another section of his statement, he recalls how he started to pursue the matter of his fees from Dunne in 2006, noting how CBRE would be paying annual bonuses the following April, subject to amounts being collected from clients by the end of March 2007.

Commenting on this, Mr Dowling says: "Being conscious of receiving my full allocated bonus, I started to push to get all fees paid before March 2007."

Among the fees Mr Dowling "pushed" for were those relating to Hume House, the singularly unremarkable eight-storey building Dunne had paid €130m for in February 2006.

While there were few eyebrows raised over that price at the time given the feeding frenzy of developers looking for a piece of the action in Ballsbridge, the spectacular nature of the €130m figure, and how it was arrived at, was plain for all to see in the High Court last week.

Sean Dunne, for his part, wasn't in court, having been brought low by a viral, flu-like infection according to his GP, Dr Michael Meighan. With swine flu a very real possibility, the doctor said that he had recommended Mr Dunne be confined to his bedroom.

Lawyers for the developer, meanwhile, sought an adjournment of the case on foot of his inability to attend the court. That request was denied with Ms Justice Geoghegan deciding that Dunne should read the transcripts of the case each night, and instruct his lawyers on that basis.

In the developer's absence, his wife Gayle, herself a barrister, attended the case for the three days that it ran before being settled late last Thursday night. Sitting at the rear of the courtroom, the former journalist appeared to be observing the proceedings as carefully as any of the lawyers who filled the benches for either side, drawing up voluminous handwritten notes on headed D4 Hotels notepaper. At other times, the well-known socialite fired off emails from her Blackberry.

CBRE Director Willie Dowling, for his part, sat impassively listening to the examination and cross examination of his colleague, CBRE's Head of Investment, Sean O'Brien.

Mr O'Brien's recollection of the events leading up to Sean Dunne's purchase of Hume House, while notably different to those of the developer, offered a further insight into the manner in which land changed hands for unprecedented sums during the boom years.

According to Mr O'Brien's account of the Hume House deal, he only ever advised Dunne that Hume House was worth €65m, and not the €130m he ultimately ended up paying. Not that such 'advice' mattered in the Dublin -- and more particularly the Dublin 4 -- property market in 2006, where agents and developers alike appeared to put a price on everything and a value on nothing.

Indeed, in his own evidence, Mr O'Brien seemed to aver to this: "There is a world of difference between the price of a property and the value of a property," he said. Expanding on this, he added: "The value would be a relevant factor in deciding what price you are prepared to pay but they could be two wildly different numbers depending on the appetite to acquire the apple."

Sean Dunne's appetite, according to CBRE at least, seems to have been insatiable.

In his witness statement to the court, Mr O'Brien claims it was Sean Dunne who first contacted him in December 2005 to express his interest in acquiring Hume House. Mr O'Brien stated his belief that Dunne was looking to buy the building in a "strategic acquisition" that would allow him to dominate the Pembroke Road side of Ballsbridge. The CBRE man further claimed that Dunne wanted Hume House as it would allow him to control the development of the adjacent 2.05 acre Veterinary College site, which had only recently been acquired by rival developer Ray Grehan, of Glenkerrin Homes, for €171m -- a record price of €84m per acre.

Sean Dunne strongly disputed both of Mr O'Brien's assertions in relation to his reasons for wanting to purchase Hume House in his witness statement.

Wherever the truth lies, the account of the negotiation process contained in the statements of both parties and aired to an extent in court last week are intriguing to say the least. For despite the massive sums involved in acquiring the characterless office blocks, it would appear that much of the running was done by text message, email and conference calls to overseas locations spanning the globe, from Austria to Thailand, South Africa to the US and the United Arab Emirates.

Closer to home, CBRE's Head of Investment Sean O'Brien appears to have engaged in more traditional business methods, availing of a network of contacts built up during his time at the auctioneer and from his previous 20 years at Irish Life to gather intelligence on Hume House, and the price it might command from prospective bidders.

That Hume House was owned at the time by Mr O'Brien's former employers at Irish Life didn't hurt, and Mr O'Brien acknowledged as much in his evidence.

In the course of last week's case, it emerged that Sean Dunne wasn't the only one prepared to pay over €100m for the building, the property on which CBRE insists they only ever advised a value of €65m.

As it turned out, Albany Homes chief David Daly had bid €102m, effectively forcing Dunne's hand to dig far deeper into his pocket than he had ever expected. And twice as deep as CBRE strenuously insists it ever advised him to.

 
 
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