Sunday 18 February 2018

Nama may face C&AG probe into €1.5bn Project Tolka sale

The Burlington Plaza office complex in Dublin was among the high-profile Project Tolka assets
The Burlington Plaza office complex in Dublin was among the high-profile Project Tolka assets
Ronald Quinlan

Ronald Quinlan

Nama is facing the prospect of an investigation by the Office of the Comptroller & Auditor General (C&AG) into the manner in which it conducted the sale of its €1.5bn Project Tolka portfolio.

Fianna Fail finance spokesman Michael McGrath told the Irish Independent yesterday that he intends to write to the State's public spending watchdog in relation to the "apparent involvement" of certain of Project Tolka's debtors in selecting potential bidders for the loan book.

"I believe that it is a transaction that the C&AG should examine. I intend to write to the C&AG to bring to his attention what I would regard as some peculiar aspects to this transaction, primarily the apparent involvement of the debtors in selecting potential bidders for the portfolio," Mr McGrath said.

"That's not a practice that I understood Nama was involved in, but it has been confirmed in the Dail reply from finance minister Michael Noonan, that the debtors did indeed have an input, and it would appear, a significant input in the selection of those who might be involved in the bidding process," he added.

Project Tolka, which consisted of loans mainly linked to developers John Flynn, Paddy Kelly and the Dublin-based McCormack family, who control the property investment vehicle Alanis, was acquired last January by the US investment firm, Colony Capital, for a sum believed to be in the region of €455m. The price paid by Colony represented a discount of approximately 70 cent in the euro based on the portfolio's €1.5bn par value.

Among Project Tolka's most significant assets is the Burlington Plaza office complex on Dublin's Burlington Road. With an estimated value of €250m, it has high-profile tenants including Sky Ireland, Amazon and Bank of Ireland. Other valuable assets tied to Project Tolka include the Clarion Hotel in Dublin's Liffey Valley, the Belfield headquarters of betting giants Paddy Power and the former Harcourt Street children's hospital, which is occupied by Dublin law firm BCM Hanby Wallace.

In acquiring the Project Tolka portfolio, Colony fended off competing bids from Lone Star and Madison International Realty.

A source familiar with the detail of the loan sale process told the Irish Independent that these three parties had been selected by Nama as bidders for Project Tolka on the basis that their participation would be sufficient to guarantee 'competitive tension' and deliver a price above the reserve, which is understood to have been set in the region of €450m.

While 16 parties with a potential interest in acquiring the Project Tolka portfolio were identified prior to the sale taking place, it is understood a number of these were deemed to be unsuitable on the grounds that they were perceived to be 'conflicted'. In the case of one potential bidder, it is understood that its participation in the process was ruled out on the grounds that Alanis, the property investment vehicle controlled by one of Project Tolka's major borrowers, the McCormack family, already acted for it. Another potential bidder was deemed to be unsuitable as they were involved in litigation with another of Project Tolka's main debtors, the developer John Flynn.

While finance minister Michael Noonan has expressed his satisfaction with the manner in which the Project Tolka sale was conducted, should the C&AG accede to Mr McGrath's request, it would represent the second significant Nama portfolio sale to be investigated by his office in less than a year.

Last September, the C&AG published the findings of its investigation into Nama's sale of its Northern Ireland loan book to US private equity giant Cerberus. In examining the sale of the €5.7bn Project Eagle portfolio for €1.6bn to US private equity giant, Cerberus, the C&AG concluded that Nama had potentially lost Stg£190m. Nama, for its part, strongly disputes that finding.

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