Business Irish

Friday 23 February 2018

Call for inquiry into sale of 'unique' Project Tolka

Noonan confirms Nama engaged with debtors on bidder selection

'The minister's confirmation last week of the
'The minister's confirmation last week of the "unique" level of consultation between Nama and the Project Tolka debtors in relation to bidder selection is likely to form part of any such examination.' Photo: Gareth Chaney Collins
Ronald Quinlan

Ronald Quinlan

The way Nama sold its €1.5bn Project Tolka portfolio is to come under further scrutiny after Finance Minister Michael Noonan described its marketing approach and the "level of consultation" with debtors on the selection of bidders for the loan book as "unique".

Noonan was responding to parliamentary questions from Fianna Fail finance spokesman Michael McGrath.

Having voiced his concerns several weeks ago on what he termed the "apparent involvement" of certain Project Tolka debtors in the selection of potential bidders for the loan book, McGrath has now written to the Comptroller & Auditor General (C&AG) asking for the events leading up to the sale of the portfolio to be examined.

The minister's confirmation last week of the "unique" level of consultation between Nama and the Project Tolka debtors in relation to bidder selection is likely to form part of any such examination.

Elsewhere in his response to McGrath's Dail questioning, the minister revealed two of the three final bidders for the loan book had expressed their interest in certain parts of its assets to the debtors prior to the sale.

The minister said Nama had informed him that one of Project Tolka's final bidders had "expressed an interest to the debtor connection in one or more of the assets securing the loans in the portfolio" while another bidder had "expressed its interest to both Nama and the debtor connection".

Referring to other "informal approaches" that had been made to the debtors by potential bidders prior to the initiation of the loan sale process, he said it wasn't possible for Nama to compile accurate data "at this time" as the agency "no longer has an active engagement with the debtor connection".

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 around €455m.

The price was some €5m above the reserve, which is understood to have been set in the region of €450m.

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 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 Betfair and the former Harcourt Street children's hospital, which is occupied by Dublin law firm BCM Hanby Wallace.

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

A source familiar with the detail of the loan sale said Nama selected the three parties as bidders on the basis that their participation would be sufficient to guarantee 'competitive tension' and deliver a price above the reserve.

While 16 parties with a potential interest in acquiring Project Tolka were identified, a number were deemed unsuitable as they were perceived to be "conflicted".

One potential bidder is understood to have been 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 unsuitable as they were involved in litigation with Flynn.

Defending the manner in which Nama had approached the Project Tolka transaction, Mr Noonan said the agency's use of a targeted marketing process had been based on the advice of its loan sales adviser, Eastdil Secured, who said the approach would "significantly enhance the sales proceeds generated for Nama by comparison to all other disposal options".

The minister added that as Nama was legally prohibited from disclosing confidential information in relation to debtors and their assets, it was "constrained" from disclosing the considerations which formed the basis for Eastdil Secured's recommendation that a targeted marketing process would maximise the State's return from the sale.

Sunday Indo Business

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