Tuesday 12 December 2017

Mister Mystery may yet fatally undermine Nama

Paddy McKillen hasn't shown his face in court, but the stakes in his case couldn't be any higher, writes Ronald Quinlan

THERE'S a burger van sitting in the driveway. In most other neighbourhoods, it wouldn't elicit more than a casual glance from the passerby.

But this isn't most other neighbourhoods. Rather, this is Foxrock in south Dublin, and the sight of a Captain America fast-food trailer parked outside one of the substantial houses in the exclusive Birches development is unusual, to say the least.

'Unusual' is a word that could also be used to describe the owner of the burger van and the house outside which it is parked.

He hasn't been home on any of the days the Sunday Independent has called to see him. In fact, he hasn't been home for a long time; years, according to one local, who claims to know him as well as anyone could expect to.

"He's a very nice guy, but he's as shrewd as they come. He wouldn't let you know what he had for breakfast," he chortles, clearly bemused by our efforts to crack the enigma that is Paddy McKillen.

These days, the only person one is likely to encounter at Mr McKillen's Foxrock home is his Romanian housekeeper. She smiles shyly as she accepts a business card with the request that she ask her publicity-shy boss to give us a call, before closing the door.

Mr McKillen certainly isn't anything like Johnny 'the Buccaneer' Ronan and Sean 'the Baron of Ballsbridge' Dunne -- two of his former neighbours in the Birches.

He has never lived anywhere near the limelight, or been under the spotlight.

That the 55-year-old tycoon has managed to avoid the media's glare until now is remarkable, given the sheer size and global reach of his property empire.

The High Court heard last week that it currently has a value of anywhere between €1.7bn and €2.8bn.

Protecting that empire has thrust him, albeit unwillingly, from the wings to centre stage in a pitched battle against Nama, which has moved to transfer his €2.1bn in loans on to its books.

In sworn affidavits provided to the court in advance of the case, which is being presided over by a three-judge division of the High Court, McKillen expresses his belief that his transfer into Nama will cause irreparable damage to the business he has built up over 35 years.

From relatively humble beginnings in his family's DC Exhausts business and a brief partnership in the retail clothing business with designer John Rocha, Mr McKillen first ventured into property investing in the late 1980s.

Since then, he has managed to amass a portfolio and a fortune spanning several continents across the globe.

Here in Ireland, he owns or co-owns a range of high-profile property assets, including the Jervis Street Shopping Centre (valued at €251m), the Clarence Hotel and the Treasury Building (in which Nama has its headquarters).

While the business of commercial property accounts for the lion's share of Mr McKillen's interests, he also owns a stake in Captain America's restaurant on Grafton Street (hence the presence of the trailer in his driveway in Foxrock), a part of the Wagamama restaurant franchise and stakes in the Irish franchises for Champion Sports and Tower Records.

Over in London, Mr McKillen is joint owner, along with the Swiss-based financier Derek Quinlan, of the Maybourne Hotel Group, which includes the internationally-renowned Claridge's, Connaught and Berkeley hotels in its collection.

Elsewhere in the UK capital, the publicity-averse businessman is the owner of numbers 11 and 12 Bond Street, buildings at the heart of London's most prestigious shopping district.

Further afield, Mr McKillen owns property on the exclusive Place Vendome and Boulevard Saint Germain in Paris, an apartment valued at €414,000 in Budapest and a 21-storey office tower on Franklin Street in Boston -- a part of which he managed to let out to Anglo Irish Bank.

The Belfast man's portfolio is impressive by anyone's reckoning. Little wonder then that he has found himself compelled to come out fighting in the High Court in a bid to prevent Nama from taking control of the €2.1bn in loans that underpin his investments.

At the heart of his legal challenge is the belief that his transfer into Nama will damage his business, making it difficult for him to refinance short-term loans on property investments that he typically holds for the long term and which he says are generating enough income for the payment of interest owed.

He also claims that Nama, through its transfer of his loans, has breached his constitutional rights to fair procedure because it did not inform him in advance of its intentions to move him on to its books.

Mr McKillen takes issue with the fact that he had no entitlement to be told the reasons for his loans being transferred into Nama or to challenge the agency's decision to take them.

He also maintains that Nama, as a "work-down vehicle", will seek to reduce his debts more quickly than a bank would, in a strategy which he believes will hugely reduce his portfolio's value.

In terms of his business reputation, the property tycoon clearly believes that being associated with Nama will do him harm.

In the first of his two affidavits submitted to the Court, Mr McKillen expresses his view that the agency is "clearly perceived" by international financial institutions as a "bad or toxic bank set up by the State to deal with distressed loans against properties which have failed".

Commenting on this, he adds: "The borrowers of these loans are perceived, perhaps wrongly, as having engaged in reckless conduct over the past 10 years in Ireland and as requiring the assistance of the State to bail them out from poor business decisions."

Regarding what happened in the Irish property market during the years of the boom and bust, he claims that he and his business colleagues "made a conscious and determined decision as far back as 2000 to steer clear" of what they considered to be the "lunacy" already evident in Irish property prices and to focus instead on investment in mature markets overseas.

Remarking on that strategy, he adds: "Whether through prudence, good business decision or good fortune, I managed to stand back in amazement while this gross overpaying for property and sites was going on and avoided acquiring development land in this market."

But while Mr McKillen might have managed to steer clear of the "lunacy", his ability to navigate his way around the Government's plans for tackling the crisis -- which he believes has been caused by the madness of others --remains to be seen.

Defending Nama's entitlement to take control of the property investor's loans, Attorney General Paul Gallagher -- who played a central role in drafting the legislation for the setting up of the agency -- argued in court that far from being on a financially sound footing, Mr McKillen's position was, and is, altogether more precarious.

Addressing the High Court last Thursday afternoon, Mr Gallagher drew from the affidavit of the Department of Finance official who is responsible for the Government's banking plan, Anne Nolan, in which she claimed that Mr McKillen had benefited directly from the State's actions to save the banks.

"If his banks had not remained in business, Mr McKillen would have been faced with urgent refinancing, transfer or enforcement of his loans by liquidators," Ms Nolan said in her affidavit.

While the State's argument that Mr McKillen's business might not have survived had Nama not rowed in to save the banks with whom he has his loans is certainly a valid one, McKillen's counter-argument -- that having his loans transferred into Nama could harm his business -- is also valid.

That's the crucial question on which the High Court must decide. Does it rule in favour of Mr McKillen, the individual citizen, and his inviolable right to protect his business, or in favour of the State and its efforts to protect the financial system and the wider economy?

Whatever the outcome of the case, it remains to be seen whether Mr McKillen himself will be called in to court number four in order to be cross-examined by the Attorney General on the contents of his affidavits.

Should that happen, an already full courtroom may not be able to contain the curiosity of all those straining to catch a glimpse of the mysterious man who is now taking on the might of Nama.

Having managed to avoid the attention of press photographers for more than 20 years now, it's difficult to say which is the greater enigma -- Paddy McKillen or Nama, the agency that he may yet come to fatally undermine.

Sunday Independent

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