British Land must have been glad to exit when it agreed to sell its half stake for €63.85 million. Was this a happy release or an unhappy one? Emotionally, an up - financially, definitely a downer

Don't expect any great bonanza from property group Dunloe Ewart. When executive chairman, Mr Noel Smyth, put a privatisation scheme (subsequently abandoned) at 51 cents per share (cash and loan stock) in 2000, to his shareholders, there was a suspicion that a lot of value was hidden in the company that would subsequently accrue to him. But if the estimates in the unpublished due diligence report, carried out by PricewaterhouseCoopers (PwC), on behalf of Mr Liam Carroll (whose emergence as a Dunloe shareholder led to abandonment of the deal), are anything to go by, they were wrong.

It was widely known that Dunloe Ewart's balance-sheet values were at cost and, therefore, well below the market values. This has now been confirmed by the report which is understood to have concluded that the development properties' independent valuations, excluding the Cherrywood development, are €47 million in excess of book values. But here's the crunch. PwC was unable to see the Cherrywood accounts because British Land which jointly owned the site (with Dunloe Ewart) refused to give access.

That tells a lot. One source suggested that British Land warned it would take out a High Court injunction to stop such disclosures.

It is now very obvious that Mr Smyth's relations with British Land were far from harmonious. So what status has that cuddly statement about the purchase of the outstanding 50 per cent by Dunloe Ewart from British Land? Explaining the severance last week the bland statement, couched in diplomatic commercial language, explained they "have different medium-term corporate objectives". Ahem!

The PwC report, thankfully, is closer to the bone. It is understood to have noted a number of cultural clashes between the two companies as demonstrated by British Land's refusal to allow access to the related documentation of the Cherrywood joint venture. More telling, it noted personality clashes, and Dunloe Ewart interestingly "investing cash in the joint venture before funding arrangements were put in place and now being tied into this arrangement by British Land which has a conservative approach to funding", according to an industry source.

Obviously very different styles of management, so British Land must have been glad to exit this arrangement when it agreed to sell its half stake for €63.85 million. Was this a happy release or an unhappy one? Emotionally, an up - financially, definitely a downer. It paid €43 million to buy the stake five years ago but also had to pay €25 million in development finance, bringing the total outlay to €68 million. So it has been a dud investment for a group that has had so many happy joint ventures in the State.

But despite the non-availability of precise data on Cherrywood, the PwC report is understood to have estimated it to have a value of €205 million. Taking out the €40 million attributed to Dún Laoghaire and Rathdown Council's involvement brings the value to €165 million. On this basis, an indicative net asset value per share of 61 cents is arrived at. This is below the 67 cents indicated in the privatisation scheme but the real figure is likely to be south of this.

The British Land sale puts a value of €127.7 million on Cherrywood. As British Land presumably knew what it was selling, its valuation is likely to be closer to reality; bringing the NAV to 50 cents plus, but this is very iffy. Nevertheless, it is pretty clear that the net asset value is being eroded.

PwC is understood to have recognised this when it noted the group had slowed down development activity due to uncertainty over its future and its plan to reduce its exposure to Belfast - the report was written in April and the Belfast sales took place a month later, cutting a few cents off the NAV per share. This has left it in a strong financial position with cash of €90 million. This represents 23 cents per share or a whopping 77 per cent of this week's share price of around 30 cents.

But these funds will now be used to pay British Land unless Dunloe Ewart does not get the required 50 per cent plus agreement from its shareholders.

Dunloe Ewart has almost 4,000 shareholders but 10 of them control 60 per cent - Vantive Holdings (Liam Carroll) owns 27.3 per cent; Mr Smyth and his wife, Anne Marie, own 22.5 per cent; Mr Phil Monahan controls 6.7 per cent; one institution owns almost 3 per cent; and Mr Dermot Desmond has a small holding. There were some 20 institutional shareholders who bought the shares in an IPO in 1997 at 23 cents but sold out to Mr Carroll at 48 cents to 50 cents.

With the share being traded at around 30 cents this week, he is showing a substantial loss but he has, so far, displayed unusual staying power. You now have a number of bizarre positions.

Here are some of them, but certainly not all. Mr Carroll refuses to meet Mr Smyth. Mr Carroll proposed a tender offer in May 2001- minimum 53 cents and maximum 58 cents per share - but this had an impractical seven days limit; he (Mr Carroll) was represented by senior counsel and an unconfirmed report said Mr Carroll was out of sight in an adjacent room.

Mr Smyth would have had to arrange a firm loan package of some €150 million in case he won and would have had to make an offer for the whole company. Mr Smyth turned it down but offered "to discuss any other proposals in relation to acquiring my shares or disposing of your own". But there was no response.

Then Dunloe Ewart, in an unprecedented move, allowed the due diligence without any preconditions. However, PwC, noting the limitations and scope of its work, said the procedures undertaken by it did not constitute an examination made in accordance with generally accepted auditing standards and therefore did not express a view on the data.

Dunloe Ewart's latest annual report has a vibrant cover. It shows an archer with a cocked arrow straddling the bow. It is tempting to ask would either Mr Smyth or Mr Carroll like to see the other representing the bull's-eye! But with suspicions and distrust running so high, there can only be one winner.