‘Banks bust brains”, “wealth wrecks worlds” and “profits plunder planets” are among the whitewashed slogans emblazoned on hoarding around the corner of Grand Street and Wooster Street in New York City.
It's doubtful the graffiti artists whose work features around this vacant lot in the heart of Manhattan's Soho fashion district knew the connection of one man to the property but the tone, if not the accuracy of the messages, is fitting given the hundreds of millions of euro in debt he has left behind in Ireland.
Property developer Sean Dunne, who uniquely is bankrupt in Ireland and the United States, admitted during eight hours of questioning over two days in December that he was involved in negotiations to purchase the site at 74 Grand Street for "one of his wife's companies", an American firm called TJD21, for $4.95 million (€3.6 million) last year.
Under intense questioning from a lawyer for the National Asset Management Agency (Nama), Dunne's second-largest creditor after Ulster Bank, at a creditors' meeting in Connecticut, the developer volunteered that Gayle Killilea, his second wife, and his eldest son from his first marriage, John(32), have an "ownership interest" in the site. They plan to build four apartments and retail space on the property. His wife provided the finance to buy the site, he said. There is no bank loan charge on the property.
When Nama’s US attorney Tom Curran revisited the subject of the Soho site during the eighth hour of Dunne’s interrogation, the developer turned prickly as he did on several occasions during his third meeting of creditors in the US bankruptcy proceedings. (Dunne will appear before his creditors for the fourth time since filing for bankruptcy 11 months ago at a resumed meeting in New Haven today.)
“There is no secret that there is a site in Soho – this is not a rabbit that you have pulled out from underneath the table. This is a site that I volunteered to you yesterday,” Dunne snapped at him.
The Soho site is the latest property to feature in the bankruptcy proceedings of one of the biggest casualties of the Irish property crash. Dunne's two biggest creditors are, along with the court-appointed officer or trustee appointed by the US bankruptcy courts, digging deep into his finances, investigating the transfer of assets and other property in Ireland, South Africa, England and Switzerland from Dunne to Killilea dating back to 2005, the year after they married.
Merely an employee
Nama has taken what are known in the US bankruptcy courts as adversary proceedings against Dunne, objecting to his discharge from bankruptcy in a bid to stop him walking away from any of his pre-bankruptcy debts of $942 million (€690 million), including €250 million due to the State loans agency.
The agency claims that he, an experienced property developer, is behind multi-million dollar property deals in the US and that they are not the brainchild of American companies owned by his wife, the one-time socialite and gossip columnist, as the couple claim. The agency alleges that the money used to finance these deals was sourced from assets that were fraudulently transferred to her in the years before he went bust.
Dunne claims he is merely an employee of two of Killilea's companies, Mountbrook USA and Amrakbo, sourcing and evaluating the right properties and offering his experience in development.
He grew most testy during December’s marathon creditors’ meeting in New Haven when asked about the personal finances or working lives of his wife and children. “Why don’t you ask me about myself? I am the one in bankruptcy, not my wife or children,” he answered in response to one question about whether his wife or children owned any properties in South Africa.
On another occasion his trustee, Connecticut bankruptcy lawyer Richard Coan, had to instruct Dunne that he must answer every single question posed unless his attorney objected, and that he could not refuse to answer because he didn't like a particular question.
“In order to investigate Dunne’s financial affairs it is relevant to know where his son is deriving his income,” Coan said at another point when the developer’s lawyer queried why he was asking about his son’s source of employment.
In addition to the Manhattan site, Dunne disclosed that his son was working on a site at Millbank Avenue in upmarket Greenwich, Connecticut, about 30 miles north of Manhattan, and building a house at the K Club golf resort in Co Kildare on a plot of land he gifted to him in 2007 “just for being my son.”
'Dubai-esque culture'
Dunne disclosed that Mountbrook USA was buying the Greenwich residential site for $3.3 million and that his son was working on securing planning and rezoning to build two condos on the land, which they would either rent out or sell.
Mountbrook has in the past four years bought three properties, two in Greenwich and one in nearby Rye, New York, and sold them at substantially higher prices after redevelopment or, in the case of the Rye property, divided the land up into two plots.
The New York venture is not on the same grandiose scale as Dunne’s ill-fated redevelopment of Ballsbridge in Dublin 4, his most daring project and one of the more ambitious if foolhardy punts in the property market of the Celtic Tiger era.
“An attempt to build a Dubai-esque culture in Dublin” was how lawyers for Ulster Bank, the bank that led the financing of the project, described the scheme in a court filing in Dunne’s US bankruptcy proceedings last year. The Soho development has the potential, however, to be the most lucrative project to which Dunne could have a connection on this side of the Atlantic.
Apartments in this hip Manhattan neighbourhood have been selling for an average of $1,773 a square foot, according to CityRealty, a New York property-listing website. New condos can fetch even higher amounts, up to $3,000 a square foot, or more for top-floor penthouses or duplex apartments, in a Manhattan property market that is booming right now.
“Soho has always been one of the most desirable neighbourhoods in New York,” said Leonard Steinberg, director of sales at property agent Douglas Elliman who is selling apartments in the building on the opposite corner from the Grand Street site being developed by the Dunnes.
“It has a mix of residential, retail, restaurant and entertainment. There are also height restrictions, so it preserves the light in the area and it has the charm of cobbled streets and pre-war architecture with much of the area protected by conservation.”
The Soho property owned by the Dunnes is one such protected site; the cast-iron façade that covered the original building that stood on the footprint must, under the orders of the city, be reinstalled on any new building constructed on the site by TJD21 under a protection order issued by New York's Landmarks Preservation Commission.
A previous owner of number 74 had failed to secure the building properly during excavation work and the building tilted so severely that it had to be disassembled.
Having to reinstall the original front of the building, which is stored in a warehouse in Newark, New Jersey, has curbed the Dunne family's ambitions for the property.
The Landmarks Preservation Commission rejected TJD21’s initial proposal to build a new eight-storey building behind the original façade, forcing the Dunnes to reduce the size to five storeys, which the commission has approved.
Plans have been submitted to New York’s Board of Standards and Appeals to vary the zoning on the property. The board will hold a public hearing on March 25th at which TJD21 will outline its plans for the site and members of the public can make comments.
Plans submitted by TJD21 and John Dunne show they want to build about 12,500 square feet including four apartments and shop space on the 100-foot by 25-foot lot, according to publicly available filings at New York’s Department of Buildings.
John Dunne lists himself as “owner” of 74 Grand Street, operating under the business name “TJD 21 LLC” on documents filed at the Department of Buildings. His business address is listed at an office suite on West 45 Street, a few blocks from Times Square in Manhattan.
'Nothing to say'
He declined to engage in any conversation on the Grand Street property. "I have got absolutely nothing to say to you, so don't call me again," he said when contacted on his US mobile phone.
Based on a rough estimate of building costs and so-called “soft costs” totalling about $750 per square foot, provided by a local property market sources, and the average per square foot sales price in Soho, TJD21 could make a profit of several million dollars on this project.
This is a conservative estimate, however – at the higher prices other new Soho apartments are attracting, the company could make considerably more than this, well into a high seven-figure sum. Working with the façade that is about 120 years old is a complicating factor.
“I don’t think it is going to be a home run but they [bought] for just under $5 million I would be surprised if they didn’t make money on it,” said New York property agent Jeremy Stein, who with his wife Robin, forms a husband-and-wife sales agency under the Sotheby’s International franchise.
Any profit on the Soho project, if his creditors could prove Sean Dunne was the ultimate beneficial owner of the site through money transfers to his wife and seize assets through the courts, would barely make a dent in Dunne’s debt pile, the bulk of which – more than €530 million – is due to Ulster Bank and Nama.
John Weiss, deputy counsel at the Landmarks Preservation Commission, and Robert Burton, a broker with sales agents Massey Knakal, which sold the building to TJD21, both said that they had dealings with Sean Dunne on the Soho property. “I met him several times and his son,” said Weiss.
While it may have been difficult for Nama to extract details from Dunne on his property dealings at his creditors’ meeting, he did not hide his desire to get back in the game. Asked whether he was involved in other projects, he told Nama’s lawyer: “We are trying to get involved in other sites,” adding that “we would be looking at London all the time.”
Displaying an eagerness to resume development in spite of being bankrupt on both sides of the Atlantic, Dunne said he had met private equity funds in the last year about the possibility of raising finance to complete deals.
“Unfortunately, I am sort of very much constrained by being in bankruptcy,” he said. “I’m a bit hamstrung, so I just keep the channels open.”
