Nama faces legal action over €80m sale of Prague properties

The National Asset Management Agency (Nama) is embroiled in a dispute with a Czech property company that says it was excluded from the €80 million sale of an asset, despite claiming it would bid the highest price.

The Savarin Palace project, owned by the Ballymore group on one of Prague's main squares, is on the verge of being sold to another Czech firm whose management includes a former Ballymore executive.

Ballymore is controlled by Seán Mulryan, who is due to give evidence to the banking inquiry today.

Flow East, the disgruntled Czech underbidder that is threatening to sue Nama in Dublin, last week wrote to the agency confirming it is “willing to pay a price higher” than the winning Savarin bid, which came from Czech investor Crestyl.

Although the proceeds of the sale go towards paying Ballymore’s debts to taxpayers via Nama, the agency allowed the sale process that selected Crestyl to be run by Ballymore.

Simon Johnson, who ran Ballymore's operations in neighbouring Slovakia until 2010, is the winning bidder's chief operating officer.

Flow East has launched two lawsuits in Prague over the Savarin sale, from which it claims it was “summarily excluded from the tender for no apparent reason”.

‘Unfair competition’

Flow East, founded in 1990 by English businessman James Woolf, is suing Ballymore for allegedly breaching an agreement it claims it had with the Irish group to enter into exclusive talks to buy Savarin until the end of April. It has also launched a separate suit against Ballymore for alleged "unfair competition" over the Savarin sale. Nama is named as a defendant in the second case.

It has further claimed in correspondence that a Ballymore executive telephoned Flow East’s financial backer, HIG, immediately before the deadline for Savarin bids in February “and effectively asked them not to participate”, disrupting Flow East’s bid.

Paul Keogh, a Ballymore director and the group's spokesman, said last night he "knows nothing" about the alleged call. Stevan Tennant, the Prague-based Ballymore senior executive alleged to have made the call, did not respond to requests for comment.

Four-storey mall

The six separate buildings comprising the Savarin scheme are located around historic Wenceslas Square, a tourist and retail hotspot. Ballymore's original proposal was to combine the buildings into a four-storey mall.

Flow East contacted Ballymore late last year and it claims it later entered into an arrangement for exclusive talks. After the apparent withdrawal in February of its financial backer, HIG, Flow East was told it was out of the process.

It has since been engaged in legal correspondence with Nama, Ballymore and Cushman and Wakefield, the consultancy that operated the sale.

“To our surprise, Nama has refused to discuss the issue with us,” said Mr Woolf. He said his company, which he claims has new financial backing, is prepared to “pay the top price for Savarin”.

Nama said the Savarin sale process is a matter for Ballymore. James Chapman, a Cushman and Wakefield partner, declined to comment.

Ballymore said Cushman and Wakefield recommended excluding Flow East because “the conditions they attached to their bid were unacceptable”. “In addition, Flow East backers pulled their support. For these two reasons Cushman & Wakefield recommended excluding Flow East and we accepted their recommendation,” it added.