UNLIMITED GUARANTEES:THE TAXPAYER is facing a bill of potentially hundreds of millions of euro for the now worthless Irish Glass Bottle site in Dublin.
At the height of the property boom in 2006, Dublin Docklands Development Authority (DDDA), a State body, joined a consortium known as Becbay, which also included developers Bernard McNamara, Derek Quinlan and a group of private investors to buy the Irish Glass Bottle site in Ringsend, Dublin, for €412 million.
The authority invested €47 million for its 26 per cent stake in the project through a series of loans to Becbay.
Its latest accounts now say that the glass bottle site is worthless. The authority never had the site independently valued before it made the deal.
Three reports released yesterday show that the authority – charged with redeveloping the capital’s docklands – gave a series of unlimited guarantees to the project’s lender, State-owned Anglo Irish Bank, relating to both interest payments and cost over-runs on the project.
Fine Gael’s environment spokesman Phil Hogan yesterday warned that, as a result, taxpayers could be left with a final bill for the project of €500 million.
He argued that the guarantees, given by the authority last year and approved by Minister for the Environment John Gormley, could leave the authority liable for the full cost of the site, plus interest and over-runs.
According to the reports, the authority’s interest bill for the glass bottle site alone is €5 million a year, a liability that means the authority is now losing money every year.
In addition, Mr McNamara is suing the authority for €100 million in a High Court action that is likely to run up substantial legal costs. A report by public accountant Ray King dealing with the glass bottle site agreement points out that, in March 2009, the authority gave new guarrantees dealing with interest payments and cost over-runs.
It also increased its share of the principal amount to €29.1 million from €26 million. These replaced similar agreements made in 2006 and 2007.
While the authority guaranteed 26 per cent of any interest due and 26 per cent of any cost over-run, Mr King’s report concludes that there is no financial limit on the actual amount of money that the authority could have to pay as a result of both agreements.
It adds that the shareholders’ agreement with Becbay could have the effect of leaving the authority to shoulder the burden of interest due from the other partners.
The authority initially sought to limit its investment in the entire project, including its share of the principal sum and the interest, to €35 million.
It invested an initial €32.8 million. Mr King’s report points out that payments to cover its share of the interest bill should have resulted in it paying €4 million annually for the next two years.
However, he says that it ended up paying a total of €47 million. He says that one conclusion that can be drawn from what subsequently happened is that the original clause limiting the authority’s investment to €35 million was not meant to include subsequent interest payments.
Alternatively, Mr King says that, once the DDDA invested €32.8 million in Becbay, it should only have loaned the consortium a further €2.2 million.
If that was the case, he says that it should not have loaned Becbay €47 million.
In that scenario, if Becbay were not able to meet interest payments, Anglo Irish Bank could have called on the original guarantee given by the authority.
This committed the authority to paying 26 per cent of the interest due over the first two years of the project.
As it is not clear which is correct, Mr King states that: “Only the people involved in the decision making or negotiations involved in this joint venture can state which of the two conclusions is correct.”
Landmark Buildings & Sites
No 1: National Convention Centre Spencer Dock, North Wall Quay
Officially called The Convention Centre Dublin the building with a distinctive glass funnel frontage designed by architect Kevin Roche will open this September. With capacity for up to 8,000 delegates it was developed by Treasury Holdings. Treasury won a competition to build a National Convention Centre in 1998 but its initial plan was rejected by An Bord Pleanála following objections by the DDDA, Dermot Desmond and others. Treasury won the subsequent competion with a scaled-down development.
No 2: Anglo Irish building North Wall Quay
North Quay Investments, one of the companies in property developer Liam Carroll's collapsed Zoe group of companies, drew down €40 million from Anglo Irish Bank to begin construction on new HQ for the bank. Construction was halted in 2008 when rival developer Sean Dunne was successful in a court challenge to the DDDA's fast-tracking of planning permission for the office blocks.
No 3: Point Village North Wall Quay
Owner of The O2, Harry Crosbie, has delayed development of the €850 million Point Village in the face of the recession. The ultimate plan is for a cinema, shopping centre, offices, a hotel and apartments. Dunnes Stores was due to be the anchor tenant of the 23,225sq m retail element but the retailer is now in a legal dispute with the Point Village development with a court hearing set for June.
No 4: Grand Canal square theatre Grand Canal Square
The 2,111 capacity Grand Canal Theatre, was designed by world renowned architect Daniel Libeskind, is the centre piece of Grand Canal Square and opened earlier this month.
The theatre opened despite a legal dispute between developer Joseph O’Reilly’s Ramford Ltd and Harry Crosbie over costs incurred during building. Mr Crosbie owns the lease on the building. Grand Canal Square, a 10,000 square metre space which is one of the largest paved public spaces in the city, was opened in 2007.
No 5: U2 Tower Britain Quay
The 130 metre high tower, which will be topped by a studio for U2 housed in an egg-shaped pod, is due to be finished next year according to the DDDA website but construction has yet to begin, as the Geranger consortium - backed by U2's members, Ballymore Properties and Paddy McKillen - have had to put plans on ice. The plans include a public viewing platform at 100-metres, a hotel, shops and apartments.
No 6: Irish Glass Bottle site Ringsend
A consortium led by builder Bernard McNamara, the DDDA and private investors assembled by Davy stockbrokers paid Paul Coulson's South Wharf Developments and Dublin Port Company €412 million for the site in 2006, financed by a loan of €288 million from Anglo Irish Bank. The deal is now the subject of a number of legal actions. The reports published yesterday reveal the DDDA has written the value of its stake down to zero.
