SEAN DUNNE: The Carlow man’s €379 million Ballsbridge vision depended on a highly speculative deal, writes FRANK McDONALD
SEÁN DUNNE was disarmingly frank in a New Year interview he gave to the New York Times , admitting that he “could be considered insolvent” if the banking crisis continued. Since then, the crisis in Ireland’s banks has become an international scandal – and Dunne’s own problems have deepened considerably.
The once-swaggering property developer – whose past excesses included a honeymoon with his second wife, former journalist Gayle Killilea, aboard Aristotle Onassis’s yacht Christina O in 2004 – had gambled on getting permission for a high-rise cluster in Ballsbridge, and lost the bet just three weeks after the interview was published.
In the autumn of 2005, when Dunne agreed to pay nearly € 54 million per acre for the site of Jurys Hotel and more than € 57 million per acre for the site of the Berkeley Court Hotel next door just a couple of months later, seasoned observers in the property world thought it was “mad money” – even though it was soon trumped by others.
Dunne had agreed to pay a total of € 379 million for the two hotel sites, with Ulster Bank advancing almost € 250 million towards the purchase. For both the developer and his bankers, it was a highly speculative deal that crucially depended on the planning authorities sharing his vision of creating “the new Knightsbridge”.
Yet there was never any basis in planning policy for the high-rise buildings proposed, not least the 37-storey “diamond-cut” tower that would have loomed up at the end of Pembroke Road. And though Dublin City Council planners decided to approve the project, minus the controversial tower, it would have to get through An Bord Pleanála.
Dunne had made it clear that it was “all or nothing” for the seven-acre site of the hotels, which re-opened for business in November 2007. He even suggested the macro-economic impact of what he was proposing would be so significant that it would be a blow to Dublin – and to Ireland – if the entire scheme did not proceed as planned.
Despite rounding up an impressive number of appeals in favour of the proposed development, which accounted for an unprecedented 87 out of the 127 lodged with An Bord Pleanála, and expressing confidence that he would get his way, the board refused permission on five counts, including “gross overdevelopment” in such a sensitive area.
Although a statement from Mountbrook, Dunne’s property company, said it would be making a fresh planning application for a purely residential scheme on the hotel sites, it seems probable that permission would only be granted for a much more modest development that would barely repay its extravagant investment.
According to property experts, the seven-acre site is likely to be worth no more than € 100 million in today’s depressed market – or just over a quarter of what Dunne paid for it in 2005 – and that the hotels he planned to demolish – now successfully trading as D4 Hotels – could be the most valuable part of what he called a “superprime” site.
Even if he had managed to get permission for the grandiose, overblown € 1 billion scheme shot down by An Bord Pleanála, what bank or banks would have lent him the money to develop it – and, in any case, where would he find an army of well-heeled purchasers to buy the 600-plus luxury apartments that were being planned?
Just one year ago, with property values in Dublin already falling, he was expecting to fetch € 1,500 per square foot for these apartments, or more than € 16,000 per sq metre. Thus, the asking price for a family-sized three-bedroom flat of 120 sq metres would have cost close to € 2 million – which would also be seen as “mad money” in today’s market.
The reversal in Ballsbridge was not the only setback Seán Dunne suffered in the past four months. Just two weeks before delivering its Ballsbridge verdict, the board overturned Wicklow County Council’s decision to approve a large-scale shopping centre at Charlesland, on the outskirts of Greystones, on the basis that it could undermine Bray.
The development proposed by Zapi Properties – jointly controlled by Dunne and Ballymore’s Seán Mulryan – was to have included 20,000 sq metres of shops, 16,000 sq metres of retail warehousing, 11,500 sq metres of car showrooms and 26,000 sq metres of office space. But where’s the market for all that?
Last November, the appeals board reversed a decision by Kildare County Council to approve plans for a retail, residential and office development on the Zed Candy site in Kilcock, saying it would have a detrimental impact on the viability of the town centre. But here again, who would be queuing up to take the 29 shops and 180 apartments?
Neither were the Ballsbridge hotel sites Dunne’s only investment in Dublin’s most exclusive inner suburb. At the height of the boom, he bought a half-share in AIB Bankcentre for € 200 million and engaged in a land swap valued at € 130 million to acquire Hume House – next door to Jurys – in exchange for an office block in Docklands.
Mountbrook’s balance sheet for the year ending July 2007 showed debts of € 624 million against assets of € 765.5 million. But the value of these assets has fallen sharply since then, leaving Dunne’s bankers still “standing by their man” while wondering if they’ll ever see the debts repaid. In the meantime, there is no question of a “fire sale”.
Others have more pressing concerns. On February 18th, for example, it emerged that estate agents CB Richard Ellis had initiated legal action against Dunne over the alleged non-payment of € 1.52 million in fees for handling the land swap deal that gave him ownership of Hume House; he pledged to lodge € 1 million in court pending the outcome.