Sunday 15 February 2009

Docklands authority in the dock over property

As property values plummet in Dublin's docklands, concern has been expressed about the DDDA's failure to pay interest on a key loan and the declining value of its holdings.

DDDA chief executive Paul Maloney with Anglo Irish Bank chairman Donal O'Connor
The South Wharf site at Poolbeg in south Dublin which was bought for €412m but is now valued at between €90m and €125m

The Dublin Docklands Development Authority (DDDA) is facing a substantial write-down in the value of its assets after the collapse in the property market. DDDA chief executive Paul Maloney confirmed to the Oireachtas committee on environment that most of its assets, which were valued at €177m last year, are "development assets". Development land has been the most adversely affected sector in the property downturn.

Chief among its assets is its stake in the South Wharf site at Poolbeg in south Dublin which was bought for €412m. Following Maloney's revelation that the state body and its partners are not paying interest on the loan to nationalised Anglo Irish Bank, the Sunday Tribune obtained three valuations of the site. The independent experts valued the land at €90m, €120m and €125m respectively, well below Maloney's assertion that he expects the site to be written down by just 20%-30% when it is valued in the coming weeks.

Maloney admitted that the value of the DDDA's assets "will be far lower this year, as we go through our annual accounts. We are determined that the €2.5m currently in the accounts for the next three years for community and social education purposes will not be affected. We have a borrowing facility with National Irish Bank. I want to make it clear that it's in place to help us through what we expect will be a difficult period". He claimed that the current downturn in the market is "cyclical".

The news that taxpayer-owned Anglo Irish Bank, and apparently Allied Irish Bank, limited the recourse on the loan to the land and the €100m guarantee, despite the loan being closer to €300m, also shocked observers. Maloney said it took a 26% stake in Becbay, the company that bought the site, to ensure it had voting rights. He also revealed that the site was valued at between €250m and €370m when it came on the market.

"We insisted that although we were taking a 26% stake in the site, we would not go beyond €375m. Our 26% was only up to that proportion; anything over it we left to the developers to take at their own risk, which they did," he told the committee. He did not say why they were willing to go beyond the highest valuation provided by their valuers for the site.

The DDDA invested €32.8m in the purchase of the site and has since "accrued interest and working capital costs of €37.6 m", Maloney said. The loan is being renegotiated as it was held on a two-year initial facility.

The DDDA has begun public consultations on the future of the South Wharf site and other land under its planning jurisdiction in the Poolbeg peninsula. Maloney said the plan is to have taller buildings facing Dublin Bay and that "they would become smaller towards Seán Moore Park". To the south, he said, "many of the buildings will be houses rather than apartment blocks and the developments will be under six storeys". The tallest building will be 15 to 18 storeys, he said.

Other assets owned by the authority include CHQ, the shopping centre in the IFSC that has struggled to attract tenants and faces significant competition from Harry Crosbie's Point Village, a major retail scheme for Spencer Dock planned by Treasury Holdings and its partners and a district centre planned for Poolbeg.

Maloney also revealed that the authority is considering bailing out developers by purchasing empty apartments in the docklands for social and affordable housing. Apartment prices in the docklands have plummeted since the collapse of the property bubble. One-bed units in Liam Carroll's Castleforbes Square development, for example, were priced at almost €350,000 two years ago; last week they were launched on the market with prices starting at €204,000. Two-bed apartments that were €440,000 now have a starting price of €250,000.

Maloney said the DDDA has held talks with the Minister of State at the Department of the Environment, Heritage and Local Government "in an attempt to use empty apartments for social and affordable housing. The rental accommodation scheme is in place and we are examining it. I understand further affordable housing initiatives will soon be taken by the department. The affordable units we are selling in the docklands are priced well below market values but are selling and people are moving into them … I expect new initiatives to emerge in the coming weeks and months".

Sunday Tribune

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