Sunday 14 June 2009

Property boom's poster boy faces his toughest battle yet

If developer Liam Carroll loses an upcoming legal battle with fellow developer Noel Smyth over The Square in Tallaght, it could deal him a serious blow.

Developer Noel Smyth, above, is suing Liam Carroll for €150m in damages over delays to an extension at The Square shopping centre in Tallaght, Dublin.

Developer Liam Carroll, the poster child of the developer made billionaire by the house price boom, will face one of the biggest battles of his business life in the coming weeks, when a case taken by developer Noel Smyth, who owns most of The Square shopping centre in Tallaght in west Dublin, begins in the commercial court.

Smyth is seeking €150m in damages against Carroll, developer Larry O'Mahony, former IRA hunger striker turned developer Tom McFeely, and related companies called Tafica and Aifca.

If Carroll's side loses, it would be a significant body blow to the developer at a time when his main company, Danninger, is asking creditors to accept 60 cent for every euro owed.

Smyth says delays to the proposed expansion of the Tallaght shopping centre cost him about €70m in lost capital allowances and is seeking additional damages, restitution for loss of profits and legal fees.

The case arose after Smyth secured planning permission for a €300m development at The Square on land where Lowe Taverns (Tallaght), a subsidiary of Aifca, had a car parking licence. Smyth had to acquire that licence to allow the development to go ahead and needed to complete the development by June of last year to claim the allowances. He also had numerous retailers interested in opening in the extension.

Smyth's Redfern vehicle is claiming that a breach of contract by Aifca, which was owned by McFeely and O'Mahony, delayed work on the development. O'Mahony and McFeely in turn say they entered an agreement with Carroll to refinance their loan facilities in September 2006 and, as a result, Carroll subscribed for more than 50% of the issued share capital of Aifca, meaning they no longer control the company.

In a contingent liabilities note in its 2006 accounts, Aifca states that if the company, its directors, Lowe Taverns (Tallaght) or any connected person, transfers, surrenders or loses the benefit of the licence, then McFeely and O'Mahony are due an extra €5m within 14 business days.

There have been attempts at mediation between Smyth and the others but they came to nothing.

The case was due to begin on Tuesday but Larry O'Mahony appealed that date to the Supreme Court, who heard a case last Wednesday relating to access to documents. He has since been given access to the documents.

O'Mahony and McFeely are expected to represent themselves after their solicitors, Ivor Fitzpatrick & Co, told the courts in April that they would no longer be representing the duo. The case will therefore only be mentioned on Tuesday before Mr Justice Peter Kelly with a delay of at least a week likely before hearings begin.

Listed for eight weeks, sources suggested it could last as long as 12 weeks and the estimated bill for the court appearances alone would be €2.5m to €3.5m for each side.

Ironically, the delays could all have been avoided by the intervention of the local authority if new retail planning guidelines proposed for greater Dublin had been in operation at the time. The draft guidelines recommend that local authorities "should allocate sufficient sites and expansion areas" to allow town centres to grow and "where necessary use compulsory purchase powers to bring forward important sites".

Smyth and Carroll have been at the centre of numerous battles over the years and there is no love lost between them. Earlier this year, Smyth settled his long-running legal dispute with Carroll over Smyth's removal from office at Dunloe Ewart when Carroll bought the company in 2002 after a protracted hostile takeover. Legend has it that the first thing Carroll asked for after the takeover was the keys to the company's blue Mercedes.

The rivalry began after Carroll was pipped by Dunloe in a tender for a site at Sir John Rogerson's Quay in Dublin.

Carroll owns a significant number of assets in his own name, having bought many of them for cash during the boom years when his developments were generating huge profits. It is not known, however, if the developer had to pledge any of them when he received additional banking facilities of about €100m from Bank of Scotland (Ireland) and AIB in recent months.

In total Carroll owes about €2.8bn to the banks, with Anglo Irish Bank among the other financial institutions that backed his projects. He is also developing the bank's proposed new headquarters at North Wall Quay but planning permission has not been forthcoming for the development and the building has been left as a shell ever since.

Kilkenny Shipping Centre Developer May Be Wound Up

McDonagh Junction Developments Limited (MJDL), which developed the shopping centre of that name in Kilkenny, is due to face a winding-up petition from Winthrop Engineering in the courts tomorrow.

MJDL, owned by auctioneer Paul Newman and solicitor Paul Hanby, has confirmed it is in financial difficulties and says it is offering 62 cent in the euro to its creditors in settlement of all outstanding debt.

BDO Simpson Xavier's Hugh Cooney is advising MJDL. The shopping centre is unaffected by the dispute.

In April the Sunday Tribune published details of documents showing the problems MJDL was having with its bankers and the extent of rent arrears at the shopping centre, which stood at more than €620,000 earlier this year. The centre's struggles had been known about for over a year.

Davy has told investors who bought into the centre that MJDL continues to have obligations to the investors, including an option to put back any unlet units "after two years for the price they paid for them".

If the vacant units are let at a "rent lower than what was capped up at, the purchase price is recalculated based on reduced rent and MJDL refunds the difference to investors". Additionally, "MJDL is responsible for letting costs associated with the unlet units such as fit out costs and tenant incentives".

Contrary to reports, Michael Whelan's Moritz is not involved in the development. Moritz had worked with Newman and Hanby on several projects through Chesterbridge Developments but in 2007 Moritz decided not to participate in the development of MacDonagh Junction from either a financial or management perspective.

This led to a restructuring of the finances for Chesterbridge Developments, allowing Moritz concentrate its equity from Chesterbridge into its core residential development business.

Sunday Tribune

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