Monday 9 November 2009

Dublin Docklands is sinking with further losses to come

It's already cost the state more on paper than the disastrous PPARs payroll system and the e-voting machine fiasco combined, yet the costs of the Irish Glass Bottle site in Poolbeg are continuing to mount with serious difficulties ahead before any resolution is reached.

The state initially lost out when Ardagh spotted a loophole in its long-term lease on the 25-acre site, which eventually sold for €412m, and was able to negotiate a deal whereby it pocketed two-thirds of the sale proceeds of the site. It had initially attempted to force Dublin Port to sell the site under the loophole which would have meant the site could have been purchased for just 5% of its value. In the end though, the state, through Dublin Port, got one-third of the sales proceeds but still lost out on nearly €275m from the sale which went to Ardagh's shareholders.

The Dublin Docklands Development Authority (DDDA) will soon report that the site is now worth €60m and it has made a paper loss of about €87.5m on its 26% stake in the land taking total state losses to more than €360m on what is a former dump. The valuation is a long way off from former DDDA chief executive Paul Maloney's assertion back in February that he expected the site to be written down by just 20%-30%, a claim that raised eyebrows at the time given the collapse in value of development land.

And there may be worse to come. First of all, based on the February Oireachtas hearing into the DDDA, taxpayer-owned Anglo Irish Bank, and apparently Allied Irish Bank, limited the recourse on the loan to the site itself and a €100m guarantee, despite the loan being closer to €300m.

Secondly, Dublin Port has already warned that the draft masterplan for the Poolbeg area that was drawn up by the DDDA would "appear to provide a rich vein for litigation against the authority if the current proposals on the density of developments contained in the draft scheme under review are maintained". The Port came to that position because, it said, the densities being proposed for the Glass Bottle site compared to elsewhere within the Poolbeg masterplan could create a "perception of bias".

There's also the danger that if Bernard McNamara's legal case against the DDDA in relation to interest payments on the site succeeds, the state will be left on the hook again. He moved last week to have the case heard in the Commercial Court. It centres on his claim that the DDDA did not meet its commitments in relation to planning permission on the site.

McNamara himself is being sued by private clients of stockbroker Davy who provided the mezzanine finance for his investment in the site.

The Glass Bottle site is but one disastrous foray by the DDDA. Their CHQ retail complex, which has struggled since opening, has lost even more tenants in recent weeks. The DDDA also faces significant writedowns on other land it owns, including a site bought for about €15m for a park and the separate Readymix site while the U2 tower site and the competition surrounding it has become a shambles.

The new financial reality means the authority has been forced to cut costs and, as revealed in this newspaper, will also cut staff. There's also been a huge drop in expenses claims. The authority's board and executive ran up an expenses bill of more than €625,000 between 2005 and 2008 with one trip for 17 to London costing nearly €38,500; €27,000 was spent on a visit by 13 people to Boston while a trip to Amsterdam for 13 cost €31,000. In addition, tens of thousands was spent on annual strategy board meetings while there was once a €1,700 bill for a Four Seasons hotel, where then chief executive Paul Maloney, director of architecture John McLaughlin, and secretary Neil Mulcahy stayed. Documents seen by the Sunday Tribune show that this year, the expenses claims by the board and executive are much more modest with only two exceeding €2,000. Former chief executive Paul Maloney claimed course fee expenses of €2,263.50 in relation to a course in property investment through the College of Estate Management in Reading, while a table of 10 for the 2009 Corporate and Social Responsibilities Awards cost nearly €2,400.

Sunday Tribune

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