The resort really began to get into trouble when its parent group, Eassda, owned by Alastair Jackson and his family, was caught out in the property crash. It ended up in receivership in the North.
It was a massive fall from grace for the developers, who had begun building houses in the North many years ago. Irish Nationwide also bankrolled the Jacksons on a number of other building projects. The society had even provided a loan facility of €12 million for the New Forest Golf Club development on 300 acres at Tyrrellspass, Co. Westmeath, half an hour’s drive away. But the Moyvalley resort was its biggest mistake. Irish Nationwide ended up foreclosing on the Moyvalley project and New Forest, and a receiver was appointed.
The extent of the collapse in fortunes for the Jacksons, who had their own helicopter and jet, was apparent from the statement of affairs for the Eassda receiver. An update from the receiver submitted to the Companies Registration Office describes how Jackson insisted that the directors put down a deposit of €2,000 if they wanted to continue using the company’s mobile phones.
PRIZE FIGHTER: PADDY MCKILLEN
Clarendon Properties, backed by the low-profile property developers Paddy McKillen and Tony Leonard, became a major borrower from Irish Nationwide. Only two photographs of Paddy McKillen were ever published in a newspaper before his battle with Barclay Brothers in the English High Court for control of some of London’s most prestigious hotels. McKillen also fought not to have his loans transferred to NAMA, but didn’t win.
McKillen has fought two High Court battles during the crash: one against NAMA, challenging its right to buy his loans, and the other the London hotels showdown with the Barclay Brothers.
For McKillen, the relationship with Irish Nationwide also goes back a long way. Clarendon was listed as owing the society €129 million at the end of 2006. Its biggest loan facility, amounting to €32 million, was for the Powerscourt Centre in Dublin and the Savoy Shopping Centre in Cork. The two men bought Powerscourt House in the mid-1990s at a cheap price in the wake of the collapse of Power Corporation, the salutary tale of the Cork dentist Robin Power, who fell in love with property development in the 1980s. Power Corporation had been floated on the stock exchange in 1987, and by 1990 it was valued at £250 million. Less than four years later it was worth only £2 million.
Power had created the Powerscourt Centre and was behind the development of St Stephen’s Green Shopping Centre, together with British Land. Over-extending the company’s balance sheet on property development in London was its undoing.
Leonard and McKillen were both wily and astute operators who rode the property rollercoaster very well. McKillen also went to Irish Nationwide for Château La Coste, his French castle and vineyard (€14 million), and the purchase of office space in the Place Vendôme in Paris (€24 million). Other Fingleton loans included €12 million for retail space in Limerick and a further €8 million for investment property in London.
McKillen’s personal and family assets include an art collection worth €20 million, mansions in California and a plush pad in the centre of London. He has owned four properties in the billionaires’ playground of Cap Ferrat, where neighbours include the owner of Chelsea FC, Roman Abramovich, and a vineyard and other assets in Argentina. He is also known to have invested in Hong Kong and Vietnam. Closer to home, he owns a significant amount of property around South Anne Street in Dublin and has held a stake in Captain America, Wagamama, Muji and Champion Sports. He likes to keep a low profile when at his home in Foxrock, Co. Dublin, but drives classic Porsches abroad and uses a private jet. Clarendon has suffered its own setbacks with the property crash but retains many good property assets.
MUIRISÍN DURKIN: BRIAN AND TONY DURKAN
Durkan has been a big name in house-building and property development for decades. Two Durkan brothers, Brian and Tony, began to become more heavily involved in property development during the boom, but perhaps not in the biggest of housing schemes. They tended to do smaller, specialist developments, such as one in Foxrock involving twenty apartments and two town-houses on a quarter of an acre. Elsewhere in the Dublin region they received planning permission for twelve to fifteen-house developments.
When it came to borrowing from Michael Fingleton their ambitions just seemed to get bigger. By the end of 2006 their company, Devondale Ltd, owed Irish Nationwide €147 million in connection with a number of developments. One was a loan of €25 million in relation to an 8½-acre site in Saggart, Co. Dublin. The site was purchased in December 2006 with a view to selling it on if a suitable purchaser came along.
While the first half of 2006 had seen house prices continue to skyrocket, in October that year they began to stall. There were fewer transactions, and prices froze as people held off buying to see what might be in the budget that year regarding stamp duty. So when Brian and Tony bought this site in December the first real cracks were beginning to appear in the invincibility of the market. They had another €22 million facility to develop 152 residential units and a creche in Saggart, which was due to be completed in late 2007.
Devondale’s biggest loan facility was €94 million in relation to a development site purchased in July 2005 at Celbridge. The site consisted of a period house on 66 acres, 49 of which were zoned for development. The master plan was not accepted by Kildare County Council until January 2007. Given that asking prices began to fall in early 2007, and house prices began to fall around June that year, this was a very late development indeed. The Durkans were about to pay the price, as ultimately was the taxpayer.
House prices collapsed in 2008 and 2009 and really only stopped falling (sort of) in 2012. Irish Nationwide had granted a capital and interest moratorium for the full term of the loan. This meant that neither the principal nor the interest had to be paid until the loan matured. The total security on the loan was essentially the property itself.
For the year ending December 2011 accounts for Devondale showed that it had assets valued at €20½ million but had borrowings due within one year of a staggering €175 million. The company was showing a deficit of €154 million and had generated trading losses of €144 million.
BLIGHTED BY OLD BLIGHTY: THE LONDON GOLDEN CIRCLE
Michael Fingleton’s passion for property investment and lending inevitably took him to England. Many of his clients were from rural Ireland who had gone to London to work on building sites and wanted to go back there and buy up the place.
Michael Fingleton was more than ready to write the cheques to fulfil their personal and financial ambitions. At first he followed Irish developers who wanted to do deals in London in particular. Seán Mulryan was a typical builder from the west of Ireland who had lived in England and now wanted to make it big in property in London. Johnny Ronan of Treasury Holdings was the same, as were the O’Flynns, Gerry Gannon and Noel Smyth.
One Irish property developer tells the story of how in the late 1990s he was in London to complete the purchase of a building as an investment. He had borrowed the money, about £25 million, from Anglo Irish Bank. While there he happened to bump into Michael Fingleton in a posh hotel. They knew each other slightly, and began to chat. The developer told Fingleton what he was doing in London. Fingleton was a little annoyed that he hadn’t gone to him for the money. ‘The next time you want to buy something over here, why don’t you come to me first?’ The developer had another building in mind, which he immediately told Fingleton about. ‘Within thirty minutes of meeting him he had agreed to lend me £15 million.’
But the really big opportunity (or risk) came from lending to British clients for property development and joint ventures in Britain. To pull this off, Fingleton needed to have an office there.
The first thing he did was to open an office in Belfast, even though it only made one loan in Northern Ireland. He then hired his own son, Michael Fingleton junior, to run a London branch, which would report to Gary McCollum in Belfast. Fingleton developed a pattern of lending in Ireland that thrived on the close social and business circles here
. Developers knew each other and met each other socially, and therefore one referred the other for business. Fingleton was at the centre of that high-flying circle.
In Britain it was a little different. There were fewer clients, and they tended to have higher borrowings, with greater profit shares for the society. But, unlike Ireland, the same small group of big borrowers kept forming consortiums, alliances, joint ventures and partnerships with each other, and financing them through Irish Nationwide.
LONDON CALLING: GALLIARD, THE LANDESBERGS, THE ROSENBERGS, AND DAVID BURKE
After Ballymore Properties the three biggest borrowers from Irish Nationwide were in Britain. They owed a total of €720 million by the end of 2006 and were interlinked in several ventures.
The first of these was Galliard Homes. This was, and is, a house-building company that has diversified into all kinds of other property development and investment. It is run by Stephen Conway and owned by him and a group of other investors. A big part of the way it does business is through joint ventures. These tend to be separate business vehicles put together for specific projects, such as buying hotels, pubs or development sites.
At the end of 2006 Irish Nationwide had a net exposure to Galliard of €252 million. Based on group accounts for the period, this suggests that Irish Nationwide was a substantial banker to the group and probably its biggest lender. Examples of loans to Galliard were €25 million for a former hospital being developed into 245 residential units, a €100 million facility for a joint venture with Frogmore Property Company (Irish Nationwide’s 28th-biggest borrower) for an apartment development, and other joint-venture loans with Frogmore for hotels in London and elsewhere in England.
Galliard shows up as an investor in several projects with two wealthy British families, the Landesbergs and the Rosenbergs. These two families were partners in a raft of ventures backed by Irish Nationwide and in which Galliard was a shareholder and sometimes did the renovating or building work. The main movers here were Alan Landesberg and his son Gary Landesberg on the one hand and the brothers Elliot and David Rosenberg on the other.
Their biggest venture backed by Irish Nationwide was Admiral Taverns. Irish Nationwide provided approximately €240 million on different pub and hotel-buying sprees. Admiral Taverns, financed by Bank of Scotland and Irish Nationwide, began buying pub chains around Britain. At one point it owned 2,500 pubs and was talking about floating on the stock exchange. Pubs were bought and certain properties were sold, which brought in a good profit on the better establishments. Its two lenders had done a major refinancing of the debt in 2007, which allowed Admiral Taverns to boast that it had a £1 billion ‘war chest’ to keep buying more pubs.
By the time the economy began to turn downwards Admiral Taverns had borrowings of £1 billion, and it had to start selling off pubs to stay afloat. The group owed Bank of Scotland £855 million and Irish Nationwide about £105 million when it was forced into administration in 2010. Bank of Scotland was forced to write off about £600 million and do a debt-for-equity swap under which it took a half share in the business. It has now emerged that because Irish Nationwide’s security was secondary or subordinated to other lenders, the state-owned building society got nothing back on the Admiral Taverns loans.
Somewhat more upmarket, the Landesbergs, Rosenbergs and Galliard teamed up to buy St James’s Club in London in 2005. This was one of the most exclusive members’ clubs in the city, frequented by well-known actors and other celebrities, including Michael Caine, Liza Minnelli, Richard Attenborough and Dudley Moore. The Landesbergs and Rosenbergs closed the club in 2006 for a multi-million-pound renovation, and it reopened in 2008. All the rooms had handmade silk wallpaper, black lacquered furniture, Murano glass chandeliers and handmade mattresses. But in 2010 it was put up for sale. The asking price was in the region of £60 million; the sale price was never disclosed, but it is likely to have fetched a high enough price to clear its £45 million in bank borrowings.
Another major borrower was a company called Roadnumber Ltd. At the end of 2006 it owed approximately €230 million. The company was originally part of the Oracle Group, set up by the publican turned property developer David Burke. At one point the company had the Galliard boss Stephen Conway on its board and became a joint venture partner with Galliard. It then teamed up also with Seán Mulryan’s Ballymore Properties as part of a proposed £1 billion London Docklands Tower development. This meant that Irish Nationwide’s first, second and sixth-biggest exposures were jointly doing a development.
It wasn’t their first joint venture. Oracle Group, Ballymore and Galliard announced plans to redevelop a seven-acre site next to Pan Peninsula in east London as a 2 million square foot mixed-use scheme. The developers sought to buy the Audi garage site at Marsh Wall, London, which they plan to redevelop as five hundred flats, two hotels and 100,000 square feet of shops. Burke wanted to be the third-biggest developer in the London Docklands, after the Canary Wharf group and Ballymore.
Roadnumber borrowed heavily for the development in London’s docklands. The company was Irish Nationwide’s sixth-biggest exposure in 2006, according to the KPMG report of 2007. It later became a joint venture with Galliard, changed its name to Millharbour Developments and in 2010 became fully owned by Galliard. Burke’s Oracle Group ended up liquidating four of its major ventures. Accounts for Millharbour show that at the end of March 2012 it had assets of £22 million and borrowings of £60 million. It had retained losses and a shareholders’ deficit of £36 million.
One of Oracle’s big coups came in May 2008 when it sold a pub site in the Isle of Dogs, London, to Ray Grehan’s Glenkerrin Group for £32 million. Oracle had bought it only twelve months earlier for £6¾ million. At the time Oracle was reported in the press to have built up a ‘war chest’ of £80 million. Two years later four of its companies were in liquidation.
One of the biggest challenges for Fingleton and his Belfast lieutenant, Gary McCollum, was to get introductions and referrals of business in London. After all, Fingleton knew the Irish scene very well but he was drifting into a whole other market. Central to forming these relationships was a firm of London solicitors called Howard Kennedy. This firm acted for the society on several big property deals, and on a number of occasions acted for both sides of the transaction, representing the borrower also. KPMG noted in its sale prospectus in 2007 that growth in commercial lending in Britain was through their existing customers ‘and those potential customers that are being introduced to them by existing customers, through their UK law firm, Howard Kennedy, and direct approaches to the society.’
Links with the Howard Kennedy firm were strong. Fingleton’s daughter Eileen, a solicitor, worked there, though she is not known to have worked on any Irish Nationwide contracts. But the strength of the links is illustrated by a hotel investment. Galliard teamed up with the Landesbergs and Rosenbergs to buy a number of hotels in Britain that were leased to the Radisson and Folio Hotel chains. Another investor in this deal, which was also backed by Irish Nationwide, was a company called Deedchoice Ltd. This was a British investment company owned by Elizabeth Philips. She is the wife of Maurice Philips, a consultant to Howard Kennedy and a former partner in the firm. Irish Nationwide’s net exposure to Deedchoice was listed as €204 million at the end of 2006.
Deedchoice operated three joint ventures in hotel investments. Each one had a loan with Irish Nationwide. Total loans from these joint ventures amounted to €278 million at the end of 2009. The loans defaulted in the summer of 2009. One of them related to an investment with Stephen Conway of Galliard and the Landesbergs, which was subsequently restructured to include cross-collateralisation with two other hotels, Jefferson Hotels and Jefferson Hotel (Cardiff) Ltd, which had a Landesberg connection.
Business breeds relationships, whether one is an investor or a lender. In the case of Irish Nationwide in Britain the tightness of the relationships left large amounts of Irish Nationwide loans with a relatively small number of people. It was a very significant
concentration of risk. The second, third and fourth-biggest borrowers had formed multiple joint ventures together. Irish Nationwide’s solicitors in London often acted for the borrower and the bank. A consultant and former partner with the firm, whose wife was the seventh-largest borrower from the society, was also a major investor in shared projects with the second, third and fourth-biggest borrowers.
In total, six of the thirteen biggest borrowers from the society had connections through participation in various joint ventures funded by the society. Irish Nationwide had a net exposure to those six borrowers of approximately €1.3 billion in 2006.
One British borrower who seems to have no connection with the other group was an elusive multi-millionaire property developer called Cyril Dennis.
WHERE DO YOU GO TO, MY LOVELY?—CYRIL DENNIS
Cyril Dennis was made for Irish Nationwide Building Society. Shy of publicity but with a good record in property development, the wealthy British developer thinks big and enjoys the good life. He was awarded membership of the Order of the British Empire for services to the Jewish community. He began his development work as half-owner of an Essex house-building firm, which he sold in 1987. After a period advising the Berisford Group he built up his own property business with a portfolio spread around different cities. In 1994 he sold three-quarters of the portfolio to Legal and General for £116 million, reputedly netting him a profit of £50 million.
Dennis spends a lot of time at his luxury villa in Monaco, the purchase of which was financed by Irish Nationwide. In 2009 his net worth was estimated by the British property journal Estates Gazette to be £130 million. When many property developers were on their knees in 2009, Dennis spent £23 million buying the 403-bedroom Le Méridien Beach Plaza Hotel in Monte Carlo. He had a good pedigree in property, having sold a 3.3-acre site in the Isle of Dogs, London, for £47 million in September 2006 that he had bough nine years earlier for £2 million.
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