Developer Bernard McNamara says he has no unencumbered assets and is "broke", but his €108m action for damages against the Dublin Docklands Development Authority could provide him with some breathing room – provided he wins. McNamara and his company Donatex are suing the DDDA in relation to the €412m Irish Glass Bottle site at Poolbeg and his company is due to file a replying affidavit this Friday. The stakes were raised last week after the DDDA brought a preliminary application aimed at having developer Donatex provide security for the costs of the action.
Standing on the margins are stockbrokers Davy and their private clients – claimed to include well-known business figures Martin Naughton, Lochlann Quinn and Barry O'Callaghan – who lent mezzanine finance to McNamara to finance his stake in the land. They secured a €62.5m judgment against the developer last week and a separate judgment of €98m against Donatex and have now sought a detailed statement of McNamara's assets, but sources say they accept they are unlikely to recover much if any of the money. However, if McNamara succeeds in his case against the DDDA, then they are likely to pursue a lien against the money he receives. That is their best way of being repaid. Davy does not envision pursuing other developers to whom it provided mezzanine finance for the foreseeable future, sources said.
In an RTE radio interview last week, McNamara was obviously irked over the Davy case. "This was originally a seven-year deal. They jumped the gun," he said.
Legal opinion is split on McNamara's chances of success in his case against the DDDA. On the one hand are those who argue that the reasons Davy won its case against the Clare man are the same reasons he is putting forward for why the DDDA should pay him damages. The fact that the Poolbeg planning scheme still hasn't been approved and is facing cost overruns (see panel) backs that view. On the other hand, some sources believe his claim is weaker and the affidavits will prove that.
Either way, McNamara has found the Irish Glass Bottle site deal as toxic as the soil that was once there. All three owners – McNamara, businessman Derek Quinlan and the DDDA – have financial difficulties and the bill to the state from the former dump could surpass €500m even before its transfer into Nama and well before a brick is even laid.
The state lost out on more than €275m initially when glass company Ardagh spotted a loophole in its long-term lease on the 25-acre site, and negotiated a deal whereby it pocketed two-thirds of the sale proceeds of the site. The DDDA has since been reported to have made a paper loss of about €87.5m on its 26% stake in the land, as part of a €186m write-down in its property assets, taking total state losses to more than €360m. If McNamara's case is successful, then sources involved in the deal believe the DDDA could face a further legal claim from fellow investor Quinlan, pushing total potential losses well past €500m.
The bitter irony for the taxpayer is that current DDDA chairwoman Niamh Brennan has said she found the question of why the authority got involved with the Irish Glass Bottle site in the first place "hard to answer". She said she had "seen quite an amount of documentation concerning the transaction but I am not fully clear as to what was going on behind the scenes that led to the transaction".
So far nobody has been able to justify the decision. What we do know, however, is that the DDDA approached the Kelly family seeking to bid jointly for the site and also approached McNamara. The Kellys said no but McNamara jumped in and paid the price. It was part of a series of deals McNamara pursued at the top of the market, including investing significant sums into the Shelbourne, Parknasilla and Conrad hotels. The developer, who paid €42m in tax between 2003 and 2006, apologised last week for having "waded in so deep".
It's a decision that has cost him almost everything financially and McNamara said he had put "everything on the line including residences", although his contracting company, from which he is resigning, is ringfenced. However, his borrowings stand at an astonishing €1.5bn. As to the future, he said he believes that "not everything here will be in trouble forever". He is part of a joint venture that will build projects in Doha and Nigeria and said he will have to rely on his "earning power" as he seeks to pay back the banks and the investors. He described the current financial crisis as the "equivalent of the 1929 crash". There will be no running away though. In typically hard-nosed fashion he said last week, "I will be there when they come to get me".
As for the DDDA, it faces its own financial crisis and has had to appoint debt collection specialists as it seeks to be paid monies due in rent and levies. Separately, it faces a claim from developer Joe O'Reilly's Ramford in relation to additional costs at Grand Canal Square. The costs are described as being part of the "normal toing and froing in any development project" and the claims are rejected by the DDDA.
O'Reilly's Ramford, meanwhile, will seek on Monday to have a case against Harry Crosbie – who bought the Daniel Libeskind theatre there – admitted to the commercial court. It seems everybody in the docklands is falling out.
The DDDA board told its executive in November that it was to produce a report on the Poolbeg planning scheme and asked that details be "clearly set out" of "the expenditure incurred but not approved" in relation to the scheme in time for the December board meeting. Among the topics to be included were an estimate of the "additional expenditure" required to complete the scheme and the level of expenditure approved by the board.
"The board directed the executive to negotiate on the outstanding amounts due to consultants in light of the reduced professional fees currently being sought by the state sector generally," minutes from the meeting state.
A spokesman for the authority said the overspending was on some aspects of the work done for the scheme and the overruns were small. The "issue should be seen in the context of the increased financial control being exercised by the DDDA in the new environment", he said.
Dublin City Council, Dublin Port and the local GAA club have all raised concerns about the plan. Clanna Gael Fontenoy says the plan is an unfair "attempt to interfere with" the GAA club's property. Dublin Port said the initial proposal could create a "perception of bias" and would "appear to provide a rich vein for litigation against the authority if the current proposals on the density of developments" are maintained. DCC said some of the proposed rezonings regarding its land were a "matter of concern".