Sean Dunne:AIB deal: Can anyone see him getting out of this without losing his shirt?

I was reading the Phoenix Christmas annual recently and there was a great article about Sean Dunne and the Ballsbridge purchases that took place there earlier this year.

To give people a bit of background information. Sean Dunne is the man who bought the 4.84 acre Jurys Hotel site in Ballsbridge for €260m which worked out at €54m an acre (an Irish record at the time). Because of access concerns to the site, Dunne then purchased the Berkley Court Hotel for €119m, €57m and acre (breaking the record he himself had set with the Jurys Hotel site). The purchase of the sites was financed by a 5.25% interest bond compliments of Ulster Bank. The plan for the 7 acre site has recently been unveiled too with Dunne forseeing "bringing Knightsbridge to Dublin" by developing a mixed use site of cafes, bars, restaraunts, light retail and offices as well as 32-storey block of apartments. It's expected that to break even on the site purchase alone, he'll have to price at €600,000 per apartment and €1,000,000 to make a decent profit.

Not content with sitting on some of most expensive land in Dublin, he then set out to purchase AIB's head office on four acres of land only to lease back to the AIB at €11m p/a. The cost of this? A cool €200m. the plan is that in five years time, AIB HQ will be torn down and replaced with another similar development to the aforementioned Jurys Hotel site.

I have no idea how Sean Dunne can sleep safely in his nearby Shrewsbury Road home while having nearly €500m of unperforming debt hanging over him. Especially considering that he'll be sitting on this compounding debt for at least four years before he'll be seeing any return on it. Can anyone see Dunner getting out of this without losing his shirt? I'd love to see him pull it off, but I can't help but think he's screwed!

Do the moderators have a problem with this sort of discussion?

Re: Sean Dunne, Dunne-for?

He'll be all right, aparently if things get stretched he's going to rent out one of the rooms in his Shrewsbury Rd pad to a Polish plumber under the rent-a-room scheme.

Re: Sean Dunne, Dunne-for?

Please note that discussion of the future of the housing market is suspended on Askaboutmoney until someone does a balanced piece on it. Any further posts on house prices will be deleted.

Brendan

Re: Sean Dunne, Dunne-for?

Did I read that correctly, we could end up with a situation where Ulster Bank owns AIB Bankcentre?

From what you're saying above all the contruction going on at AIB would be for nothing, it's all going to be torn down almost as soon as it's complete.

I can't see how that would make sense. If that was the plan then surely they'd have stopped all development by now? Or perhaps they have, I haven't been around in a while.

-Rd

Re: Sean Dunne, Dunne-for?

its a very ballsy play,

but doesn't look like ulster bank got a great deal on this.

aib are paying 11 of his aporx 25 million annual interest payment.
He obviously has interest cover for at least a year on the balance, but it is flying close to the wind!...i'm supprised ulterbank bet thier annual proifts on one deal...

fiar play to him.

Re: Sean Dunne, Dunne-for?

what equity has dunne put into deal?

Re: Sean Dunne, Dunne-for?

i was just about to ask that. there was an article in one of the sunday papers about the financing for the purchase & development of the ringsend. the developer was only fronting a minimal amount whilst the banks and a consortium of private investors (arranged by Davy's i think) provided the lion's share of the financing. the reason that he can sleep so well at night it that most of the the money involved is not his!

Re: Sean Dunne, Dunne-for?

daltonr said:

Did I read that correctly, we could end up with a situation where Ulster Bank owns AIB Bankcentre?

Click to expand...

Not Ulster Bank, but the Royal Bank of Scotland. Don't forget they all had to reapply for their jobs!

Towger

Re: Sean Dunne, Dunne-for?

Raskolnikov said:

I have no idea how Sean Dunne can sleep safely

Click to expand...

I don't think he has anything to worry about.

There is an old saying that if you owe the bank $1000, you're in trouble; while if you owe the bank $1 million, the bank is in trouble. in thiss case we are talking about many multiples of $1m.

I would sleep far better owing the bank that sort of money rather than someone normal mortal who owes them 40k on CC a 20k overdraft and an few bob here and there (all at extortionate interest rates) and a job that could move abroad in the future.

The Government isn't goint to let this project fail. if there is a problem they will bail him out. Remember AIB and Insurance Corporation of Ireland, Long Term Capital Management etc. if the major banks are allowed to fail they society as we know it is finished and a major depression will follow.


Murt

Re: Sean Dunne, Dunne-for?

I think this loan is no longer on Ulster Bank / RBS books but has been sold on to US Investors.

Re: Sean Dunne, Dunne-for?

Murt10 said:

The Government isn't goint to let this project fail. if there is a problem they will bail him out. Remember AIB and Insurance Corporation of Ireland, Long Term Capital Management etc. if the major banks are allowed to fail they society as we know it is finished and a major depression will follow.

Click to expand...

What do you reckon the government could do to bail him out should it all go pear-shaped? Will they end up buying all of those luxury apartments, and turn them into corporation homes so they can create a new ghetto in that leafy part of D4?

I think if the government jumped in to safe a businessman that made a bad descision, the general public would go ballistic. I certainly wouldn't like to see my hard earned taxes spent in this manner! I'm guessing also that recent EU regulations on government intervention in companies would prevent them from jumping in to safe the banks if they run into difficulty.

IMHO this hyper-optimistic idea that everything will be alright in the end and the government will pick up the tab for any bad moves that people and companies make is quite damaging. If everyone thought like that then it essentially removes any personal resonibility and the buck would never really stop anywhere.

It's interesting that you bring this point up though, as I think that many more out there might be thinking along the same lines as yourself. It would go a long way in explaining the new Irish's taste for high risk strategies. That and maybe the fact that we've been on an upward trend in the cycle for the last 10 years or so!

Re: Sean Dunne, Dunne-for?

StoppedClock said:

I think this loan is no longer on Ulster Bank / RBS books but has been sold on to US Investors.

Click to expand...

Yes, I heard something along those lines as well. I think that it was passed off the books very quickly in the form of derivatives. Nobody wanted to be holding that hot potato! Who actually owns those derivatives now is anyones guess.

Re: Sean Dunne, Dunne-for?

Afuera said:

What do you reckon the government could do to bail him out should it all go pear-shaped? Will they end up buying all of those luxury apartments, and turn them into corporation homes so they can create a new ghetto in that leafy part of D4?

I think if the government jumped in to safe a businessman that made a bad descision, the general public would go ballistic. I certainly wouldn't like to see my hard earned taxes spent in this manner! I'm guessing also that recent EU regulations on government intervention in companies would prevent them from jumping in to safe the banks if they run into difficulty.

IMHO this hyper-optimistic idea that everything will be alright in the end and the government will pick up the tab for any bad moves that people and companies make is quite damaging. If everyone thought like that then it essentially removes any personal resonibility and the buck would never really stop anywhere.

It's interesting that you bring this point up though, as I think that many more out there might be thinking along the same lines as yourself. It would go a long way in explaining the new Irish's taste for high risk strategies. That and maybe the fact that we've been on an upward trend in the cycle for the last 10 years or so!

Click to expand...

your on about "moral hazard"....a fancy way for someone else to worry about your choices.

Have to say, that as much as I hate AIB, they were left with very little choice over the ICI debacle. They could have walked away and let ICI drag the central bank down, which is when the gov would have to jump in, or come clean and say that ICI's liabilites where too massive and that if they were to honour them they would fail.
Either way, the government had to set in to prop up confidence in the market.

Sean Dunne won't be bailed out. He may lose his shirt, but this is still tiny money in todays terms. RBOS balance sheet can easily take this knock..

Re: Sean Dunne, Dunne-for?

Afuera said:

Yes, I heard something along those lines as well. I think that it was passed off the books very quickly in the form of derivatives. Nobody wanted to be holding that hot potato! Who actually owns those derivatives now is anyones guess.

Click to expand...

not sure how you could package these as derivatives, more likely locked in acs with alot of cover...

any ideas on how??

Re: Sean Dunne, Dunne-for?

daltonr said:

Did I read that correctly, we could end up with a situation where Ulster Bank owns AIB Bankcentre?

From what you're saying above all the contruction going on at AIB would be for nothing, it's all going to be torn down almost as soon as it's complete.

I can't see how that would make sense. If that was the plan then surely they'd have stopped all development by now? Or perhaps they have, I haven't been around in a while.

-Rd

Click to expand...

From what I know, there's no construction going on at the AIB headquaters in Ballsbridge. In four years time when their lease expires, the building will be torn down to makeway for a development along the lines. AIB will have to find a new home.

Borrowers and lenders who enter into these huge "hope the trend continues" deals must do so knowing they protected.

Or I suppose they could be fools. You can't rule that out.

Personally I think a high profile failure would come with a silver lining.

Might help your kamikaze-leaning irish specuvestor pay more attention to the "risk profile" of their favourite investment.

From what I know, there's no construction going on at the AIB headquaters in Ballsbridge

Click to expand...

There was until very recently, if it's finished then it's only just finished. I've been away for a while, so I don't know where it's at. I don't think It was a secret, the construction could be seen from Serpentine Ave.

Whatever other aspects there are to this story, I'd be amazed if AIB are leaving Bankcentre any time soon.
But money is money and if it makes financial sense then...

-Rd

Re: Sean Dunne:AIB deal: Can anyone see him getting out of this without losing his sh

Construction work is still being carried out at AIB centre and will be for another year or more. As far as I was aware AIB have a 30 year lease. It's highly unlikely that this will be pulled down in 5 years...more than likely won't be finished until then!

5 years for the AIB lease is not correct - the lease is at least 25/30 years.

I'm sick of reading newspaper/magazine articles where they have something like this that is clearly wrong, which causes me to doubt the entire contents of the article and wish I hadn't started reading it. I especially hate where they get their figures wrong, eg. million instead of billion or vice versa. And then of course there are the typos, particularly in the so called 'paper of record'.

You're both right as far as I know. The Ballsbridge site was actually split into three separate lots - Dunne only bought the front bit (mostly grass but with 2 or 3 of the blocks in the current complex). This bit has a much shorter lease than the other parts. He has the option to terminate the lease in 4 or 5 years - presumably he will exercise this. AIB will remain at the site but will confine themselves to the new building (nearly finished at the back) which they are leasing from a consortium of private investors on a long term basis (25 years at least). Presumably the middle section (the bulk of the existing office complex) will be redeveloped in the medium term.