Posted by Austin Kenny, Chairman
31st August, 2014.
Ireland’s biggest supermarket chain, Tesco, has bought some Nama loans associated with developer Michael Cotter’s highly successful Park shopping centre in Carrickmines, marking the first time that the grocery giant has done a major deal with the State agency.
Tesco has also written off borrowings of up to €38.1m racked up by the property investment vehicle and paid almost €15m in “compensation monies” to the firm which owns a site in the retail park, according to documents. The loans were taken out by Tristor, an AIB private bank syndicate, which is 80 pc held by the bank’s private clients and 20pc by Cotter’s Park Developments. Cotter’s company initially owned the eight-acre site which forms part of the rapidly expanding Park complex in Carrickmines. It sold a stake to the geared-up AIB syndicate during the boom, with plans to build a €75m mixed use retail and leisure development at the Park, with Tesco earmarked as a key partner.
Some €52m in loans were racked up in site development and purchase costs, with these loans were subsequently transferred to Nama in 2010. Tristor is run by Cotter’s associate Tim Crowley, with current and former AIB executives Bryan O’Connor and John Rockett serving on the board.
Despite gaining planning permission, plans for the development were blocked in 2010 by the then Environment Minister John Gormley, leaving the project in limbo. The value of its lands have fallen sharply since the downturn with internal figures showing the property being written down from €28m to €13.2m in 2012. The Tristor syndicate entered into negotiations with Tesco for “the conditional sale of a portion of the site and the construction of a substantial store therein.”
It had been thought that Tesco had agreed to a €70m deal to buy a supermarket site at the project. However, the weakening economy saw this process stall leading to a “contractual dispute”, which resulted in Tristor launching legal proceedings against Tesco in 2012.
“Rather than pursue a lengthy, uncertain and costly legal route, the retailer and the company agreed to enter into a commercial mediation process which….ultimately led to an amicable agreement,” according to documents. “This agreement met with Nama’s stated objective whereby the retailer acquired the company’s entire debt from Nama. The retailer subsequently agreed to a substantial restructuring of the company’s debt in return for the company releasing the retailer from their very onerous contractual obligations and dropping the court proceedings.”
The Cotter/AIB joint venture negotiated a lucrative settlement deal with Tesco, which included a major debt write off and a €15m cash injection. Company documents indicate a “forgiveness of borrowings” to the tune of €38.1m. This arose “due to various agreements between Tristor and a major retailer who had acquired the company’s debt.” The firm received €14.99m in “compensation monies” which was “due to the termination of a sale and development agreement between Tristor and a major retailer.”
Tesco disputes these figures. “Tesco reached a settlement with Tristor in relation to a development area in South County Dublin, the terms of which are confidential. Tesco does not comment on internal financial matters and speculation in relation to the purported cost to Tesco is inaccurate and overstated,” according to Tesco.
Michael Cotter is one of the most successful developers in the country and is understood to come through the property crash in good shape. The Foxrock developer owned the country’s fastest yacht Whisper, which has sailed in high profile races in the Caribbean and Mediterranean.