How the O'Donnell property empire crumbled
Defending the conduct of his business affairs, O’Donnell said he had stopped buying property in Ireland in 2004 because of “our concerns that the overheated nature of the market which would become one of the largest property bubbles in the world”.
Deciding no longer to invest there, the couple sought premium offices elsewhere let to highly-rated companies, or State bodies, buying nearly €1 billion worth of them in London, Scandinavia and the United States before the credit crunch in 2008.
London is now home and will remain so, he insisted: “I do not have any intention of returning to Ireland as the economy in Ireland has been destroyed by the Irish banks. The Irish banks lent 160 per cent of their deposit books almost entirely on Irish property.”
In one affidavit prepared in June, one of several included in the file, O’Donnell added: “I have no incentive to return to Ireland other than to occasionally visit my children, some of whom currently reside there.”
Claiming that Bank of Ireland had “severely damaged” his professional and business reputation, he said that “even if the economy were to provide opportunities, which it is unlikely to, I would not be comfortable living there”.
Listing the causes of his bankruptcy, O’Donnell said that the loans he took out from the Bank of Ireland were “backed by best-in-class residential and commercial real estate” and had not been worth more than 65-70 per cent of the assets.
In 2008, markets collapsed. Income from his Stockholm investments was stopped by a lender, Aareal AB, which followed up with a cash-sweep. Similar sweeps by banks hungry for cash followed, “choking off income which largely serviced Bank of Ireland loans”.
“In the midst of the most severe property crash in the Western world, Bank of Ireland refused to co-operate in an orderly management and disposal programme of my real estate interests in a number of jurisdictions.
“(They) chose to enforce their own loans which highlighted the distressed nature of the assets destroyed their own security and the value of potential sales. (It) refused all proposals, such as bond buy-backs and refinancings with other banks.
“In one case (it refused) to release security over a three-year bond to allow a new bank to refinance their debt to provide a pay-down. All proposals as late as February 2012 have been rejected,” he complained.
The handling the Sanctuary office-block sale in Westminster – home of the department of education – illustrates the problem, he said, since it should have been worth between £185 million and £200 million.
“(It) would have released substantial proceeds to pay down debt had an orderly sale been achievable. Rather than wait for an orderly disposal. Bank of Ireland decided to call in my loans and create a media storm which immediately lowered prospective bids to around £165/£170 million.”
In her declaration, Mary Patricia O’Donnell said she had decided “with great sadness” last December after the High Court judgment against them in Dublin that her move to London would “by necessity become a permanent” one.
Under the rules, the couple had to declare all legal actions in which they are involved. Besides the Bank of Ireland, her husband listed actions with Shale Construction, Dublin architects ODOS, Adrian Burke, the Nolan Partnership – with the latter two, he claims, owing more than £200,000.
In a declaration of his assets, O’Donnell listed shares in a French-registered company, Greystoke SA, that he values at £2.9 million, along with a Friends First pension policy worth £172,000 and a series of life policies, totalling £6.1 million. Moreover, he listed a Daimler DS 420 – in reasonable condition, “given that it is 22 years old”, a 1992 Morgan Plus 4 worth £6,000 “that needs works and servicing” and a seven-year-old Bentley Continental that he uses in London, where he rents a car-parking space for £3,500 per year.
The county registrar for Galway subsequently seized the Daimler and the Morgan on April 6th, 2012, at Gortdrishagh.
‘I am not a property developer’
In February, O’Donnell advanced a series of proposals, including one about the Westferry Circus offices, which the couple told the High Court in Dublin last month that they do not own, on foot of a petition from the Bank of Ireland alleging fraud.
Then, a Malaysian pension fund had offered £128 million, which would have left the main lender, Morgan Stanley, short and Bank of Ireland with nothing, though O’Donnell believed that the price could be increased to £135 million with some “soft marketing”.
The February note offers intriguing background on Greystoke SA, which owns Chalet Hermine in Courchevel in France: “When (the house) was constructed, it did not comply in full with planning permissions. There is no French pIanning permission concept of retention. Greystoke SA was unaware of this when it purchased the property. A purchaser of the building will probably need to demolish the chalet, apply for planning permission and reconstruct a new one.”
No buyers are interested. One did make an offer in 2011, but this was lost: “There have been some very low offers from so-called ‘chancers’ that would barely cover the mortgage and produce no surplus whatsoever,” continues the note.
Bank of Ireland should hand back to him, he argues, a series of properties: 84 Ailesbury Road, 61 and 62 Merrion Square and 61-62 Fitzwilliam Lane – once worth €40 million at the height of the boom, but then on the market for just €9 million. With just small investment, O’Donnell could increase the properties’ value to €17 million by 2017 and find enough rent in the meantime to cover interest charges: “Mr O’Donnell believes that he is a far better receiver for Bank of Ireland than anyone else.”
He then put his faith in getting an Individual Voluntary Arrangement – a UK device short of bankruptcy that allows a debtor five years to pay off part of their debts as long as three-quarters of creditors agree.
“If the bank supports such arrangements, (he) would use best endeavours over the following five years to recoup the maximum amount of recoveries for the bank by basically doing what he is good at and what he has been enormously successful at over the last 35 years,” it continued.
In one document, O’Donnell bridles at the notion that he is a property developer, tersely comparing his own investments in “core world-class assets” with the offers to invest in development land in Ireland that he received when he was at his height.
“I am not a property developer and do not have any interest in any aforementioned areas. I am a real estate investor, not a speculator,” he said, adding that his work had been thought “dry” and “boring” when he spoke about it at a Morgan Stanley conference in 2006.
In April that year, Bank of Ireland Private Banking – which was by then increasingly showing up as a bidder for London assets that O’Donnell wanted to acquire – approached him, wanting to increase the business it did with him. They offered, he said, to be supportive and flexible.