Indebtedness arises from nursing home venture
BACKGROUND:MINISTER FOR Health James Reilly’s appearance in Stubbs Gazette arises from a troubled investment he made with others in a nursing home in Co Tipperary.
In 2000, Reilly, former Fine Gael councillor Anne Devitt and 11 others joined together to build the Greenhill nursing home in Carrick-on-Suir. Five of the investors, including the two politicians, were recourse investors, meaning they could be held liable for the bank loans taken out to fund the project. They include Dr Dilip Jondhale, an Indian doctor who operates the home.
The other eight, who include a number of doctors friendly with Reilly, were non-recourse investors to be repaid after a decade. The amount, over €1.9 million, has been due since the end of 2010.
The home was built and operates successfully, but has been bedevilled by disputes. A row between Jondhale and the other owners over rent and the condition of the building ended up in the High Court and was resolved only this year.
Another row concerned a new lease agreement due to be signed after 10 years’ operation in 2010. After protracted disagreement and a hearing in Wexford Circuit Court, this was signed last month.
Reilly and the other recourse investors do not dispute that the €1.9 million is due to the other eight non-recourse investors. Last February, they consented to judgment orders for this amount being made by the Commercial Court, though a stay was imposed until the end of April.
However, the recourse group were unable to raise the finance to pay off their fellow investors because no lease agreement was in place on the property, a source close to the investors told The Irish Times yesterday.
This is because banks require evidence that properties have an income stream before they will lend large sums of money on it.
Now that the lease has been signed, the way has been cleared for a bank loan to be obtained, which can be used to pay off the debt, the source said, adding that bank negotiations had started.
However, this presupposes that a bank would be willing or even able to lend a substantial amount of money in the current climate. The building is worth several million euro and the operator pays a six-figure annual lease, so it is a valuable asset.
If Reilly’s group can’t raise the money through a loan, the non-recourse investors are likely to pursue them for repayment. The five recourse investors are jointly and severally liable, meaning that each of them could be pursued for the full amount of the debt.
In reality, though, Reilly and Jondhale, as the two wealthiest members of the group, would feel most of the heat.
In Reilly’s case, this could mean that he would have to dispose of some of his other assets in order to repay the debt.
As a wealthy businessman and property-owner, he is unlikely to be facing the threat of bankruptcy, in contrast to Independent TD Mick Wallace.