Bank takes major stake in Burlington

Bank of Scotland (Ireland) has taken a major equity stake in the Burlington Hotel project led by Bernard McNamara, the acquisitive developer and construction magnate who bought the property for €288 million last month.

The bank is understood to have agreed to co-develop the hotel site with Mr McNamara in a joint venture deal agreed earlier this week. It will take a significant equity stake in the initiative and provide debt-financing for the development and land acquisition costs. This suggests the bank's exposure is well in excess of €300 million.

Characterised as an "integrated finance" arrangement, the deal is unusual in the Irish market in that the bank will combine the roles of lender, project participant and equity player. While it is normal in such a scenario for a bank to take an equity stake of 30-50 per cent in a project, the bank is said to have taken a 30 per cent stake in the Burlington initiative.

Mr McNamara acquired the hotel last month through a vehicle called Soltura Ltd. McNamara Construction, which he owns, will carry out development work on the site.

The Burlington occupies some 3.8 acres on land which fronts on to Upper Leeson Street, Sussex Road and Burlington Road in Dublin. The prestigious site is likely to be redeveloped for residential, retail and office use.

As co-owner of the adjoining Allianz insurance site on Burlington Road, which occupies some 1.3 acres, Mr McNamara has ample scope for manoeuvre beside the hotel site.

Convenient to the city centre business district, the Burlington site has already attracted interest from possible lessors of any new office development there.

Before the Jurys Doyle group sold the hotel to Mr McNamara, financial services firm KPMG declared an interest in pre-letting some 27,870sq m (300,000sq ft) of office space on the site.

The bank's participation in the initiative pits it against Ulster Bank, which is backing a rival scheme led by developer Seán Dunne at the Jury's Ballsbridge and Berkeley Court site nearby in Ballsbridge. However, Ulster Bank is not believed to have an equity stake in Mr Dunne's project.

At €75.79 million per acre, the Burlington deal was one of Ireland's most expensive land transactions. The purchase price was significantly in excess of the €66 million per acre valuation on the Allianz site.

Jurys Doyle is likely to close the hotel next January. The disposal will result in the loss of 188 full-time and 296 part-time jobs.

In winning control of the Burlington, Mr McNamara trumped bids from Mr Dunne, Seán Mul-ryan's Ballymore Properties, Derry-based Taggart Holdings and McAleer & Rushe Group, another Northern Ireland group.

A Navan-based consortium also submitted a tender for the site.

Already an investor in the Shelbourne Hotel in central Dublin, Mr McNamara has several hotel interests in the city.