Zurich Bank loaned some €32 million to a shopkeeper to develop a shopping centre in Co Monaghan in 2007 just months after Allied Irish Banks pulled out of funding the project on grounds it was not viable, the Commercial Court heard today.
A €30 million valuation placed by estate agents CBRE in 2007 on the shopping centre site at Main Street, Castleblayney, involved development costs of €10,000 for each of the town’s population of 3,000 and was akin to justifying “a single development in Dublin of over €10 billion”, Jim McConnon said.
“There has never been such a development contemplated anywhere in the world.”
Mr McConnon (40), Main Street, Castleblayney, is resisting the bank’s application for €32 million summary judgment against him on several grounds, including the bank’s alleged failure to properly analyse what he claims were “nonsensical” site valuations provided in 2007 to him and the bank by CBRE.
His decision to proceed with the development was based on the €30 million valuation and it was perfectly reasonable for him to assume Zurich and CBRE knew the property market, he said.
He claims the bank made an unsolicited approach to him in April 2007 and, within 24 hours of meeting him for the first time, gave him a term sheet for a €32 million loan on conditions ultimately contained in the bank’s formal loan offer issued in June 2007.
He has no unencumbered assets and his agreement with the bank related to the development of a shopping centre which was expected to yield income which would ultimately repay the loan, he said.
Mr Justice George Birmingham reserved judgment on the summary judgment application today and said he hoped to give his ruling shortly.
Earlier, Paul Gardiner SC, for the bank, said nothing advanced by Mr McConnon amounted to an arguable defence to summary judgment. Despite various “outrageous” suggestions by Mr McConnon, there was no wrongdoing by the bank concerning this project, counsel said.
Mr Gardiner said the CBRE valuations were clearly based on information provided to CBRE by Mr McConnon and his various agents and advisers. Mr McConnon lived in Castleblayney, knew the situation there, had what he now alleged were “nonsensical” valuations in February 2007 before the bank got involved in the project in April 2007 and still chose to go on with this development.
Mr McConnon was arguing he won’t pay back the loan because that was difficult or impossible given the collapse in property and rental values but that was a risk a developer takes and constituted no legal defence, counsel said.
Nor could Mr McConnon establish any defence on grounds he was acting as a consumer within the meaning of the Consumer Credit Act, Mr Gardiner said. This was a businessman borrowing €32 million for a commercial development and surrounded by auctioneers, accountants and lawyers.
Mr McConnon has claimed it was “not a coincidence” the precise site valuations required by the bank in its formal loan offer of June 2007 were contained in CBRE reports to the bank in August 2007. While agreeing he sought valuations from CBRE in February 2007, he denied he had shown those to Zurich officials in April 2007.
He claims the €30 million valuation relied on “wholly nonsensical” key factors such as the site’s location at the “centre” of Castleblayney, a small market town, and reference to a “long commute” to Carrickmacross and Monaghan town when these were 10-15 minutes away. Only part of the site had commercial planning permission, he added.
Ross Maguire SC, with Vincent Martin, for Mr McConnon, argued he was entitled to rely on the credence given by the bank to the CBRE valuations.
Counsel also argued the total collapse in property values here amounted to an “unforseeable and cataclysmic” event disentitling the bank to judgment.
In an affidavit, Mr McConnon said he completed his Leaving Certificate, was manager of the Supervalu store in Castleblayney at the age of 21 and bought that business in 1996 for IR£500,000 with a bank loan.
With loans from AIB, he bought a site behind his shop for €3.2 million in 2004 and an adjacent site for €3.3 million in 2005. The intention was to develop a shopping centre, and he was advised a €21 million investment, plus another €10 million to refinance the AIB loans, was required.
In late 2006, AIB decided the project was not viable and refused further funding, he said. He had no further success getting funding until Zurich approached him in April 2007.
The court heard the Zurich loan was due to be repaid by May 2009 but, while the shopping centre was built, Mr McConnon could not get enough tenants for it and encountered repayment difficulties.
The bank extended the loan for a period to see if Mr McConnon could come up with a repayment plan, but proposals advanced by him in June 2010 were rejected. The bank appointed a receiver over the property last October.
