Development costs in Dublin to be significant

Dunloe Ewart's buy-out of British Land's 50 per cent stake at Cherrywood, south Dublin, follows its sale for €141.5 million in June of almost its entire portfolio in the North.

That transaction was designed to free Dunloe to concentrate on key properties in Dublin. It left the company with about €95 million in cash, some €63.85 million of which now seems set to be spent acquiring British Land's stake in the 412-acre site at Cherrywood.

Dunloe also controls a landmark site on four acres at Sir John Rogerson's Quay in central Dublin and has full planning permission to build a 19-storey office building on the site and 231 apartments. When taken with the 412 acres Dunloe has to exploit at Cherrywood, its ongoing development costs are significant.

The latest proposal requires the endorsement of investors in Dunloe to whom the transaction has been described as a "once-off opportunity". However, it comes just three years after British Land came on board with responsibility to meet the full share of its half of the development costs.

Asked about the development costs of Sir John Rogerson's Quay and the Cherrywood project, given the company's reduced cash position, a spokeswoman said yesterday evening that both would be developed through a mixture of cash and debt. The company's debt was reduced by proceeds from the sale of the Northern Ireland assets. For that, however, banks will be aware of the uncertainty surrounding Dunloe due to a stand-off between its chairman, Mr Noel Smyth, and the apartment developer, Mr Liam Carroll, who owns 27 per cent of the company.

While Mr Carroll has thwarted Mr Smyth in the past, the latest proposal requires the support of only a simple majority of Dunloe shareholders. As such it cannot be blocked by Mr Carroll. Assuming Mr Smyth can convince other shareholders of the merits of the proposal, it will be passed.

Relations between Mr Smyth and Mr Carroll appear to be non-existent, even though Mr Carroll is sitting on a significant loss after buying into the company when its shares were worth about 50 cent each. The stock closed unchanged at 28 cent yesterday.

Mr Smyth's frustration with the situation prompted him to complain to the Director of Corporate Enforcement about the conduct of Mr Carroll's own companies, with whom Dunloe competes in the Dublin market. Thus it is difficult to see the commencement of normal relations between Mr Smyth and Mr Carroll.

In the background lies an offer by Mr Smyth to buy out Mr Carroll's stake for some €40.7 million. Various means of achieving this were proposed, among them the transfer to Mr Carroll of some of the Cherrywood assets. Ironically, British Land is understood not to have been informed of the proposals.