Kelleher firm's €149.6m loss linked to Chicago Spire project


A COMPANY in the Shelbourne Property Group owned by developer Garrett Kelleher has reported a pretax loss of €149.6 million after it made a provision for debts owed to it by other group companies.

A large part of the debt is linked to the stalled construction of the landmark Chicago Spire in the US, a €1 billion-plus project that was being part-funded by the now nationalised Anglo Irish Bank.

A spokeswoman for Mr Kelleher said he would not be commenting on the latest accounts for Clarinabbey Ltd, which show the company made the loss in the period to the end of March 2009.

The company’s accounts say its bank facilities are “technically in breach” as a result of the company not meeting certain loan to value and interest cover convenants and that it is in ongoing negotiations with its bankers to procure a standstill agreement.

“The group continues to have excellent relationships with its bankers,” the directors state in their report dated January 28th, 2010. However, in the event of standstill/restructuring agreements not being negotiated, “there exists a fundamental uncertainty over the company’s ability to meet its obligations as and when they fall due”.

The accounts state the group’s main bankers are: Anglo Irish Bank; Royal Bank of Scotland and Bank of Scotland (Ireland). They say Clarinabbey had a development property at year’s end worth €9.7 million after its value had been decreased by €1 million following a valuation appraisal.

The notes to the accounts say the company made a provision of €142.18 million arising from uncertainty associated with the recoverability of amounts due by group companies. They also say that total loans from banks were €145 million at year’s end.

The loans are the subject of several guarantees, including a guarantee from a group company and charges over property.

The accounts show the provision arises from money due from group company Shelbourne Finance Ltd. The most recently available accounts for that company are for the year to the end of March 2008. The accounts were signed off on in January last year and explain that the company has provided finance to US partnership, Shelbourne North Water Street LP, which is involved in the Spire project. The directors say the recoverability of the money “is critically dependent” on the project’s success.

The accounts show the company owed €254 million to group companies and was owed €252 million. During the year the company advanced €69.6 million to the US partnership, and was owed a further €27.5 million from Shelbourne Development Group, which is involved in the Chicago development.

The accounts for Shelbourne Finance show a list of companies within the group being advanced significant amounts of money or being owed money by Shelbourne Finance. The Shelbourne group is headed by an unlimited company, the accounts of which are not publicly available.

Work on the Spire, which was to have been the highest building in the US, has been stalled for some time and the architect, Santiago Calatrava, has had a charge registered against the property, claiming he has not been paid his $11.3 million fee. Bank of America has filed a lawsuit in relation to the development.

Although a number of units in the proposed development have been pre-sold, the development as of now comprises a large hole in the ground in the middle of downtown Chicago, about a block away from Lake Michigan.

Mr Kelleher, who put $194 million of his own money into the project, has held discussions with US unions about the possibility of pension fund money being used to finance the building.