Loophole may see State site sold for 5% of its value

A company is claiming it has a right to acquire a 25-acre State-owned site in Dublin, worth €300 million, for approximately 5 per cent of its value.

The company, South Warf plc, is seeking to make use of a loophole that it is understood was brought to its attention after an amendment to close the loophole was rushed through the Oireachtas in May.

The Minister for Enterprise, Trade and Employment, Míchéal Martin, rushed through an amendment of the Landlord and Tenant (Ground Rents) Act that closed off the loophole in respect of IDA Ireland, Shannon Development and Udarás na Gaeltachta.

The high-profile move, however, left the loophole in place in so far as it might apply to other State agencies that were leasing out land under certain terms. Other departments were advised to examine the situation.

Now South Warf, which is 27 per cent owned by Paul Coulson and related interests, is seeking to acquire the former Irish Glass Bottle site in Ringsend from Dublin Port Company, making use of the loophole. It is understood it made the legal moves necessary prior to the closing of the loophole in relation to Dublin port on June 28th.

After Mr Martin's move in May, the Department of Communications, Marine and National Resources wrote to the Irish Ports' Association and on June 17th a letter was received from the Dublin Port Company stating that it might have a problem under the law.

On June 28th, the department inserted an amendment into the Maritime Safety Bill 2004, which in turn again amended the Landlord and Tenant (Ground Rent) law, inserting a reference to the port company.

A spokesman for the Government could not say last night whether any other Government department had amended its legislation in this way so as to close off the loophole in relation to an agency. Nor could he say if any other company was making a claim using the loophole.

The loophole allows that, where a company holding a lease creates a sub-lease, it can acquire the right to buy the "fee simple" for the property.

The amendment was rushed through the Oireachtas by Mr Martin in May after a client company of the IDA made use of the loophole to get a property in Clonshaugh at a reduced value.

The problem with the law was pointed out by the Law Reform Commission in 1989 and again in 1992 but nothing was done until this year.

South Warf is claiming it has the right to the Ringsend property for a multiple of 15 times its annual rent. A company spokesman confirmed that a statement to the Stock Exchange would be made today.

While no figures are yet known, it is believed the company is claiming the right to the property for significantly less than €20 million.

The warehouse on the site is currently subject to a restricted usage imposed by the port company. However, if the site were to be taken by South Warf, its designation could change and it would form part of the planned redevelopment of the Irishtown/Poolbeg area.

A member of the board of the port company, Labour Councillor Kevin Humphries, said that, whatever about the law, "there is right and wrong and this is clearly wrong. This is a valuable State asset, probably worth up to €300 million."

The move by South Warf is being resisted by the port company and it is likely to be fought in the High Court and the Supreme Court. The port company is understood to be challenging the basis on which South Warf created its sub leases but the plc is adamant that it has created an appropriate device giving it a right to acquire the property.

The Ringsend property was formerly a manufacturing and storage facility for Irish Glass Bottles plc. The manufacturing activity was closed down in 2002, with the loss of more than 360 jobs.