Cantillon: Clerys building accounts show how quickly things change

Gordon Brothers more than doubled its initial €15m investment in Clerys

What a peculiar directors statement attached to the recently filed accounts of OCS Properties, the company that owns the building that housed Clerys, the department store which was sold and brutally shut this summer.

OCS has filed accounts for the year to the end of January 2015, when it was owned by US private equiteers, Gordon Brothers. The directors report states quite bluntly that Clerys owners had received expressions of interest to buy it "as a going concern" and the directors anticipated a sale "on this basis".

This statement was signed by Malcolm MacAulay, Gordon Brothers chief operating officer for Europe, and Rafael Klotz, a senior managing director of the private equity group. It was dated June 11th, 2015.

Later that night, the business was sold to Natrium, a consortium led by Dublin developer Deirdre Foley, which kept the property arm and flipped on for €1 the operating company, which entered liquidation on June 12th. The store shut and more than 400 staff were put out on their ears.


So much for selling it as a “going concern”.

It would be surprising if MacAulay and Klotz did not have at least some inkling of the impending fate of the iconic department store when they put their signatures to that statement on the 11th.

Natrium’s people had been ensconced in the store for weeks prior secretly conducting due diligence. Several people connected to Gordon Brothers would have known they were there. They would have known what information they were seeking. It must have been obvious that a closure was on the cards.

The Natrium bid of €29 million was reportedly far ahead of the nearest competing bid, so that, too, would have been an indicator that the buyers’ planned to do something drastic to the premises to extract value and generate a return.

Interestingly, OCS valued the building at less than €18 million in the accounts, so the winning bid must have sparked some fist pumping within Gordon Brothers when the sale process reached a climax.

Gordon Brothers also picked up €3 million from the sale in 2014 of the Sackville House building beside Clerys. There was also the small matter of a €7 million accounting gain from a flooding insurance claim and some chunky dividend payments.

Gordon Brothers more than doubled its initial €15 million investment in Clerys. It did well. As has been oft-lamented here and elsewhere, Clerys’ staff, concession holders and suppliers, unfortunately did not.