Brian Carey: Players Square deal in Dublin reignites planning gain (2024)

Time really is the great healer. In the days before Christmas, American group Hines and Dutch pension fund APG agreed to refinance Nama loans secured on two former factories on Dublin’s South Circular Road. Players Square, headed by developer Ciaran Larkin and builder PJ Walls, bought the John Player and Bailey Gibson factories for about €70m in 2006 with loans from AIB. The enterprise obtained permission for 754 apartments — and then the great recession struck.

The value of the properties collapsed, and in 2010 the loans, which had a face value of €76.5m, were transferred to Nama. The book value of the factories was written down to €10m. The 11-acre site is in Dublin 8, near the city centre and St James’s Hospital. Clearly it was valuable, yet it lay idle, and its permission lapsed. It was not sold or developed, even after Nama appointed a receiver in March 2016.

The interest rolled up, and by the end of last year the debt amounted to €96m. Between 2011 and 2017, the carrying value of the lands in Players Square accounts rose to only €15m, suggesting a negative equity position of €81m one year ago. When Dublin city council sat down to draw up valuations for its vacant site levy last year, it valued the two factories at €36.5m. According to market chatter, Hines and APG placed a value on the site of about €110m.

Nama gets a cash windfall of nearly €100m — the face value of the loans plus a dollop of interest — and will most likely book a profit of €90m on the loans as transferred from AIB. Larkin and Walls will also have equity in the project — a position unthinkable two years ago. They negotiated from strength, as both Hines and Oaktree Capital Management were keen to complete a deal.

The decision by Eoghan Murphy, the housing minister, to loosen restrictions on apartment densities undoubtedly helped. Planning gain is back.

The site deserves to be developed, and Larkin probably has more of a right than anyone else. A planning application is expected soon. Yet here is a perfect opportunity to exact a quid pro quo. If the planners are to facilitate increased densities, surely that should come with increased obligations for social and affordable housing.

Players Square borders St Teresa’s Gardens, a Dublin council flat complex earmarked for demolition. It might be time to mix up planning pain with all that planning gain.

Taxing times ahead
This is a dangerous-looking government surplus, rooted bizarrely in international accounting rules. These now dictate that the multinationals must recognise more of the revenue upfront from long-term contracts, such as software licences, rather than over the contract’s duration.

So the extra €1.88bn in tax banked is not the result of higher profitability or better collection. It is tomorrow’s taxes being collected today.

Corporation tax has doubled to more than €10bn since 2014, yet this growth trajectory is unsustainable. Forget iPhone sales in China, the real danger to tax revenues is IFRS 15. A correction in corporation tax is not only possible but almost inevitable.

Aside from corporation tax, the combined total of domestically raised taxes was behind profile in 2018. Yet spending was up almost 9%, with big overruns in health, housing and social welfare. As an election approaches, the pressure on spending in these areas will rise, as the top-performing tax’s takings head south. Dangerous times.

Aryzta bake-off hots up
The showering of incentive shares on senior execs at Swiss-listed baker Aryzta is not likely to cure the moods of the thousands of Irish shareholders locked out of the company’s recent rights issue. Aryzta and Link Asset Services continue to point the finger of blame at each other as to why documentation did not get to certain shareholders in time to participate in the share issue.

The company says the trustee seems to have been woefully ill-prepared for a well-flagged event. Link says Aryzta was dilatory in forwarding key documents.

Link has told the investors that it has independent legal advice confirming it fulfilled “all its legal, fiduciary and contractual duties”. This does not mean it offered a good service, of course.

The company, chaired by corporate grandee Gary McGann, was fully aware of the challenges that a Swiss rights issue held for these shareholders. While it issued warnings, its delays in issuing formal notices to Link proved critical.

The rights issue massively derisked Aryzta, which is great news for the execs who were given generous incentive shares just before Christmas. Some shares were awarded under a two-year, long-term incentive plan. How can two years possibly be considered long term?

Meanwhile, the rights issue diluted the holdings of the locked-out investors and damaged the value of their investments. Reputations have been stained. Aryzta should distribute to the locked-out shareholders all of the profits it earned from selling unclaimed rights issue stock in the market. It should screw the legal advice and do the right thing.

brian.carey@sunday-times.ie