III.

The Ballyman Deal.

The Ballyman deal must be set in context so that the reader can fully appreciate the “timing” of the disclosure of the developer's interest in DLGC.

In a four month period between July and November 2001, the then captain Frank Sexton took the members of DLGC from a situation where the existing clubhouse would cost ˆ3.2 million to repair with serious adverse financial implications for the members; to the building of a new clubhouse for ˆ5.7 million with very serious adverse inconvenience and financial implications for the members; to a situation where a “deal” could be done with the developer that would result in no inconvenience and no adverse financial implications for the members of DLGC - or so they thought!

In November 2001 Sexton, through the medium of a letter and a special edition newsletter advised the members of DLGC of the many reasons for Council's recommendation for a new clubhouse of 15,000 sq. ft at a cost of ˆ5.7 million or ˆ380 a sq. ft. Comparable clubhouses were being built elsewhere at between ˆ200 - ˆ250 a sq. ft.

Sexton advised the members of DLGC that their clubhouse was beyond repair and that the only alternative was to build a new clubhouse. Such advise is all the more alarming when one considers what the developers were able to achieve with the existing DLGC clubhouse in the summer of 2003 with only ˆ60,000? In fairness, it should be stated that the members of DLGC had to fund ˆ114,000 to re-decorate the clubhouse after the developers had completed the structural repairs.

By November 2001 the adverse financial implications of building a new clubhouse had very clearly been “imparted” to the members of DLGC, most of whom are retired and on fixed incomes. It was therefore time to inform the members of the approach by the developer and the steps taken by Sexton and the Council in dealing with this very timely approach.

In May 2002 the new Captain Pearse Rayel wrote to the members enclosing an information pack on the Ballyman proposal.  In his covering letter, Rayel stated  “The Heads of Agreement which would form the basis of the contract with the developers ………. “would result in no exposure, financial or otherwise, to the members of DLGC.”

As part of the decision process, a series of information meetings was arranged (3) between 23^rd May and 11^th June 2002. The EGM to decide on the matter would be held very shortly thereafter on 19^th June 2002 in the Royal Marine Hotel, Dun Laoghaire. Why such speed for this very important decision process?

At no time between November 2001 and June 2002 did Frank Sexton or Pearse Rayel, in their capacity as club captains ever suggest that any information would be with-held from the members of DLGC on the grounds of confidentiality.  Both went to great lengths to stress that “members would be fully informed.”  In fact, Sexton was already on record as having stated that “DLGC belongs to it's members” and as such members had no reason to expect that any information would be with-held from them for any reason! How wrong they were! Do the assurances and undertakings of captains in DLGC count for nought?

III.

The Ballyman Deal. (cont/d….)

At the information meetings, Montgomery informed the members that the deal with the developer involved the following:-

By way of a slide presentation, the financial elements of the deal were.

The clear impression taken from this slide presentation was that the members of DLGC were getting ˆ100 million for their lands and that these funds would be applied as to ˆ40 million for the purchase of the Ballyman lands; ˆ40 million for the development of the Ballyman golf facility and ˆ20 million cash payment on completion of the development in 2008. In effect, the cost of the move to Ballyman was ˆ80 million.

To suggest that “costs and valuations did not matter“ as is now being argued by the Parent Council of DLGC was not the basis of the presentation to members before they voted at the EGM on 19^th June 2002.  McKimm, the club president acknowledged this point to Coen on 1^st November 2002. The above slide clearly indicates that valuations and costs did matter when this information was first presented to the members of DLGC in May/June 2002.

All professional fees and costs, including stamp duty in relation to the deal would be paid by the developer – Clause 14 of the Heads of Agreement (Appendix 9) and (Appendix 11). This statement supported what Rayel had told the members in May 2002 but contradicts what the members were told at the EGM on 9^th January 2003 (Appendix 12) – they would have to pay ˆ16 million for professional fees, bank costs and sundry contingencies.

Lisney's had apparently prepared valuations of the DLGC and Ballyman lands and in the case of DLGC, the valuation was based on an independent report prepared by a local firm of Town Planners by reference to their estimation of the “medium” likely density for the DLGC site. The existence of such valuations was critical in obtaining the members support for the “deal” with the developers.

Note :  In October 2000 – 18 months before the CRC negotiated the Ballyman deal with the developers – the Grange, Stillorgan Road, Co. Dublin, an 11.3 acre development site without planning permission, was sold for ˆ31.75 million or ˆ2.8 million an acre. How therefore could the DLGC lands, with full re-zoning and planning permission have been valued at ˆ1.3 million an acre – a staggering difference of ˆ1.5 million an acre? The Stillorgan land was again sold with planning permission, in November 2004, for ˆ7.6 million an acre.

The Ballyman development costs of ˆ40 million had been examined by the club's professional advisors and the members of DLGC were requested by Montgomery not to enquire into the detail of these costs as no useful purpose would be gained from doing so! No information was provided on the breakdown of this figure. Members were provided with a general overview of what these costs would cover – course design and build, boundary protection, water features, buggy paths and equipment, Ballyman underpass to link course, clubhouse etc.

Clause 2 of the Heads of Agreement states that the contract between DLGC and the developer is “conditional on the purchaser securing a variation of the current Dun Laoghaire / Rathdown County Council Development Plan” – secured March 2004 – and that “the purchaser will have the right to reject the variation of the plan if it does not provide a sufficient number of residential units to be agreed with DLGC.” The deal with the developer involved full re-zoning and full planning permission which therefore required full valuation.

III.

The Ballyman Deal. (cont/d….)

Clause 2 therefore provides the developer with a very valuable option on the DLGC lands for a period of 30 months from June 2002 for which Montgomery and the CRC, on behalf of the members of DLGC, did not request any payment.  Would most professional and competent negotiators not have insisted on some meaningful consideration for such an important and lucrative option? Could such option monies not have been used to avoid increases in members' subscriptions until the move to Ballyman in 2008?  Also, did such a valuable option not justify a demand by the CRC for a “kicker” in the upside of any increase in the density for the DLGC lands over and above that envisaged in early 2002?

Members were aware of the presence of high voltage transmission cables over the Ballyman lands and were informed that all these cables would be routed underground at very significant cost to the developer. The minutes of the January 2003 EGM (Appendix 12) refers to the ever increasing cost of routing such cables underground as a justification for the “fantastic” deal negotiated by the CRC / three wise men!

In June 2004, the members of DLGC were informed by their new President, Terry Reynolds, that the ESB cables would not be going underground as “ the ESB were unwilling to do so.” - it would upset the local flora, wildlife and ecology! The cables were instead being routed over-ground , apparently regardless of the local flora, wildlife and ecology. Amazingly, the developer requested this overground re-routing as early as November 2002 at a time when the members of DLGC were being assured by their Parent Council that such cables were indeed going underground at great cost to the developer (Appendix 12). Who decided that the cost of ˆ1million per kilometre for the underground option would not be paid?

The members were advised that the cash payment of ˆ20 million in 2008 had been determined by way of “Equality of Exchange” (clause 16 Heads of Agreement.) which in layman terms means that the value of what you are getting is equal to the value of what you are giving away.  In other words, the value of the lands in DLGC was equal to the value of the new course/clubhouse in Ballyman and ˆ20 million (ˆ15 million in 2008 after adjusting for inflation)? The cynic might find this difficult to believe!

Based on the above information presented to the members of DLGC by Montgomery and the CRC, the Captain (Pearse Rayel) and the Parent Council of the club, “unanimously” recommended acceptance of the Ballyman “deal” which the members, including Patrick Coen, voted 79:21 in favour at an EGM in the Royal Marine Hotel on 19^th June 2002.  The minutes of this meeting, arguably the single most important meeting in the history of the club, have not been approved by the members of DLGC in general meeting.

A condition precedent of the approval at the June EGM was the payment by the developer to DLGC of ˆ872,410, including value added tax at 21% of  ˆ151,410, by 26^th June 2002 which DLGC would place on deposit in its name.  However, these funds are not in the name of DLGC and are not reflected in the club's audited financial statements in accordance with best practice as recommended by the Institute of Chartered Accountants in Ireland. Furthermore the value-added tax included in these funds had not, by 30th September 2004, been paid by DLGC to the Revenue.

Why have the Trustees and Parent Council of DLGC failed to account for these funds in accordance with “best practice” and does their omission from the audited financial statements suggest that such statements are incorrect or mis-leading?  These are most certainly not “Trust Funds” as advised by the Parent Council to the members of DLGC at an EGM on 8^th December 2003.  More importantly, does the failure to properly account for these funds suggest that the condition precedent incorporated in the “Letter A” attaching to the Heads of Agreement has not been complied with and if so, why not?  Have the members of DLGC been misinformed and misled on yet another important aspect of the Ballyman financials?

Did Brendan Ryan, the 2004 captain and previous Treasurer, let the proverbial cat out of the bag about these funds at a meeting in DLGC on 30th September 2004?

On April Fools day 2003 the then captain of DLGC, Ned Dempsey, advised the members that the Ballyman clubhouse was being increased from 20,000 sq.ft. to 35,000 sq.ft. at no extra cost to DLGC.  Maybe because of the day it was, Dempsey “forgot” to tell the members who was going to pay the cost of ˆ6 million for the extra 15000 sq. ft?

III.

The Ballyman Deal. (cont/d….)

The minutes of the EGM on 9^th January 2003 (Appendix 12) suggest that the CRC had done a “fantastic” job negotiating the Ballyman deal. The development cost had increased by ˆ31.6 million suggesting a similar loss for the developers.  For such successful property developers, this is indeed a strange outcome.  By contrast, these same developers purchased approx. 800 acres in the Ballyman area, with development potential, at an estimated cost of ˆ50 - ˆ60 million or at an average cost per acre of ˆ68,750.  The CRC purchased 300 of these acres, now utility land as planning had been refused, for ˆ40 million -  ˆ133,333 per acre or twice what the developer had originally paid. The reader will have to draw their own conclusions!

There are many in Dublin's property development sector who would readily admit that the DLGC deal is without question a “steal” for the developers. The man who negotiated the deal with DLGC on behalf of the developer, Jim Gahan, is apparently one of the best in the business. Why therefore were the members of DLGC represented by three amateurs in such negotiations?  Why were the services of a top professional negotiator not retained by DLGC so as to ensure the best possible deal was negotiated on behalf of the members of DLGC?  Was there a Machiavellian reason for not doing so?

To put the deal with the developer in prospective, it would be necessary to consider two important factors, namely :-

Once the “real” values and costs have been determined, a realistic comparison could then be made with the Ballyman deal.  This exercise, which no doubt would be revealing, is however beyond the scope of this document.