A KEY strategic site in Kilkenny city that was valued at €55 million at the height of the property market bubble is now worth a modest €5 million.
The 14 acres was the subject of court proceedings last week when the company set up to develop the old mart site on Barrack Street-Castlecomer Road site went into receivership. Half of the shares in CityMart are owned by Kilkenny Co-operative Mart and the other half my Melcorpo, a company that was managed by Mr David Lyons and purported to have expertise in such joint ventures.
It was left to the chairman of the mart co-op, Mr Michael Parsons to deal with all the questions following the decision of National Irish Bank to bring in a receiver.
It will now be sold to the highest bidder and it may in time increase substantially in value once the new bridge over the Nore is built in two years time and allows direct access to the site and on to the Castlecomer Road.
It was the lack of access and doubts over the future of the road network around the site that led to the decision of An Bord Pleanala to turn down planning for the site a few years ago. If that planning application was lodged today it would be successful, no question about that.
It marks a huge disappointment for the mart and serious questions are now being asked about whether or not the mart should have sold to Tescos or another big multiple retailing giant like Marks & Spencer’s for around €48 million.
Instead, the mart co-op decided to jointly develop the site with Melcorpo. Some would say it was greed others would say it was the best way to maximise the potential from the site and guarantee an income stream for the co-op for years and years to come. The mart co-ops financial advisors agreed with the strategy.
The good news is that the collapse has no impact whatsoever on Cillin Hill and its 29 acre business park and that it is business as usual there. The mart co-op were able to ring fence the debt to the old mart site only and the bank were happy to use the 14 acres as collateral and nothing else.
Also during the life of the joint venture with Melcorpo, Kilkenny Mart Co-op received €13 million from it and that helped to finance Cillin Hill.
This is a disaster for the mart co-op but it could have been a lot worse. They could also have lost Cillin Hill.
And fortuitously for the mart co-op, former chief financial officer with Glanbia, the highly thought of Geoff Meagher has come on board and is providing sharp financial advice to the co-op and his presence has re-assured people about the long term survival of the mart. The new mart at Cillin hill is going from strength to strength and is the envy of many others around the country, helped in no small way by the new motorway.
A total of €25 million is owed on the old mart site by CityMart and the co-op can now walk away from its half of that and concentrate on Cillin Hill. The situation there is that it owes E9 million on Cillin Hill after investing the €13 million it received for its part in the old mart site joint venture.
Chairman of the co-op Michael Parsons said that it was business as usual at Cillin Hill and that the co-op continued to make its interest repayments on the outstanding €9 million. It may seem like a lot of money but with a strong footfall and a lot of enquiries from businesses anxious to locate there, the agri-trade park is going from strength to strength with existing tenants and businesses there looking to expand.
Bottom line is this: Were farmers badly advised to get involved in developing a shopping centre-retail-residential quarter for the city or should they have taken the money being offered and used that to pay for Cillin Hill or did the farmers, as this writer thinks, do what they thought was best at the time in consultation with their financial advisors? It is easy to be wise after the event but the mart co-op like a lot of the people got caught up in the property bubble got badly strung but it could have been an awful lot worse.
There is also an element of bad luck involved and if CityMart had received planning it would have been up and running before MacDonagh Junction and it had an agreement with Tesco and other high profile brand names to locate at the old mart.