Vastly inflated values paid by Green for two apartments within the Kallakis portfolio have raised fresh concerns over whether AIB has fully quantified its risk on this transaction
QUESTIONS FIRST arose about AIB’s deal with Green when it emerged the firm had, in some instances, paid the same boom time prices as AIB’s erstwhile client Achilleas Kallakis for the real estate.
According to industry sources the similar price tags indicate that the assets were transferred into Green’s ownership at a 100 per cent loan-to-value, in what one property expert described as a “win-win deal” for both parties. As the source pointed out, the sale protected the bank’s balance sheet from the “potentially catastrophic” consequences of “offloading a massive property portfolio into a falling market”, which at the time was paralysed by a credit crunch.
And by the same token, Green gained ownership of the real estate without any “significant downside risk” to the company as the loans are understood to be secured against the individual properties.
AIB has insisted that the Green deal “was carried out in an entirely appropriate manner which was subject to the appropriate rules and approvals”. A spokesman for the bank said it had nothing further to add on the matter.
Yet there remain puzzling inconsistencies in the pricing of some of the properties.
Records filed at the UK Land Registry show the Green vehicles, which are titled Kish One through to Kish Fourteen, paid hefty premiums for two central London apartments.
According to historical Land Registry documents, a company registered in the British Virgin Isles, and allegedly connected to Kallakis, paid £1.95 million for a two-bedroom apartment in Belgravia in April 2006. Three years later, Kish Thirteen paid £3.6 million, which represents a 45 per cent increase.
In August 2006 another BVI vehicle, apparently connected to Kallakis, bought a ground floor apartment in Knightsbridge for £1.2 million, while Kish Fourteen stumped up three times that figure at £3.6 million.
A local Knightsbridge estate agent, who spoke on condition of anonymity, described the prices paid by Kish as “way out of range”, even in today’s market. He said the first-floor apartment at West Eaton Place in Belgravia would now fetch “£2.5 million at most” and he claimed that price hinged on whether the company had extended the lease on the property.
Land Registry documents for the apartment show there are 11 years left on the lease, when most of the residential real estate in the area is let on long-term leases ranging from 90 to 150 years.
The real estate agent recalled the Knightsbridge property from its 2006 sale and described it as “not very exciting” and in “ropey condition”. He said if the ground floor flat had been refurbished, it would sell for “no more than £2.25 million” in today’s market, but without a makeover the price would be closer to that allegedly paid by Kallakis.
Green, which is headed by Stephen Vernon and Pat Gunne, declined to comment on the deal, but a senior figure within the firm claimed the price discrepancies were “probably due” to the “averaging out of the sales prices” across the portfolio.
“We paid X for the portfolio,” he explained, and “so the higher prices on those apartments may have been a reflection of lower prices paid elsewhere” and he said he hadn’t “been concerned with the individual property prices”.
He also stressed that AIB was confident it would “recover all of its money” on these assets and stressed the portfolio has been performing well since Green took it over.
When asked whether AIB had simply transferred the loans over to the firm at a 100 per cent loan-to-value as part of a deal designed to protect the assets’ underlying value, he replied, “Well that just goes to show you what a good deal this is for AIB and its shareholders”.
