Punchestown racecourse and event centre has returned to profit but difficulties over leases are holding up a restructuring plan, writes Colm Keena.
The centre made a pre-tax profit of €163,000 in 2003, its first profit in a number of years.
A business plan agreed in 2002, which would see Horse Racing Ireland (HRI) invest in the complex, has not yet been put into place because of ongoing difficulties over tax and the validity of certain leases.
The former Minister for Finance, Mr Charlie McCreevy, authorised a controversial €14.8 million grant for the event centre at Punchestown without an in-depth examination of the project. Of this money, €14.59 million had been drawn down by the end of 2003.
Leases between a number of the entities behind the Punchestown complex have been queried over the past year and a half by figures within the Punchestown organisation and the issue has yet to be settled. Should the leases turn out to be flawed, serious issues could arise.
One source said that, should the leases turn out to be flawed, commercial development opportunities could arise, although this was not the motivation behind the ongoing examination of the issue.
"If the leases turn out to be defective, then what you would have here is something that is not properly established," said another source, referring to the Punchestown complex.
It is understood that legal advice received by HRI was of the view that the leases are not defective.
In 2002, the complex made a loss of €481,000 while in 2001 the loss was €1.46 million.
There are a number of companies involved in the Punchestown complex. They are: the Kildare Hunt Club Ltd; Punchestown Development Company Ltd; Punchestown Enterprises Company Ltd; and Blackhall Racing Company.
The latest accounts for Punchestown Enterprises, which leases the event centre from Punchestown Development, states that the accounts are prepared on a going-concern basis based on a business plan which is supported by HRI. The plan involves HRI providing €2.5 million.
The plan is dependent on the establishment of a joint venture company, owned equally by HRI and the Kildare Hunt Club, which would run Blackhall, Punchestown Development and Punchestown Enterprises, according to the accounts.
The accounts were signed off in October 2004. The wording used in relation to the intended establishment of the joint venture is identical to the wording used in the previous year's accounts.
VAT issues arising from the leases and the issue of the validity of some leases between the various entities involved, including the Kildare Hunt Club, are the cause of the delay. Some reports have said the unpaid VAT bill is in the region of €750,000.
The potential Revenue bill is noted in the 2002 Punchestown accounts and it is not clear why the issue has not been resolved.
The VAT issue is understood to have arisen in the course of a due diligence associated with the proposed HRI investment. No due diligence was conducted prior to the €14.8 million grant.
The failure to establish the proposed joint venture is also preventing the closing of an episode involving an investment by the Getty family in the Punchestown complex.
According to the accounts, €3.18 million owed to the holders of redeemable preference shares in Blackhall Racing is to be satisfied in full with the payment of €2.15 million. However, this is dependent on the joint venture being established and the HRI monies being handed over. The redeemable shares are held by GT Equinus, a Getty family company which made an investment in Punchestown as part of the passports-for-sale scheme.
Arising from a December 2003 agreement, another company, Punchestown Holdings Ltd, is providing management services in relation to the operation of the racecourse and event centre. The company's board is made up of five representatives each of HRI and the Kildare Hunt Club. The agreement is an interim measure pending the establishment of the joint venture, according to Punchestown Enterprises accounts.
The joint venture agreement, once established, will run for 15 years, allowing the hunt club to repay HRI out of profits from the racecourse and event centre.
