The first thing to grasp about the Bord Gáis Energy Theatre, the premium arts venue in Ireland that is now being offered for sale by Nama for just €20 million, is that it was built on public land and with a public purpose.

Its origins lie, oddly enough, in the discovery of natural gas off the Irish coast, which made the old Dublin Gas operation on a huge site around Grand Canal dock redundant. The site was taken over by a public body, the Dublin Docklands Development Authority (DDDA).

The most attractive part of the site was the western end of the dock. The DDDA decreed that the corner of this site nearest to the River Liffey would be reserved for a building with a social, public or community purpose. The deal was that a developer would construct this building at his own expense but could deduct the full cost from the price of the rest of the site, which eventually contained 45,500sq m of office and retail space.

In effect, ownership of this lucrative block would be exchanged for the creation of a significant public building.

This is indeed what happened: the site was given initially to a developer called Terry Devey. He in turn passed it on to Joe O’Reilly, best known for his development of the Dundrum Town Centre. It was agreed that the public building in question would be a theatre.

Since the price of design and construction would be deducted from the overall cost of the block, there was an incentive to create an expensive, signature structure that would in turn enhance the value of adjacent developments.

Hence, Dublin got a state-of-the-art Daniel Libeskind-designed theatre and in return for approximately €75 million spent on initial construction, O’Reilly got a prime development site.

There was, at this point in 2006 and 2007, an extraordinary opportunity for the State to acquire a world-class theatre within walking distance of O’Connell Street for a tiny sum: probably no more than the €4 million that was required to complete the fit-out of the theatre.

The theatre, as I understand it, was offered by the DDDA to the Department of Arts and Culture. There had been much talk of the Abbey Theatre moving to the docklands, of the need for an opera house in Dublin and even of a possible new home for the National Concert Hall.

However, the department decided not to take the offer of the theatre. It was instead sold to the developer Harry Crosbie for what he himself calls a "nominal" sum of €10 million.

‘Peppercorn’ rent

In discussions about the sale of the BGE theatre, it has been widely reported that Crosbie bought a “lease” on the theatre. This is technically true, but in fact misleading. Crosbie got a 200-year “lease” at a “peppercorn” rent (ie no rent at all) – in effect full ownership.

As Crosbie readily admits, this kind of lease was a common device used by most developers to (lawfully) avoid the payment of stamp duty.

The reality was that he became the sole owner of the finest arts venue in Ireland. In fairness to him, most people in the arts community would agree that he took on the theatre with genuine enthusiasm and a pride in its beauty. Crosbie spent €3.8 million fitting it out to a very high specification. He borrowed this and the €10 million purchase price from Allied Irish Bank.

Which brings us to the second important point: the total sum of the loans on the theatre that ended up going, via AIB, into Nama is just €13.8 million. But Nama almost certainly acquired those loans at a huge discount: the average “haircut” was 58 per cent.

If this loan was typical, Nama probably paid about €6 million to acquire it. In the context of a theatre that cost €80 million to build and fit out, this is a very small sum – too small, surely, to justify the fire-sale of a very significant Irish cultural asset. In any case, the €13.8 million that Crosbie borrowed for the BGE Theatre is not a “bad loan”. The theatre is not a “distressed asset”.

The selling agents for Nama, CBRE, describe the theatre as “a trophy asset which affords investors and operators a unique opportunity to acquire a world-class specialist asset offering considerable growth potential”.

For once, this is not mere estate agent puffery. The BGE is not a ghost estate or an empty office block – it is a fully functioning, highly profitable commercial theatre that is also an important part of the social fabric of Dublin. In 2012, it produced a total revenue of €7,649,438 which increased by six per cent in 2013 to €8,099,106 and is expected to rise again in 2014. Revenues on this scale seem perfectly capable of servicing Crosbie’s €13.8 million loans.

Collateral damage

So why is it in Nama, then? For reasons that have actually nothing to do with the viability of the theatre itself: the BGE is caught in the crossfire in a struggle between Nama and Harry Crosbie over a completely different project: Crosbie’s doomed Point Village retail complex in the docklands, on which he owes AIB €44 million.

It is those bad loans that are at stake in the bitter court battles between Nama and Crosbie: the BGE is mere collateral damage. (Crosbie claims that the theatre is not lawfully subject to Nama at all, since it was not yet finished when Nama was established – a claim that is likely to be tested all the way to the Supreme Court.)

The final, most important point, is to determine where the public interest lies in all of this. It lies, obviously, in having the €13.8 million loans raised on the theatre paid back to AIB – something that can be done on a normal business basis if the theatre continues to function as a profitable going concern. But it lies, too, in restoring to the theatre some of the broader cultural remit that was originally envisaged for it.

No one suggests that the BGE’s 2,111 seats can be filled on a regular basis with Irish opera, ballet or theatre – it needs to continue to make money as a commercial operation.

But within that imperative, there should be much more room for Irish productions than is currently the case – and certainly more than will be available if the theatre is simply flogged off to international investors for a knockdown price that invites the interest of those looking to make a short-term killing. An obvious example of how things should be is the Wales Millennium Centre in Cardiff, which hosts many of the same touring commercial musicals as the BGE, but is also home for part of the year to the acclaimed Welsh National Opera and other indigenous dance and theatre companies.

This broader remit does not require the State to take over the BGE and try to run it – an option that might provoke justified scepticism. The simplest way to achieve it might be to leave the current commercial business in place (with its obligations to repay loans) but with strong new conditions.

Crosbie told me this week that he is willing to agree to three such conditions: representation on the theatre’s board for the Minister for the Arts; blocks of stage time to be set aside for Irish productions and artists; and an apprenticeship scheme for local young people to learn technical theatre skills in areas such as sound, design and lighting.

Obviously, this new deal would suit Crosbie’s own interests, allowing him to keep ownership of the theatre. But it could also suit the public interest – securing the premier arts venue on the island with public oversight and a commitment to Irish arts. This can be done without the State having to invest a cent directly – the notional cost would be the difference between the €13.8 million to be paid back on the theatre’s loans and whatever sum Nama can get from a quick sale.

At the very least, there is an overwhelming case for the BGE to be withdrawn from sale pending a proper public and political discussion about the best use of this superb asset. It is extraordinary that the State passed up the opportunity to have a stake in this asset once. It would be shameful if it were to repeat the mistake this time.