Rising costs and risks prompted receiver Luke Charleton to opt for a quick sale of a landmark hotel in a €1.5 million deal that now faces a legal challenge, the High Court heard on Friday.
Treacys Hotel Group is asking the court to enforce a contract to buy the Ard Rí Hotel overlooking Waterford city, for €1.6 million, which the business says it agreed with US fund Cerberus and Mr Charleton on November 21st, 2016, when it paid a €160,000 non-refundable deposit and proved it had the cash to pay for the property.
Mr Charleton told the High Court that he had recommended an earlier €1.25 million offer from businessman Seamus Walsh, who ultimately paid €1.5 million for the property, as Cerberus believed the rival bidder could complete the deal quickly, something the receiver said was a key concern.
He explained that as a receiver, he had been responsible for a vacant site that needed 24-hour security to deter antisocial behaviour, where insurance costs were mounting.
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“My main concern was that nobody was injured on site and that there was no antisocial behaviour,” Mr Charleton said, adding that the property had become a well-known magnet for trespassers. Mr Walsh’s lawyers noted that someone had tried to set fire to the hotel.
[ Treacys had €8.5m pot to develop Waterford’s Ard Rí Hotel, High Court hearsOpens in new window ]
Cerberus subsidiary, Promontoria Aran Ltd, appointed Mr Charleton as receiver of the hotel on November 3rd, 2016. The firm had bought the loan secured on the Ard Rí in 2015.
Mr Charleton stressed that he was the ultimate decision-maker on all assets where he has been appointed receiver. “I am the person who has to make the decision to proceed with a sale, subject to the secured lender releasing their security,” he said.
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He pointed out that in November 2016, Cerberus only favoured doing this “on the basis of Mr Walsh’s offer”, and not any other bid.
Mr Charleton added that Mr Walsh had a track record with Cerberus of completing deals quickly, while the Treacy group had no such record with either the US company or the receiver’s firm, Ernst & Young (now called EY).
He acknowledged that he authorised one of his staff, Chris Allen, to simply take delivery of the Treacys’ deposit on November 21st and to give them a receipt, but that did not mean he was accepting any offer.
Mr Charleton recalled that when he was told of the second, higher, offer that day, his main fear was that the emergence of a new bid could “drag out” the sale, which had to be balanced against the costs and risks associated with the Ard Rí.
He also told the court the non-refundable deposit would have been returned to the Treacys, as lawyers had always advised him that these payments should be returned if a potential buyer did not go through a with a deal.
[ Group bids to overturn €1.5m Waterford Ard Rí hotel dealOpens in new window ]
The family-owned Treacy group demonstrated that it had the cash needed to complete the Ard Rí deal on November 28th, and showed it had €8.5 million to invest in the derelict property itself.
Earlier, Martin Heydon SC, the group’s lawyer, argued that a November 22nd email from Darren Das of Capita, Cerberus’s adviser, to Mr Allen, shows the US company intended to accept the €1.6 million offer.
“It’s quite clear that somebody in Cerberus told you, ‘We’re accepting this but we want to see proof of funds’,” Mr Heydon said to Mr Das during cross-examination.
Mr Das’s email advises Mr Allen not to lodge the Treacys’ bank draft for €160,000, as Cerberus wanted to see proof that the group had the cash to cover the outstanding balance before “formally accepting the offer”.
However, Mr Das cautioned that the phrase “formally accepting the offer” may have been his words rather than reflecting what someone in Cerberus may have said to him.
Treacy family member Maria Keena is asking the High Court to order Promontoria Aran and Mr Charleton to complete the sale of the Ard Rí Hotel to the group.
