Capital D Property takes €13m writedown

A RESIDENTIAL property investment company backed by investors including Lochlann Quinn and Bill McCabe took an impairment charge of €11.8 million and a writedown of €1.48 million in its 2008 accounts, reflecting changed “property values”.

Documents filed at the Companies Office show that Capital D Property, founded by entrepreneur John Morrissey, took the €11.8 million “stock impairment charge” to reflect its directors’ assessment of property values at the end of last year.

The firm was renegotiating loan facilities and covenants with its bankers and its auditors, Deloitte, flagged a possible “material uncertainty” about its ability to continue as a going concern.

It is thought a new five-year loan facility has since been arranged without any breach to earlier covenants.

Capital D attracted some €20 million in investor funds two years ago on the basis that it would buy and refurbish prime properties in Dublin’s most expensive districts and sell them at a profit. It stopped purchasing assets in early 2008 and, according to last year’s accounts, has no plans for more acquisitions.

It has six properties on its books at the moment, all of which are located in Dublin 2, 4 or 6. All have either secured planning permission or have been refurbished, but no work is ongoing.

In notes accompanying the 2008 numbers, the firm’s directors say they conducted an internal valuation to ascertain the market value of its investment property and trading stock, which resulted in a writedown of €1.48 million on an investment property at 23 Northbrook Road in Ranelagh, Dublin 6. A further “diminution” of €11.8 million was recorded on the value of trading stock, “based on the most recent sales and movements in similar properties”. The directors noted that 2008 “witnessed the worst economic crisis in Ireland in a generation”.

The revaluation led to Capital D recording a €13.6 million after-tax loss for 2008, compared to a loss just shy of €600,000 for the previous year. Shareholders’ funds moved from being €740,000 in the black to a €14.3 million deficit.

The accounts show that Capital D had debt of €45.6 million at the end of 2008, but this includes the initial €20 million raised in equity, which is classified as loan notes for tax reasons. Cash on the balance sheet fell from €9.2 million to €4.8 million. Stocks and work in progress were given a value of €19.4 million, down from €23.7 million.

A bank loan of €25.4 million was secured by a number of charges over the company’s assets and a personal indemnity by Mr Morrissey for up to 10 per cent of funds advanced.

Capital D’s directors are Mr Morrissey, Kevin McConnell and Kevin Beary, who is also a director of Dolmen Corporate Finance.

Mr Morrissey came to prominence as co-founder of an aircraft leasing company, which was sold in a multimillion-euro deal almost a decade ago.

He subsequently emerged as the largest shareholder in Havok, the Irish software firm that Intel purchased in 2007 for $110 million.

Malakoff, a company related to Capital D, went into liquidation last year but was expected at that time to meet all its liabilities.