Sisters of Mercy owed €12 million from property now under Nama control

An order of nuns is still owed about €12 million from a six-year-old property deal that led this week to Nama appointing a receiver to a trust run by the Diocese of Kerry.

The State assets agency has just appointed Gearoid Costelloe of Grant Thornton as statutory receiver to a Killarney property that is legally owned by St Brendan's trust, which holds property on behalf of the diocese.

The Sisters of Mercy sold the property on Rock Road in Killarney to local developer Galvin Developments in 2007 for in excess of €30 million, and part of it now houses a nursing home and retirement village.

Outstanding sum
A spokeswoman for the Sisters of Mercy Southern Province told The Irish Times yesterday that there is still an outstanding sum of money due for 6.45 acres of the site, which is 16.9 acres in total.

The figure involved is understood to be in the region of €12 million, about a third of the agreed sale price.

The order made several attempts to recover the sum since the original agreement in 2006, but has not been successful.

Galvin Developments, one of the region’s biggest property players, originally intended to build 81 houses on the site as well as the care facility and retirement village.

However, its banker, AIB, subsequently refused to finance this as the Irish property market turned dramatically within a year of the company agreeing to buy the land.

The company owed the bank €43 million in relation to the site. The liability subsequently passed to Nama. The agency recently appointed Mr Costelloe as receiver to some of the company’s assets on foot of securities given to AIB in 2005.

Galvin Developments never registered its ownership of the Rock Road site, leaving St Brendan’s Trust as the legal owner.

In August 2007, the trust agreed a series of third party mortgages with AIB which effectively meant that it was guaranteeing the Galvin Developments loan, which is why Nama appointed its receiver to the property.

Stamp duty
The fact that the trust retained legal ownership also meant that the company did not have to pay stamp duty on the transaction.

The duty is only charged on documents that effect the transfer of legal ownership of a property, so the liability could not have arisen in the first place.

Arrangements such as this were common during the boom, particularly where the purchaser intended to sell on the land quickly.

Efforts to contact Galvin Developments for a comment were not successful yesterday.