Tuesday, 29 June 2010

Small Rivets in the Titanic Court Case

According to the Belfast Telegraph, construction of the Titanic Signature project "is a month ahead of schedule, with the landmark building on course to open in the first quarter of 2012."(1)

But Titanic Quarter, the property development, is finding the going harder.

"Mr Smith [chief executive of Titanic Quarter Ltd] said he is not concerned Titanic Quarter - a 1,000,000 square foot development - may find it hard to attract tenants in the current depressed property market, though the company is having to work hard to secure investments on the scale of Citi Bank's recently opened operation"(1)

The Titanic Quarter has a number of apartments whose price was agreed at the height of the property market, before the credit crunch took hold, and property values fell, and financing loans became more difficult as banks became less willing to lend money. Here the picture is not so rosy:

"People signed a contract and we believe that those contracts are watertight," he said. "We are working with people to get them to complete their contracts. We haven't sought to litigate against everyone who has delayed. (1)

This can be seen most clearly in what is a landmark test case reported by the BBC News on the 11 June 2010, in which the person has no money at all:

An order for a cash-strapped buyer to complete on an apartment in the Titanic Quarter in Belfast would be impossible to enforce, the High Court has heard. Lawyers for a jobless man being sued for failing to honour a purchase contract argued that their client was completely without cash. The defence is being put forward as a test case and may determine the wider action brought by Titanic Quarter Ltd. The company issued writs against 12 customers who failed to secure finance. (2)

The financial situation in Ireland shows little sign of getting much better in the foreseeable future:

Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession...Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed - those out of work for a year or more - have more than doubled, to 5.3 percent (3)

It appears that Neil Rowe, at the centre of this court case, is one of those jobless:

Titanic Quarter Ltd, owned by Dublin-based Harcourt Properties, is seeking orders of "specific performance" which would compel the defendants to honour their side of the deal. Several defendants are fighting the action by claiming they simply have no money. The court heard one of them, Neil Rowe, is currently unemployed and has no other assets to enable him to complete on his agreed purchase. His barrister, Richard Coghlin, said: "The element of futility and impossibility is brought about by the circumstances of the defendant and also by the impossibility, we say, of enforceability of any order for specific performance." (2)

I can understand that Harcourt, having invested in property, and having contracts agreed on the apartments, does not want to be out of pocket. That seems fair enough, but their pursuit of their claim seems to verge not only upon what might be seen by some as vindictiveness, but in the case of Neil Rowe, of a kind of willful blindness to the circumstances of the unfortunate man. Surely as with a bank foreclosing on a property, and then selling it on, Harcourt can argue a good case to reclaim ownership of the apartment and sell in to another buyer? But perhaps, given the parlous state of the economy, there may be no buyers;  perhaps the property market is not buoyant enough for them to pursue this strategy:

Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of G.D.P. this year.(5)

The signs of austerity are all around:

Signs of the decline encrust Dublin's streets. Boisterous crowds still mash onto the cobbles of Temple Bar. Yet farther out, "To Let" posters obscure the hollowed shells of once-vibrant cafes and clothing shops. Fifteen minutes north of the city center, hulks of empty buildings form stark symbols of why Ireland must now hunker down. At Elm Park, a soaring industrial and residential complex, 700 employees of the German insurer Allianz are the lone occupants of a space designed for thousands. In the impoverished Ballymun neighborhood, developers began razing slums to make way for new low-income housing. Halfway through the project, the financing dried up, leaving some residents to languish in graffiti-covered concrete skeletons. "Welcome to Hell," read one of the tamest messages. (5)

The sunken road (maintenance £500,000 per annum cost to the States) and the prestigious Hopkins Masterplan that Harcourt dreamed of building belong to an age of plenty, of booming business, and Jersey's prosperity, but the downturn of the economy makes me wonder if we could end up with something like that terrible picture of half-finished decay over here. Perhaps it is time to scale back ambitions, and look for something more modest. Otherwise, the States may have to pick up the pieces, at a time when they are trying to save money, rather than spend it.

Ireland is a mirror of what Jersey might look like if we don't pull back on grandiose schemes, and a warning that hubris inevitably leads to nemesis. The court cases in the Titanic Quarter are small rivets, coming unstuck, but if enough rivets fail, the ship may sink.

(1) http://www.belfasttelegraph.co.uk/business/business-news/weather-puts-titanic-project-on-course-for-2012-opening-14858706.html
(2) http://news.bbc.co.uk/1/hi/northern_ireland/10298214.stm
(3) http://www.calculatedriskblog.com/2010/06/ireland-austerity-in-action.html? utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29
(4) http://news.bbc.co.uk/1/hi/northern_ireland/8620288.stm
(5) http://www.nytimes.com/2010/06/29/business/global/29austerity.html

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