Developer may profit from club lease sale

The Irish property developer Mr Noel Smyth will make money on the Irish Club's building in London if the sale of its lease exceeds a certain price.

The lease on the club's 17,000 square foot premises at Eaton Square, Chelsea, has 10 years to run and has an estimated value of between £3.5 million sterling (€5.4 million) and £4 million sterling.

If the sale realises more than the upper estimate, then the excess will be shared equally between the club and a company owned by Mr Smyth, Aulburn Investments Ltd.

Mr Smyth organised a £750,000 sterling loan for the club from the Irish Nationwide Building Society some time ago and personally guaranteed it. The loan was required to keep the club going and it has to be repaid with any proceeds from the sale of the club lease.

Mr Smyth entered into an agreement with the club when the loan was being organised. He personally paid for an assessment by KPMG into whether the club could be made viable in its current location. A significant upgrade of the building, which is in a bad state of repair, would have been required, and this could have cost up to £13 million sterling, the assessment revealed.

KPMG advised that the plan to upgrade the club and its facilities was not a viable one.

The club and Mr Smyth's company had a fallback option of refurbishing the premises and then selling it on as a private residence. They would then split the profits.

In both cases it was felt that a new 75-year extension on the lease could be secured from the landlord, Grosvenor Estates. However, the second option was also ruled out.

The agreement then dictated that the premises should be sold, the loan repaid, and any profits on a sale price of up to approximately £4 million sterling should go to the club. Any profits on a sale price which was in excess of appoximately £4 million sterling would be split 50/50 between the club and Aulburn.

Another equally large building on Eaton Square was sold recently for £20 million sterling.

The purchaser of the Irish Club building would most likely refurbish it and then seek an extension of the lease.

The Irish Club has had difficulty maintaining its premises for many years and at the time the loan was taken out with Irish Nationwide it had accumulated debts of £650,000 sterling. The upper floors of the building are no longer in use because of their poor state of repair.

The club has been at its Eaton Square premises since the 1950s. It is open to anyone who is from Ireland or of Irish descent and has some 600 members. In its time, the club has played an important role in the Irish community in the UK and in relations between the UK and Ireland.

The committee which runs the club intends to spend any profits it makes from the sale of the Eaton Square lease on a new, smaller premises in London.