McInerney Homes was Ireland’s largest volume house builder/developer.  It is also a plc which has/had extensive property interests in Britain, Spain and Portugal.  It has also been unraveling as a business for the last 2/3 years, as the company has lurched towards bankruptcy, with all the grace of a messy divorce.

This process has been well documented as the 3 banks owed €100m have (successfully) opposed the restructuring of the company under examinership.  The Supreme Court delivered a fascinating Judgment delivered by O’Donnell J. on the 22nd day of July, 2011 in the whole affair. http://preview.tinyurl.com/3mkwsmm.  To make things more interesting a group of shareholders are opposing the (now defunct) Board’s liquidation of the company as reported on savemcinerney.com.

However, what of the implications for the future?  We’re talking about one of the big suburban developers here, holders of significant land banks, and formerly significant employers.  All gone.

The Supreme Court judge described the attempts of the various parties (accountants, lawyers, valuers) to project future returns in the next 10 years on the companies assets as “surreal”.  Indeed, he goes so far as to place economic projections in the context of J.K. Galbraith’s quote, that its only done to make Astrology look respectable.  This is not encouraging.  The only thing the valuers appeared to agree on, is that now is not the time to sell or build.  It also shows that they really don’t know if this model of development still works.

The court case reveals that future expectations/values for these lands (such as these) will be based on very random calculations.  The concern is that once a figure is adopted, it will then dictate the development expectation for those lands.  Under these never-ending write-down accounting exercises, it is hard to see the banks or NAMA raising their sights for the sites, but a race for the lowest common denominator. 

The banks, lawyers and accountants currently fighting over their “surreal” figures will at some point have to face the fact that people/communities/towns will have to desire these houses and buildings and currently sit at the bottom end of a spreadsheet.