PRAGUE, July 21, 2015 /PRNewswire/ --
Flow East, a Prague developer specialising in the restoration of historic buildings, has filed two court actions alleging improper process and breach of good faith in the pending sale of the Savarin Palace project by Ballymore Properties to Crestyl Developments.
Flow East says that it was invited to bid for the Savarin Palace project late last year and confirmed a bid of €81.5m against Ballymore's guide-price of €80m. On this basis Ballymore granted Flow East preferred bidder status.
James Woolf, Flow East's chairman, says: 'We have focussed on restoration projects in and around Wenceslas Square for 25 years. The Savarin Palace is important to us - it is a superb example of Baroque architecture which has been allowed to deteriorate. Today Savarin is a simple tourist mall dominated by fast-food outlets. Our vision is to return the palace to its former glory.'
Flow East dropped from bidding roster
In February Ballymore told Flow East that they had been dropped from the bidding roster in favour of three other contenders. Woolf was astonished: 'Not only had we been formally given exclusivity, we had also made it clear that we would pay the top price for Savarin, come what may. This wasn't simply a verbal agreement; it was the subject of formal, legal undertakings negotiated and agreed between Ballymore Properties and Flow East.'
Flow East knew that price had to be the vendor's over-riding consideration. Although Ballymore was technically the owner of Savarin, the principal of the Savarin deal has to be actually NAMA - the Irish Government body set up to retrieve taxpayers' money following Ireland's banking crash in 2008. The sale documents made this clear: 'A structured and transparent process organised by Cushman & Wakefield in conjunction with NAMA.'
Flow East felt they had been summarily excluded from the tender for no apparent reason, and tried to communicate with NAMA and NALM, its loan management agency. As the declared highest bidder, Flow East felt they were in the best position to deliver against NAMA's objective - the highest possible return for Irish taxpayers.
'To our surprise, NAMA/NALM refused to discuss the issue with us,' says Woolf. 'They said they had no involvement in the details of the tender process and were solely concerned with the loans which stood behind Ballymore's ownership of the project. This didn't make sense to us, and it was certainly not what the sale particulars stated about NAMA's role in disposing of the property.'
Flow East launches legal action
Left, as they saw it, with no alternative, Flow East instructed solicitors to sue Ballymore Properties for breach of good faith and improper process in the conduct of the sale of the Savarin Palace project. The cases continue. James Woolf says that important principles are at stake:
'We feel that the tender for Savarin Palace project has been less than fair. No-one has been able to explain why our status as preferred bidder was suddenly rescinded. The relationship between Ballymore, NAMA and Cushman & Wakefield is obscure: who is the actual vendor? Common sense tells us that it is NAMA, but this is denied.
'With no explanations offered, we felt the integrity of this tender process should be tested in a court of law.'
About Flow East
Flow East is a privately-owned property development company active in Prague since 1990. It specialises in restoring neglected historic buildings. Flow East has a portfolio of 25 properties including the Generali Building and the Hotel Jalta in Wenceslas Square, the Richtruv Dum in Male namesti and the Ericsson Palace in Karlova.
About The Savarin Palace
The Savarin Palace is an architectural gem designed in 1743 by Kilian Dientzenhofer, one of Europe's most distinguished Baroque masters. It has had many owners over the centuries and in 1911 passed into the hands of the Prague Municipality.
SOURCE Flow East