The owners of the Jervis Street shopping centre shifted its control in 2013 to an Isle of Man offshore structure that was designed specifically to ensure Irish tax authorities were not ranked ahead of its banks in the queue for repayment, according to documents from the Paradise Papers leak.
The structure was designed by a Dublin tax adviser for property developers Paddy McKillen and Padraig Drayne, who were refinancing a performing loan from the Irish Bank Resolution Corporation.
The shopping centre was valued at €230 million for the purposes of the deal, which released €140 million to repay legacy IBRC debts secured on Jervis.
The documents, obtained as part of a massive data leak of material from Isle of Man law firm Appleby, also reveal that Tyrone-born Mr McKillen "is not tax resident in Ireland or the UK".
He has been based outside of Ireland for many years, although he still uses a Foxrock, Dublin, home address on official documents.
The leaked Appleby files include documents sent by Dublin firm Twomey Moran, which says it is a boutique tax firm "for the needs of wealthy individuals".
In January 2013, representatives of Mr McKillen and Mr Drayne, as well as Kieran Twomey from Twomey Moran, arranged meetings with law firms in the Isle of Man to set up a structure for the refinancing, which was ultimately completed a year later with lender M&G Investments.
Refinancing
Ahead of their meeting with Appleby, Mr Twomey sent an agenda and the outline of the structure to be used for Jervis Street Shopping Centre (JSSC). “The structure... is designed to facilitate a refinancing for JSSC by a UK institution,” wrote Mr Twomey.
“The refinancing offer is conditional on the finance being made available to a bankruptcy remote vehicle... that owns the asset in such a way that Irish capital gains tax is not a priority payment to bank debt...” if the security was called in.
Mr Twomey directed the structure to be used. An Isle of Man parent company (Parentco) would, in turn, would own a Manx subsidiary (Subco). Neither was to be UK or Ireland tax resident.
Mr Drayne and Mr McKillen would own Parentco “50/50”. The two men would sell JSSC and related operating companies to it for €230 million, settled by issuing them with shares.
Intercompany balance
Parentco would then sell JSSC for €230 million on the same day to Subco, which would pay for it with the refinancing loan (€140 million came in 2014 from M&G). The remainder would be an intercompany balance. Parentco would then lend the cash to Mr McKillen and Mr Drayne, who would use it to pay IBRC.
Mr Twomey asked Appleby if similar Isle of Man structures had ever been closely examined by tax authorities in Ireland or the UK. He also included a detailed report on JSSC prepared by Mr Drayne’s office.
The documents say JSSC had a rent roll of €19 million. The structure specified that “Jim Byrne”, of whom few details were provided, was to be hired to manage the asset.
Appleby quoted set up fees of £13,500, legal fees of £10,000 and annual fees of £50,500 to maintain the structure.
Days after the scheduled meeting, a Parentco-Subco structure for the Jervis centre was set up by another Isle of Man firm, Equiom Trust Company, Manx records show. Documents filed by these companies include a full list of rents paid by Jervis tenants, including €275,000 rent for Burger King and €1.6 million by Boots.
The Jervis centre was refinanced yet again earlier this year by AIB.
The Appleby documents were part of the Paradise Papers data leak via the International Consortium of Investigative Journalists, of which The Irish Times is a member. The ICIJ also handled last year's leaked Panama Papers.
Mr McKillen declined to comment on the Isle of Man structure.
