After receiving the securitised income he went on a share-buying spree, investing in everything from sugar to ferries. Millions were invested in Greencore, Irish Continental Group, McInerney and Aer Lingus, stocks that had little in common other than the fact that they had land banks, and land was what Carroll understood.
I found the quote in this Sunday Tribune article. It displays the fundamental mistake we all made. LC didn't understand land, what he understood was construction management really well. Better than anyone ever has done in this country and perhaps many others. It was when LC convinced himself he knew about land, that he made the biggest mistake of his career. LC’s life is one of two contrasting halves. As a young man he stumbled out of the dull world of engineering consultancy and into a world he didn’t fully understand. Along the way he met people, shook their hand and promptly hired them. They were great people who knew their business or trade well. The kind of people the Irish nation had turned its back on before. LC did very well out of this relationship and reaped the rewards.
Zoe was a business that understood how to save a thousand euro here or there, without compromising the integrity of the final product. LC drummed that idea into his employees and built a beautiful low-cost enterprise around such a simple approach. LC had a very fresh and unencumbered vision of construction management. Which enabled him to stumble across a niche that wasn’t been served at the time: inner city apartments. LC only had one big idea during his lifetime and that idea was enough. Or was it?
On the day that LC lost 20 million on Aer Lingus shares I was on the phone to a carpenter trying to beat down a price on a couple of timber doors. I was walking in the foot steps of those who had gone before me. I was learning to build constructive relationships with most players in an industry that I know. On that day, our financial director ran past me, a mobile phone pressed to his ear babbling excitedly to a man on the other end: We have un-wound all of our positions. There is no doubt about it, Zoe were a brazen bunch. They fooled themselves into believing they could re-invent the rules for whatever market they went into. After all, they were Zoe developments.
The real truth is there was an absence of strategy and comprehension behind most of what Zoe did in the end. That is why LC had his ass handed back to him on a plate by the marketplace. You might be able to game the system for a while. A system created by mere mortals, a system of tax incentives and development plan guidelines. Especially a system engineering by the people you know in Fianna Fail. LC is so intelligent he could juggle all of those things. He had worked his way up from the bottom. As someone said to me, he had bought the tin of paint and the bucket of nails. He hired the guy who sold him the bucket of nails who became employee no 5 or 6.
Gaming a system created by politicians or a planning authority is one thing. But the marketplace is a different matter entirely. It is like a hive mind or super intelligence. It doesn’t behave like an organisation made up of human beings should. It can display its own emergent behaviour when you least expect it. There is something happening in the marketplace, which experts cannot even explain to this day. If LC’s strategy had been working on any front, he might have pulled through with some scratches and bruises. But in the end, the company he built was carried off the playing field lying on a stretcher and needing a machine to breath.
What ultimately ruined LC was the one billion windfall his company earned from securitization of all future rental earnings. On that occasion, there were a shrewd collection of bankers from BOSI sitting opposite the table from Danninger. (Normally, it is Danninger who have the upper hand and sit across the table from a bunch of clueless civil servant planners working for a local authority) But on this occasion Danninger met more than their match. They had the ingenuity to make made LC feel like he was the man in charge.
LC couldn’t wait to get his hands on the securitization money. I remember when fortnightly site meetings working for Danninger became something surreal. You would find yourself sitting in a draughty site office with a group of tradesmen. They looked at you as if you had landed on site, not in a helicopter but in a flying saucer. I felt like asking the question, do I have two heads or something? But didn't ask, because I was afraid the answer might be yes! Nothing seemed implausible during that brief time. If you completed a seven story building and had to knock the building, because land values had increased again, that is what you went and did.
Society can only judge this now and decide what to do. It shouldn't be up to the likes of Sean Dunne to tell Ireland that millions of tonnes of CO2 emissions embedded in the concrete at North Wall Quay has gone to waste. It is time for green legislation to be passed under the European Energy Performance in Buildings direction, which deals with this lunacy. Sean Dunne as a director of a development company should be made to answer to his corporate responsibilities towards climate change prevention.
I wrote a short essay about the ‘smarter’ economy to send to LC early in 2009. I wanted to express my concern as an employee that we were doing things wrong in the company. Like the local authorities who didn’t want to compromise the authority of their ‘Mickey Mouse’ housing departments, by allowing a sustainable rental model to develop and grow in Ireland – Danninger was working with a concept of commercial real estate that couldn’t scale with the developments we could build.
Within day I received a redundancy letter in the post from the financial director who had un-wound the AerLingus shares. I guess LC wasn’t too impressed with my suggestions for building a sustainable economic future in Ireland. I remember at the end with Danninger, all economic logic went out of the window. It was like the Germans building V2 rockets to shoot down the thousands of allied bombers flying above in the skies over Berlin. Every kind of hair brained idea was pulled out and hurriedly transferred onto drawing paper. Anything with as many thousands of square meters rent-able floor plate as possible in order to grab more securitization of rental income from BOSI.
It was surreal in my mind, that a company that had started out to become the Ryan Air of the residential propety market, now wanted to become the AerLingus of the commercical world. It was like BOSI were selling our great little company a drug we could not say no to. The first 'free fix' was more than likely the two floors BOSI leased in Danninger's speculative Chapel House development in 2007. BOSI must have felt confident they would own the whole building within a year, which they did. People talk about Sean Fitzpatrick a lot in the media. But some one else sold Danninger the product that eventually killed them. Along with the good hopes and dreams of 1,000 employees too. One of the last jobs I worked on for Danninger was the new BOSI headquarters located at Cherrywood. But now I realize that project's only purpose was the carry the fool even further. You can still see the tops of pile foundations I designed with my colleagues if you take a drive out. Which I often do, to stare at them in disbelief. Stupid pile caps.
Having attended a couple of lectures at the Engineers Institute of Ireland I wrote a report about Dublin Airport Authority’s capital investment program of €1.8 billion over a ten year period. Now there are a group of guys who know what to do with a couple of billion. They have a plan and they publish it on their website for everyone to see. Danninger doesn't have a website and isn't in the phonebook. What sickens me most is that we were in a joint venture with DAA. Was it possible that Danninger also could learn from DAA? I sent my report to the directors concerned to see if the ideas could be of any help. Too little and too late unfortunately. BOSI had already ran away with the loot.
After all, it was the Irish nation who was paying DAA to do what they do very well. Why shouldn’t we learn some of the capital management techniques that UK consultants Turner and Townsend had pioneered in Ireland? In all fairness, wasn’t Danninger in some kind of joint venture with DAA? Similar to the smart economy essay I wrote, I got nowhere with the DAA report either. The criticism was that DAA should be re-aligning themselves to a Danninger way of doing business, not the other way around. I will remind you, they are a brazen sort of bunch.
While working for Danninger I began to listen to some of the pioneers in the sustainability movement in Ireland. I heard Gerry McCaughey talk about his company Century homes, and the housing projects he tendered for and won in the UK with his new parent company Kingspan. McCaughey later obtained a position as director at DDDA. Gerry was the right man, but in the wrong job for sure. Paul Leech the eco-tect, is one of those pioneers that I would have liked to have invited to work with us. I think it could have been a very productive cross-fertilisation of ideas and I know that Paul Leech would have enjoyed a challenge of ‘greening’ up our organisation. I know there would be differences and we both would have to compromise. But eventually I feel I could have turned Danninger around towards a more sustainable direction. Now I fear it is too late. Some other developer might lead the way, but I doubt they can do it in the same way that only Danninger could.
The one positive thing that I have taken away from my experience working for LC is a truly deeper and more sophisticated appreciation for sustainable development ideas. This has taken me a long time and a long hard road I can tell you. Listening to Eamon Ryan of the Green party on RTE television yesterday evening I was impressed by what he had to say. It isn't what he has to say, but the way in which he can say it. (In spite of many interuptions from the RTE TV presenter) John Gormley knew how to choose a good man for the long road in Eamon Ryan. While working as a lowly project manager at Danninger I used to augment my education with whatever cheap on-the-job learning experience I could. I spent a lot of time hanging around the lecture theatre in my Alma Mater, Bolton Street technical college. It was close by our offices in Parnell Street.
On one occasion I listened to Dick Gleeson describe his ideas for a sustainable and low carbon city. What is that guy smoking I thought to myself? But now I think that Dick Gleeson was on to something. I scribbled down my ideas for a new knowledge campus in the Custom House dock area. We need to advanced beyond the level of what Dermot Desmond and a couple of accountants (Haughey included) could envisage in the dark 1980s. What Dublin and Ireland needs now is the Irish Financial Services Centre Mark II.
My conclusion is that we need in Ireland to wean architectural consultants away from designing glass boxes in peoples’ back gardens. We need their design input in figuring out the most valuable route for the Dublin metro project: the most valuable that is in creating new opportunities for urban regeneration. Rather than reinforcing the same old status quo of O’Connell St. We need to re-invent Merrion Square, Customs House Quay and the area east of the Mater hospital heading towards Croke Park. There is vast potential to be un-locked in those areas and it would be sustainable too. Every major capital investment program by the Irish state, including the national spatial strategy, has been vacant of any input from the design professionals that were educated by the same Irish state.
The finger of blame for that should be pointed squarely at the Royal Institute of Architects of Ireland for being backward and impoverished with their vision. Their system of handing out rubber medals for glass box house extensions has ruined the profession they were responsible for developing. (A profession I onced tried to become part of myself) I think they and all the other land professional institutes should have to answer to a new central state body. That central state body should have an executive with experience in the building industry. Not some poor old architectural consultant who means well.
We can’t sustain the Mickey Mouse scale approach of the RIAI any longer. Too many billions of Euro capital are being squandered as we speak. While architects are contented to stay in some incestuous relationship with public spending on small school and housing projects. Architects need to venture forth into the real world, stand up and be counted with the Rebar Engineers of the National Spatial Strategy. We only need a fair referee for that to happen.
I feel that the current approach we have towards land assets in this country is un-sustainable over the longer term. What we are doing in Ireland is putting all of our eggs into one basket. On this occasion it was LC’s basket that gained and lost, (and BOSI's that gained in due course) but that is purely academic. We could equally refer to LC and BOSI in this case as Mr. X and Mr. Y. Depending on one Mr. X or Mr. Y to guarantee the sustainable management of an asset class of this scale is a recipe for disaster.
The same problem was very apparent in the stage management of the Dublin Metro project. What we need is a land taxation scheme in order to burn the hands of developers or banks who hold onto land that is too much or for too long. The stage management Bertie Ahern orchestrated with Metro North, reminds me of watching a hoist movie where all of the crooks meet at a pre-designated location after the job is done. All of the ‘loot’ is distributed in shares to the team members out of the back of a van. What happened when government unveiled the new route of the Metro project was very similar. I know that, because I was in the crowd and jostling for a position when the van doors would swing open.
But noticeably absent from the crowd on that day were architects. The real architectural and urban discussion which should have been the main focus didn't even take place. This is what I try to argue for in my idea for a new Customs House Quay knowledge campus. (A heck of a lot better idea that a sports campus and Bertie bowl) If I could take a best guess, I would say for the Metro project to pay for itself we will have to introduce land tax. Expecting Metro North to pay for itself through ticket fare sales alone (as we did in the LUAS project) is a waste of time. The minute the line is drawn on the map, the financial gain is captured by private land owners. Those are the people we have to tax.
I did make one very ballsy suggestion, even by my own standards while an employee at Danninger. I had introduced myself to David Wetzel when he gave a lecture in Dublin. David worked for the Mayor of London for years and had offered to speak to Danninger about his ideas to do with land taxation. I am surprised I wasn’t fired for that one. But I did believe and still do believe that companies such as Danninger need to embrace the future rather than try to hold it off for forever. In the end, the marketplace has a strange way of telling you what it wants. Whatever LC had to offer to the marketplace in 2007, it certainly wasn’t buying.
It seems that Carroll could not have chosen a worse time to move into the stock markets, as he sought to diversify away from property.
The journalist Neil Callanan at the Sunday Tribune has got his analysis back ways. (It is time for the reporters and everyone else to learn some basic economic theory I suggest) That is the trouble in Ireland. We became so far removed from the original goal of exporting a product to a global marketplace, that we find it difficult now to work out the basic logic of how things work. It wasn't that the market went bad when Liam Carroll moved into it. It was precisely because Liam Carroll and others like him, went into the market selling themselves as the product, that the market turned against them.
It was almost a sure bet that anything they touched would sink to the bottom. They thought they could fool the markets the same way as they tried to fool everyone else. I think we need to get real in this country as George Lee would say. We need to start viewing ourselves and every company in Ireland as a product. Then ask ourselves the question, if I was a potential buyer in the global context would I be buying the product? The answer the market gave in the case of LC was a categorical no! We are not buying your brand.
We need a robust management and rental model for property belonging to both private builders and the local authority. The fact that Corcoran Jennison were not awarded the tender for the public housing projects when McNamara chickened out is nothing short of a scandal. We have our local authority representatives to thank for that one. As we speak there are people in local authority flats trying to pull themselves up by the boot laces. While having to suffer the sale of all kinds of toxic waste outside of their own door step. The truth is, the same model should work for both private and public housing rental demand. The two should co-exist together in proper private company supervision. There is no need for Part V of the planning act. It was shoved in their so local authority planners would not feel guilty about themselves and could engage in a futile blame game with mean old nasty developers.
We need diffusion of the ideas developed during large capital investment programs engaged in by Dublin Airport Authority, ESB Networks, the Railway Procurement Agency and other power houses of construction excellence. We need to realise that the low carbon city is really a return to good urban principles that have been around in Europe and elsewhere since the middle ages. In that respect, we need architects sitting at the table when decisions are made about investment programs: be it the national spatial strategy, the Metro North or whatever else. To that end, we need architects to work outside of their own field. They are too addicted to their own marketing crap. We need them to understand cost benefit analysis, net present valuation and the language of finance and project management.
When we have all of the above elements in place then we can feel ambitious about a future for our country, but not until then. The land taxation idea has been tried by successive Labour governments in Britain since the end of the Second World War. Each time the conservative governments ousted Labour, they dismantled whatever land taxation scheme that Labour had put in place. It has been a series of trials and mishaps throughout the later half of the twentieth century. But as time moves on, it is becoming more apparent that land taxation in a modern twenty first century nation is the way to go. We need our best brains working on putting all of these elements together into a package that will prove a winner as far as Ireland is concerned.
Danninger had no real confidence it itself or any of the four main elements I mention above. Let that be a very stark lesson to other Irish companies out there. It could be you next. As Danninger matured and became larger the business and banking world wasn't very kind to it. LC should have done like Michael Dell did. Michael had the cop to know he wasn’t a million dollar or a billion dollar grade manager. Sure Michael knew what to do with a few thousand dollars here and there. He started his computer manufacturing empire at his dorm room in university. Michael never finished his studies at university because he had created his own employment. In order to retain that employment and enhance his opportunities for the future, Michael employed people who could run a large scale operation.
LC needed a manager capable of expanding the vision to embrace progress towards a sustainable model for construction. LC did not find this person. I get the feeling that is why LC was thrashed so mercilessly by the marketplace in '07 and '08. The marketplace wants to buy into a vision, and for good reason. It aught to be the same on the public sector side of the equation too. I hope that Danninger is taken over by a bank soon. If I was to wave a magic wand today, and take charge of company, the first thing I would do is hire back all of the long term employees that Danninger lost. Those guys are the bed rock of that company and it cannot or should not afford to be waste them.
We often complain about the improper compensation that executives companies receive. Danninger was like the opposite to that. A firm case could be made for the opposite. The reason we don't see court cases from ex. Danninger directors, is probably because they were simply men and women, not hired from the executive class. In future, all Danninger directors should receive some piece of the action. I would focus on the re-training of ex. Danninger employees around the points I have described above.
Danninger is like a mini construction industry itself within the larger construction industry. That is why it is so valuable to Ireland as a company. I would make that case and go to the marketplace for re-capitalization. Danninger is a company where progress and new innovative techniques are easy to introduce, in cooperation with the CIF, Homebond, SEI and whoever else. There are efficiencies to be won inside a walled garden. I would plead for some architect to display a forward thinking view, and work directly for a great company such as Danninger. During the Celtic Tiger it was impossible to hire architects to work at Danninger. Consultancies were offering huge packages to the few we had.
I would then give our old friend Sean Fitzpatrick a call and ask him to be involved as executive manager. He is the kind of guy I want sitting opposite BOSI the next time a deal is struck that could decide the future of a company. The right sort of re-organisation at Danninger would give Sean Fitzpatrick and LC a chance to really redeem them selves. To make up for the betrayal of many employees who worked tirelessly for them down through the years. (Indeed to repay a debt to the whole country) If they could find a way to lose billions, then I hope they can find a way to re-create that lost wealth also. Sean Fitzpatrick was never interested in banking anyhow. Since the earliest days he sat around the boardroom table with Desmond and Haughey his obsession was with building. We need many of those old players to re-group around a table now in 2009. I suggest that my idea for a new knowledge based 'smarter' economy at Custom House Quay, with help from the right team of architects could go along way.
Brian O’ Hanlon