In the case of larger transactions the corporate or investment divisions arranged finance in smaller chunks after lending a large sum of say €200m to say 5 other banks again locking in a margin. The problem on these were that many of the banks stopped syndicating the majority of these loans and at the wrong point in the cycle held onto too high a proportion. I'd not be worried about the prime commercial lending that was done as a lot of the assets will recover within 2-5 years, it is the domestic development land that will need greater scrutiny.
Sounds to me like you are describing a phenomenon like that, that happened at Long Term Capital management in the late 1990s. Where LTCM gave back money to investors, in order to increase their own personal proceeds from their successful formula for doing bond arbitrage. Of course, within months of giving back the capital to their investors they badly needed it to cover their positions. Very bad timing. In that case, the traders working at LTCM were possibly the best in the world. What was that phrase that Roger Lowenstein used? When Genius Failed.
The problem on the smaller transactions was that after concerns were raised that a lot of securities were not the quality they were originally assumed to be the entire system froze up. The Irish banks can't be blamed for this it was simply a systemic risk that not many people saw.
Thanks very much for taking the trouble to outline some simple explanations of the process to me. That is very valuable kind of insight to have. It reminds me of what Edward De Bono said about the crisis of climate change. Edward said that this is an important challenge, but the main challenge facing human kind at this point in time is a crisis in how we do our thinking. I had so many useful discussions at Zoe developments about the ideas of Edward De Bono. Zoe understood construction management so well, they were more advanced than an architectural consultant, when it came to thinking out a problem. That was the valuable part of Zoe developments, that could have served Ireland well as it moved into the 21st century. Old Friends on the Assembly Line
It was so tragic to see the idea squashed. I personally know every single tradesperson and installer on the whole Zoe building assembly line. I can put faces and names to each one of them. I know what they like to do at weekends and possibly what their kids names are. When I was at my drawing board (screen) I had those guys in my mind, and the work they would have to carry out to realize the designs I drew on my screen. I feel certain though, that the best architects out there in Ireland, needed to be included in the process. I was interested in working for Zoe developments in order to get to the bottom of that work flow logic. How our designers link up with what happens on the building site.
One example I mentioned was Paul Leech, the pioneer of sustainable architecture in this country. Myself and Paul exchanged emails and discussed how great it might be to integrate some of his ideas into the Zoe developments roll out construction process. It is a pity now, that with the banks working on the drawing board, using Liam Carroll as their intermediary, I will not get the chance any longer. The same I have no doubt will happen with NAMA. I don't think Ireland will produce it's own Toyota or Intel kind of company this century. Because we don't know how to integrate the people working down at the bottom. It was Liam Carroll and his directors who gave me this new wonderful vision for Ireland. It was an all inclusive, democratic and astonishingly beautiful vision. Even though I am pissed off with LC for squandering millions. That was merely stubborness, and over large personal ego and incompetence. I still cannot take his basic thesis away from him.
Did people see this coming?
Not many, people probably thought a lot of poor quality instruments were over-priced but few saw the stampede out of quality assets as well as deliquent debt. Unfortunately every bubble is built on a set of assumptions that involve people in senior position convincing themselves that this time it is somehow different. It never is the same emotions drive markets fear and greed; with fear exposing the greedy.
Very good description of the market there. I used to enjoy reading George Soros's description in the Open Society and his more recent books. My understanding is that George would not be content until he could discover where his own assumptions were wrong. In fact, I used to like reading George Soros and Edward De Bono at the same time. Because both individuals were discussing some of the same characteristics of how the human brain behaves in situations.
This is the sophistication that the few architects working for Liam Carroll at the moment are missing badly. It is like every kid nowadays who puts together a computer model of a project for a planning permission believes that the computer is going to do all of the thinking on their behalf. Advances in technology have now made it possible that Liam can model his schemes up front in 3-dimensions using software that cuts slices like a Cat-Scan technology through the model in order to produce drawings.
We used to fight against such over simplistic metaphors, as 3-D computer models of buildings, in the design department at Zoe developments as much as possible, in order to maintain the human brain at the centre of the process. Edward De Bono was one of the main arguments backing up our position. It wasn't that we were 'back ward' and could not understand the benefits of advanced design software.
Will securisation return?
Probably not anytime soon but when the quality of the debt on the banks balance sheets is fully assessed the quality of what would have been securitised will determine the rates at which the banks can raise finance from the markets.
I am probably biased in my opinion here, but I believe that it is the project management skills and process by which one develops the land assets, that characterises for me what is valuable or not. That is why I mentioned the progression of different owners of the land bank at Cherrywood. In the 1980s, British Land had a basic enough scheme (fine in terms of 1980s attitudes with regard to sustainable development and creation of social spaces etc) to cover Cherrywood 450 acres in a carpet of 2 storey housing. That land owner at Cherrywood had planning permission for such a scheme and could have easily completed the roll out of that project in a mere couple of years. The LUAS Cherrywood Aquaduct
We wouldn't even be in a situation now, where Dun Laoghaire Rathdown county council are able to talk about a sustainable master plan for Cherrywood site. We wouldn't even be in a situation where Cherrywood site can be designated as a Strategic development zone. We tend to forget that. While the land at Cherrywood was sitting idle in the possession of one builder or another, our local authorities became more sophisticated in their appreciation and in their planning visions for Dublin and Ireland as a whole.
This is what gets up the nose of builders in Ireland to be honest. The more they try and work with planning departments, local authorities and whoever else, the more the playing field underneath their feet keeps on moving. A carpet of two storey houses in Cherrywood would have been an easy thing for Liam Carroll to execute I can tell you. He did it down in Limerick city, he could easily have done it in Cherrywood and walked away with a handsome profit. Instead he pumped what investment he could into the LUAS cherrywood aquaduct and thereby set up the playing field for a really sustainable master plan to be rolled out in Cherrywood. Liam Carroll listens to his architects and respects their input to a certain degree.
But everyone including the planners seem to miss that point. Someone had to put their hand into their pocket in order to build the aquaduct at Cherrywood. All that the planners and the Railway procurement agency could envision was the usual kind of LUAS line running across at grade level like everywhere else. This is my whole point about having people who really know construction management invovled in the process. This is the lesson that was always drummed into me while working for Zoe developments. That is why we really do need a proper appreciation of construction, somehow sitting at the table at NAMA. Liam Carroll is a builder and does have that appreciation. But bankers, accountants, economists, architects or even planners do not have that appreciation of what is possible and feasible through construction ingenuity. Ten years ago, the 1998 joint planning conference
I could reference several examples in Dublin city centre itself, where Liam Carroll's involvement in the project resulted in a much better scheme being finally built. (Or Liam Carroll in partnership with architects at certain stages) It is not only about land assets. That is what British Land thought about Cherrywood in the 1980s when they drew up their masterplan of carpet housing and a mickey mouse little 'shopping centre' in the middle. But people in the planning department who aren't aware of construction sequence and vision are often impeeding the process. That is why builders lose all interest in dealing with local authority planners who cannot see the bigger vision. That I believe is the frustration that drove Liam Carroll and others to bet so heavily on the stock market.
Jame Pike, Van der Kamp, the RIAI, the Irish planning Institute and Peter Bacon were a part of this new sustainable planning vision in the 1990s. I can only presume that this journey they started decades ago to deliver a complete solution for Ireland is the reason they are still hanging around today. They want to see the plan brought to fruitition. You can obtain a copy of the report from the joint RIAI and Irish planning insitute 1998 conference from no. 8 Merrion square RIAI headquarters. It is a very interesting document to research ten years later on.
The 1998 conference was indeed a kind of dry run for what the Urban Forum is trying to do today. A collection made up of Engineer's Ireland, RIAI, Landscape Architects, Chartered Surveyors of Ireland and the Irish planning institute, along with a couple of other university departments and faculties, to try and come up with some advancement on the National Spatial Strategy. It is weird in a way how that activity undertaken by the Urban Forum, the first intelligent collaboration between the land professions, has happened in parallel with something such as NAMA. James Pike and other architectural consultants managed to sell a lot of their ideas to Liam Carroll and others in the nineties, Charlotte Quay being one of the early promises of success. This became part of the engine that drove Liam Carroll's business from then on. The 1998 vision, problems with implementation
However, my experience has been that the over-arching sustainable planning ideas incubated by Mr. Pike, Sean O'Laoire and the architectural consultants, were not grafted on properly to Liam Carroll's original formula of lean design and lean manufacture. This is one of the pitfalls I can see with NAMA. That too little on the construction management side of sustainable development will follow through into the final formula. And that too much high profile, front cover of a magazine sort of Euro-modernism style will be pushed through by James Pike and his crew. Remember they are architectural consultants with ambitions of becoming major players in the world design scene. I believe that their talents can be exported, their visions accomodated in the grand scheme of things. But their lack of sophistication in construction management also leaves Irish consultant architects exposed on a crucial front.
The circular Gasometer apartment block at Barrow St is a perfect example of what not to do, if you want to arrive at ease of construction in your design. I have no problem with the overall concept to put a circular building inside the steel circular frame. But the details of how the architect forced Danninger to implement the concept caused the company enormous difficulties at construction stage. I am concerned to be honest, that with NAMA that kind of logic of assembly and project management will get thrown out of the equation once again. But this time, on a monumental scale. The architects will be let loose without proper skills and level of construction awareness to saddle us with terrible built products. Even if the concepts are right and good in the overall sense.
Peter Bacon is a bit too close to the likes of James Pike etc for my liking. I would like to sit on the board of NAMA not because that would make me feel high and mighty. But rather, to represent something of Liam Carroll's logic of construction management point of view. The things that Liam was really good at and succeeded in developing in his life time. Not that I don't think Pike's ideas are brilliant, but that I think sustainabililty needs to happen at both levels simultaneously. There is no a la carte menu for achieving sustainability. The architectural consultant for all their best intentions, will mostly choose the aspects of sustainable development that suit their purpose, of finding more clients and getting more jobs. Someone has to be around who is sophisticated enough to keep that in check.
I know some of the people at MCO projects run by Laura Magahy and partners. I believe that the same criticism is valid in that case also. I believe that MCO projects can offer solutions in achieving sustainable development to the client, be it the government or whoever else. But it is going to be difficult to balance the desires of a consultant designer with the bigger picture. At Zoe developments, acting on behalf of that client I learned skills that might be of some value. The members of the 1998 RIAI/IPI conference have this tendency to believe that they made their clients into millionaires. I buy into that argument a long ways. They did contribute many of the elements and indeed many of the ideas. But the biggest ideas of all, those of lean construction and design, design build, speculative development under cutting the market and intense focus on land acquisition were all patented in the 1980s by Liam Carroll. The architects and the planners merely went along for the ride.
Zoe developments believed up until the last they and other property developers created the economic boom that was the Celtic Tiger. They are a very brazen sort of bunch. As far as Zoe developments are concerned Fianna Fail didn't have a clue what they were doing. They only went along for the ride too. I would still have more faith in Fianna Fail to get value for money out of a billion Euro, than I would in Liam Carroll. Many of Liam's sub-contractors I have spoken to or corresponded with in recent weeks - the famous breakfast roll men as David McWilliams would call them - believe that they are responsible for a lot of spin off jobs in catering and the service industry. On the other hand, the land professionals believe that they handed the developer the documents and the formula to make his or her millions. It is quite a messy debate therefore. But one I would enjoy moderating myself. We will have to arrive at some kind of closure on this, if we intend to move forward in this country. Ireland becoming the new Japan
If we got this collaboration between designer and contractor right, it would be a win-win opportunity for both sides. The trouble is that one side of the debate doesn't really interface with the other very well at present. They are different cultures and they don't mix well. It goes back to how people are trained in the schools of planning, design and construction. It goes back to the lessons that Edward De Bono is trying to teach the world. To be aware of the human brain and its limitations. One side of the construction debate has got pre-conceptions about the other. That is really my interest in being invovled in NAMA. To try and get both sides of the approach to sustainable development to be exercised in tandem, rather than one being exclusive from the other. As is currently the situation. That is why I had to go into the description above about architects and parasites.
I would like to stick around Ireland, if only to institute a sucessful and intelligent blending of both traditions: excellence in sustainable planning and architectural design . . . with a compliment in terms of excellence in construction management and program management. This intelligent kind of approach towards collaboration is what will become the corner stone for future economic success in Ireland. Like what happened in Japan from the 1950's through to the 1980's. Because, when we are done with Cherrywood, the next step is Harristown, Dublin Airport city and then to finish out Adamstown and Clonburris. That is why I would advocate a phased approach. Taking one problem at a time and working out an agreement that will suit all of the land professions and the financial people into the bargain. That is not Liam Carroll's thesis now unfortunately. That is my own thesis.
Brian O' Hanlon