What I have written down below is of great relevance to Irish Architects, or any architects who are seeking to find commission for their services in Ireland over the coming two decades at least. Basically, when you read Pat McArdle's article in today's Irish Times, the truth of it all hits you between the eyes. Those 'angel investors' who kept the boat afloat for Irish architects over the past decade are essentially wiped out. Even if they get the best possible deal on the 16th of September. Architecture has to look for a new business model, or clear the hell out of dodge. The later being the most likely solution. Angel Investors
I remember a story told about Bob Noyce, one of the founders of Intel who later became an 'Angel Investor' to many Silicon Valley high tech start up companies. When Bob Noyce was preparing his legal will not long before he died, he told his accountant there was something he should look into.
Noyce went upstairs to his bedroom wardrobe and fetched an old shoe box which had been there for years. He handed the shoe box to his accountant. The accountant almost dropped dead when he discovered what was contained inside. It was millions and millions worth of 'first issue' stock market tokens for young Silicon Valley companies.
It appeared that Bob Noyce had been pumping money into small companies for decades. But he had no idea what was in the shoe box and whether it had any worth. There were some interesting finds in the shoe box, such as Advanced Micro Devices (a competitor to Intel) first round investment papers. But the bulk of what was in the shoe box was of no value at all, when they went through it.
A lot of the companies had not lasted more than a few months and died. They were forgotten bits of history in Silicon Valley. Bob Noyce was philosophical about the whole thing. The way he looked at it was, he was giving back to the garden from which he had derived so much of his own wealth and achievements. That is what 'Angel investment' is all about.
Pat McArdle, an economist until recently at Ulster Bank wrote a good article in today's Irish Times newspaper.
The difference between the initial value of the projects funded, €115 billion, and the current market value of €50 billion is split 45:40:15 with the borrowers losing €30 billion equity, the banks taking a hit for €25 billion and the Government putting up €10 billion.
As soon as I read McArdle's article, I knew he had put time an effort into structuring the writing and the overall points very carefully. He seems to have covered quite a lot of ground in his article. The paragraph above did strike me as significant. It is the first time I have seen NAMA analysed in that manner.
I like to visualise something called a 'NAMA tree'. On the 16th September, we will all find our presents underneath the NAMA tree. I can visualize it now. First the taxpayer will sneak down stairs and pick up the smallest of the presents. The taxpayer will give it a shake, listen to it closely against their ear and then turn it upside down and around. Satisfied that they cannot 'guess' anymore, they will go about their business satisfied and proceed to unwrap it.
Next will come the the banking institutions. They will choose the next largest present and proceed to do the same as the taxpayer with their present. They too will go away satisfied and unwrap their present.
Lastly will come the 'borrowers'. They will be the least enthuasiastic about the whole affair. They will take one look at the big huge box lying underneath the tree and say: That is much too big, it couldn't be mine and walk away in denial.
The truth is, the Irish property developers travelled around Ireland in their Mercedes four wheel drives and helicopters for the past ten years. The story is told in Frank McDonald's excellent book 'The Builders'. They weren't even property developers of any note worthy skills or talent. They thought they were 'Angel Investors' like Bob Noyce and NAMA land was their Silicon Valley.
The truth is, many of the developers operated very little sole traders, and very bad ones at that. Yet the banks offered them million after million to do their 'Angel investing' with. On the 16th of September, the taxpayer has got the department of finance and heaven knows how many other departments to interpret the figure of €10 billion. The banks are also capable of understanding
The only people who have no ability whatsoever to understand their figure of €30 billion is the Irish property developer. They were the only ones who really bought into the 'spirit of Christmas' that was the Celtic Tiger madness. On the 16th of September, the builders will begin their process of collective denial of reality. Perhaps they will never come to terms with their own collective actions. To many of them, the Celtic Tiger was only a shoe box full of monopoly money. It was never real at all.
Brian O' Hanlon