National Asset Management Agency

National Asset Management Agency

Postby garethace » Sun Aug 02, 2009 1:39 pm

One of the few newspaper articles I enjoyed reading in the past week was Brian Lucey's article in Saturday's Times.

Demographically, we are at or near the peak of the population bulge, with probable lower demand for housing from household formation. The final three elements relate to planning and zoning, which are political considerations. But, it is to be hoped, we are not to return to the ultra-laissez-faire developer-led planning of the past.


http://www.irishtimes.com/newspaper/opinion/2009/0801/1224251852071.html

But for more entertainment value than all of the rest, I would recommend Martina Devlin in Saturday's Irish independent.

Parts of the National Development Plan appear to have been put on ice because we cannot afford it. But if we are borrowing €50bn for the Nama experiment, could we not scrounge a little more and get people back to work?

It might be cheaper in the long run. Vision usually is.


http://www.independent.ie/opinion/analysis/we-need-a-generous-dose-of-optimism-to-recover-from-new-nama-flu-1848778.html

People of a pragmatic frame of mind, who appreciate common sense down to earth thinking on subjects should read what Shane Ross has to say in the Sunday Indo.

Nama is the new fantasy property game. Nearly all the usual players are rolling up their sleeves and joining in.


He seemed to echo the word I have heard on the streets myself, over the last couple of days, in these sentences.

No one joined ACCBank in its move against Carroll. Under the rules of fantasy property Irish banks do not ask developers for their money back. All the Irish banks sat on their hands and let ACCBank pursue the unique path of recovering its money.


Shane Ross also comments quite accurately:

Yet the men on the magic mushrooms are still pretending that a bankrupt bank should be lending millions to an insolvent builder for a headquarters they will never occupy.


http://www.independent.ie/business/irish/high-as-kites-on-nama-trip-1849287.html

Brian O' Hanlon

RTE Audio Visual Link:

http://www.rte.ie/news/2009/0730/banks_av.html
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Re: National Asset Management Agency

Postby missarchi » Mon Aug 03, 2009 4:37 am

Section 58 is a sloppy, confused and conditional basis on which to mortgage the future prospects of the country. If this is the best we can get from the Department of Finance after nine months of hard work, God help us.

http://www.irishtimes.com/newspaper/opinion/2009/0801/1224251852071.html

30 years... who is going to keep tabs on it for 30 years... have they published there quarterly balance sheets and so on? This is a great time to buy some BOI@college green
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Re: National Asset Management Agency

Postby garethace » Mon Aug 03, 2009 9:20 am

-

Pile of Scrap Metal


From Suzanne Lynch's piece in Friday's Irish Times.

http://www.irishtimes.com/newspaper/ireland/2009/0731/1224251764490.html

The NTMA, in consultation with the agency, will draw up guidelines on misconduct and procedures for investigation and suspension of any staff member. The legislation also permits the agency to employ, on a contract basis, advisers or 'service providers' which it considers to be necessary.


I am not going to try to shoot the messenger, as Suzanne was merely drawing my attention to a piece of the NAMA legislation, which I unsurprisingly haven't had the time or means, to sit down and read through. I wonder how many more interested parties are in the very same boat. When I read the above paragraph, already I began to get the smell of failure, inefficiency and incompetency off of NAMA. That is why I tried to articulate my ideas properly in this blog entry this weekend:



As a kind of 'last plea' for sanity regarding how to structure the NAMA organisation. I suggest that if the NAMA organisation is structured as described in the above quote from Suzanne Lynch's article, then the NAMA vehicle will not even leave the starting line. It will simply sit there like a bloated piece of scrap metal and we will be lucky to even get a few musical tunes, of coughing and spluttering out of it.

I have experience in construction and land development projects over a decade and more. I have been in positions where these 'contracts' became part of the arrangement. Once you begin to create contracts between all of the different disciplines and experts involved, everyone goes on 'guarded neutral' to borrow the phrase from ACC bank. Everyone positions themselves in a 'negative' kind of world, where all they have access to are negative actions, such as the pressing of the release bombs button. It is the usual scene in the construction industry, and it is the reason that buildings cost so much and take so long to be realized at all.


Joint Venture Partners


The NTMA has already received expressed interest from international players, to set up joint ventures. Why the hell wouldn't it? It is larger than GE Real Estate Capital, and anyhow we wouldn't know where to find our own expertise within this tiny island of Ireland. However, in reference to my blog post about the 'Ford Cobra' I do very much see an important role for foreign partners to play as joint venture partners, if they have interest and experience in running facilities of a certain kind elsewhere. In order words, they can become the 'client' component in the 'race track vehicle' I suggested in my blog entry. Or in other words, it is like in Formula One racing, we are the underdog team, the Eddie Jordan if you will, and we need to hire the services of a world class driver who will take the vehicle around the laps.

Even though the Eddie Jordan vehicle might end up on the back of a lorry after each race as a steaming pile of junk metal, the driver does lend the team a credibility and international appeal. The right choice of driver can be a very important move indeed. However, I believe it is crucial for Ireland that it provides the engine, the chassis, the aero-dynamics (yes, we will require consultants on that point in particular) and the pit crew. It is crucial that we try to assemble as much as we can from providers who are Irish. That we learn how to do this for ourselves, from within our own resources and talent. That is the kind of message that Eddie Jordan was sending to the world about Ireland. We can build race cars and they can compete.

There might be existing government departments like that of Agriculture, which is used to handling and distributing money on a scale that is similar to NAMA. They should provide the chassis, and by all means acquire consultants in whatever area of 'chassis design' they need focussed help on.


Where are the hard hats?


I feel very compelled to say something about this sentence:

Board members will be required to have “expertise and experience at a senior level” in one or more of these specific areas: finance and economics; law, valuation and risk management.


What is contained in this sentence is very interesting. It does not mention anything about anyone with any experience or notion of how construction works. Because we are still trying to solve our problems by thinking inside of an old and redundant paradigm. Presumably, the crucial construction point of view will be provided by the same clowns as we saw in the Celtic Tiger, the Irish property developers who are an extinct species today. What are we going to do? Resurrect them? B**** to that idea I say.

What is described in the above sentence from Suzanne Lynch's article is the senior board of any existing Irish bank. The same arranagement that totally screwed up the country in the first place. We need a new vehicle, we need a new approach. I wrote about this problem in last Friday's blog entry:



What existed between Irish banks and companies such as Zoe developments, was an umbilical chord from the bank to the company. That chord was never severed once the company was able to walk for itself. It continued to exist, long past the point when the relationship had become incestuous. It is necessary to sever umbilical cord, in order for a new stage of the relationship between the parent and the child to take place. A relationship that enhances both the spirit of parent and child, in short, a relationship that flows in both directions.


Douglas McGregor and Amartya Sen


What we need in Ireland is an entirely new paradigm within the banking sector. We are not simply trying to save what is left of a crumbling old Irish banking system. We are trying to invent a new sustainable paradigm around which Irish banking can grow into something useful for society as a whole. The exact same way as we invested our money into the third level education of our children in Ireland from the 1980s onwards. The banks have to go to 'further education' if they are to make Ireland proud again. That is why I referred to Douglas McGregor in this blog entry:



We need our bankers to drop the pretence of being removed from the business in which they are dealing. We need the flow of 'nourishment' contained in relationship between parent and child to flow both ways. We need bankers (NAMA is effectively going to operate as a bank, regarding bad property debts) to learn to collect information about construction projects and we need those running our construction projects, to compile that information to feed back to the banking institution, NAMA in this case.

We have an opportunity in NAMA to do more than simply resolving a terrible situation. We have an opportunity to create a new robust way of doing business for Ireland in terms of executing projects and providing finance which isn't managed from an arm's length distance. The arm's length method can produce very dysfunctional offspring as we have witnessed. Projects and finance have to form a meaningful relationship with each other.

In the blog entry I wrote about Amartya Sen's ideas, I described a crucial need in Ireland for economic, social and political needs of the people to come back into balance.


Already we are witnessing the emergence of wonderful ideas from the Left wing parties of how NAMA will provide social benefit to the people of Ireland. In the same way as the banks are receiving benefit from the situation, so should the people them selves who are footing the bill. We need to view NAMA as an opportunity to re-build and develop Ireland as a nation in more ways than simply economic regeneration.


Brian O' Hanlon
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Re: National Asset Management Agency

Postby garethace » Mon Aug 03, 2009 10:02 am

Not a bad analysis at all from the Sunday Indo, written by Alan Ruddock.

Lenihan, though, does not just hold the economy in his hands. His handling of the banks will have a profound and lasting effect on the public's faith in government and, ultimately, in democracy itself.


http://www.independent.ie/national-news/lenihan-must-save-banking-not-bankers-1849338.html

I am beginning to get my head around the Fine Gael argument gradually. A little bit of information comes through in today's Irish Times by John McManus, Simon Carswell and Harry McGee.

“Nama will create a false market by buying assets well above their market value in a very uncertain market and probably at a cost to the taxpayer,” he said.


http://www.irishtimes.com/newspaper/finance/2009/0803/1224251928895.html

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Re: National Asset Management Agency

Postby missarchi » Mon Aug 03, 2009 11:09 am

The only way this will be solved is a...

googlelandzonevaluemap formula which is related to social welfare and minimum wage after tax needs 5 years ect. So you can look at prices live change the social welfare automatically the price of land changes.

There is price zoning/actual zoning/capacity/population zone all in one and its live for the whole of Ireland.

over to you google...
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Re: National Asset Management Agency

Postby garethace » Mon Aug 03, 2009 8:55 pm

All of you thought that Bank Holiday Monday newspapers were supposed to be dull and boring didn't you?

Think again.

Joe Brennan contributes a very interesting break down of the numbers here at the Indo:

http://www.independent.ie/national-news/tough-questions-for-aib-over-loans-to-developers-1849640.html

AIB's outgoing chief executive Eugene Sheehy said earlier this year that "four to five" of the bank's developer clients each owe more than €500m, while 30-40 customers accounted for more than half its development loan book. The concentration of AIB's book is way less than that of nationalised Anglo Irish Bank, where the top 15 clients had each borrowed in excess of €500m.


It would appear from that quote that AIB exercised at least some cop on, in constructing their loan book. Therefore their problems will be much easier to sort out for NAMA. But Anglo's problems are a whole other ball game. Probably why it fell like a stone in the markets and created a huge vacuum that everyone else got sucked into. It still does not remove much heat from AIB or BOI, but at least it relieves some. To be fair about it though, while Anglo's loan book was extremely vulnerable, there is no point in claiming that the other banks were a shining example of how to go about business.

I really couldn't agree more with Maeve Dineen's article, also in today's Indo:

The verbal characteristics of a High Court judge are usually not the most exciting. Their vocabulary tends to be somewhat understated, abstract, and fairly colourless and, if he's really good, totally obscure.


http://www.independent.ie/business/irish/only-one-thing-to-do-if-liam-carroll-loses-tomorrow-panic-1849600.html

I don't understand much about the courts system myself, but I think Maeve's piece really put the whole Zoe scandal into perspective for the average reader.

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Re: National Asset Management Agency

Postby garethace » Tue Aug 04, 2009 8:05 am

Brendan Keenan of the Indo offered yet another useful slant to this whole business in last Friday's paper:

It would not, however, be an apocalypse. And there is the point that, the more the creation of NAMA had helped economic growth in the meantime, the lower the real and actual burden of any final loss would be. Economies are not arithmetic. Economic growth over the next 10 years will have much more effect on how the bank rescue turns out than any amount of legal details or fretting over the value of Dublin docklands. In turn, that growth will depend more on global conditions than the actions of NAMA or the lending capacity of Irish banks.


http://www.independent.ie/opinion/columnists/brendan-keenan/we-still-need-answer-to-the-multibillion-euro-question-1847673.html

Elaine Byrne gives her take on the whole process as it has unfolding to date, with Brian Lenihan coming across as being 'scary' sometimes to the general public out there. Her piece deals a little with this issue of 'commercial sensitivity' and tries to contrast that with another issue, the democratic right of the taxpayer.

The public are not enthused with confidence as far as the relationship between Fianna Fáil and property developers is concerned. A perception of improper influence exists in the public mind for good reason.


http://www.irishtimes.com/newspaper/opinion/2009/0804/1224251960430.html

The Standards in Public Office Commission donations records show that developers Seán Dunne, Ray Grehan, Seán Mulryan, Paddy Kelly, Gerry Gannon, Johnny Ronan, Séamus Ross and many others donated to Fianna Fáil during the property-fuelled boom years when Fianna Fáil was in government.

Indeed, the developer Bernard McNamara stood for Fianna Fáil at the 1981 general election but failed to win a seat for the party in Clare.


They don't term Fianna Fail the 'builders party' for nothing it appears. I particularly agreed with this little block of text that Elaine wrote:

The danger right now is that moral questions are regarded as impractical because we are fighting for our economic independence; that the speed with which this war is being fought leaves little time for the luxury of ethical niceties such as responsibility.


It goes back to the failure in the process that Amartya Sen witnessed at so many United Nations and World Forum discussions about 'the future for the third world'. Where social and political needs were brushed away to one side, in order to tackle what is perceived as the 'meat' of the situation, the economic challenges.

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Re: National Asset Management Agency

Postby garethace » Wed Aug 05, 2009 8:11 am

IAVI members moving in for a piece of the kill.

Ms Myler added that valuers had not inflated the property bubble: “During that time, valuers reported the facts as they saw them. They interpreted the market, they did not create it.”


http://www.irishtimes.com/newspaper/finance/2009/0805/1224252010094.html

I guess we created the mess and will have to sort it out too. I was glad to read in the same article that foreign opinions will also be sought in terms of assessing of values. That will be a great help I am sure.

A good little piece from Charlie Weston today:

http://www.independent.ie/opinion/columnists/charlie-weston/recession-is-taking-its-toll-on-younger-generation-1850028.html

That is really what the matter boils down to I guess.

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Re: National Asset Management Agency

Postby garethace » Wed Aug 05, 2009 12:44 pm

One in four of AIB's loans are now either impaired or at risk compared to around one in ten at the end of last year as the country’s spectacular property crash lays bare the lender's exposure to struggling developers.


http://www.irishtimes.com/newspaper/breaking/2009/0805/breaking13.htm

Breaking developments from the Irish Times today from AIB's first six months 2009 results publishing.

Dealers said investors were betting on the "bad bank" giving AIB the opportunity to put its past behind it.


As Brian Lucey, a professor in Finance at Trinity College, in his interview on Morning Ireland yesterday pointed out, the Irish government might find themselves in a 'sticky situation' where they are seen to be presiding over a massive transfer to economic wealth from the public coffers - the equivalent of one years income from taxation - to the private investors and bond holders of the Irish banking sytem.

http://www.rte.ie/news/2009/0804/carrolll_av.html

Brian's Morning Ireland interview is audible at that link. Opinions expressed on Irish radio this morning suggest, that in the United States the private part of the economy has paid back in full the investment made by the US government. It is nice to believe that finance is out there, available to us from the private investors to re-float the vessel. But in the context of NAMA and in the context of Ireland, we could be witnessing a very bad fall out from this. If it is perceived that the Irish government are transferring public wealth into the pockets of private investors. I mean, what impact will that have on perceptions around the world? Who knows?

Elaine Byrne has uncovered some of the aspects of this problem in his Irish Times contributions recently. In this article she spoke about Irish man Denis O'Brien, who was more clever than Liam Carroll perhaps and went forth in search of new markets abroad for his investments after the sale of Digifone.

http://www.irishtimes.com/newspaper/opinion/2009/0728/1224251492393.html

At least Denis O'Brien's wealth is still intact, and that should count for at least something, in the context of the Moriarty tribunal. The same cannot be said of Liam Carroll's fortune, most of which was lost as the single largest player on the Irish stock market. More recently, Elaine Byrne in the Irish Times highlighted the concerns in relation to the procedures at NAMA.

http://www.irishtimes.com/newspaper/opinion/2009/0804/1224251960430.html

Welcome to the world of commercial sensitivity. In this world, the right to know is the privilege of the Department of Finance and not [a] democratic right of the taxpayer.



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Re: National Asset Management Agency

Postby gunter » Wed Aug 05, 2009 3:34 pm

If, as seems probable, NAMA ends up in possession of a huge patchwork of development property, some of it admittedly in the back of beyond, but much of it in prime urban locations, will there be anyone exercising design and planning oversight of this enormous unexpected opportunity?

If NAMA is to be an agengy, managing assets in the national interest, surely that must involve a comprehensive evaluation of this unique (once in a lifetime) resource in terms of what it could contribute to genuine urban regeneration and not just the bankrupt developer's version of urban regeneration.

Any such evaluation would surely decide to abandon some existing planning permissions and seek to develop properties in new ways incorporating much higher levels of civic contribution.

Or will it all be just about the money?
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Re: National Asset Management Agency

Postby garethace » Wed Aug 05, 2009 4:09 pm

If, as seems probable, NAMA ends up in possession of a huge patchwork of development property, some of it admittedly in the back of beyond, but much of it in prime urban locations, will there be anyone exercising design and planning oversight of this enormous unexpected opportunity?


Gunter,

This is where all input and assistance from people such as yourself I hope will be most appreciated and sought after, either as external advisers or as part of some 'vehicle' by which we can integrate a lot of different land and building professions together. Working of course under the overall framework of the risk managers, valuers, financial planners, accountants and so on. They will take the completed product off the hands of the professional teams and get the best possible price, or model to float it into the private section of the economy. I like to think of it like one huge Boeing airplane factory. At least, something of that gargantuan scale.

My own interest would basically be in recruitment of such teams for whatever length of time required, and the building of teams with which to tackle this vast experiment of the National Asset Management Agency. Many thousands of parts, moving or otherwise will have to merge together into an overall end product. We are going to have to step up to the mark really in terms of project management and organisational skills. I think this is Ireland's version of a space program and nothing short of it. No one has tried to launch something this huge before. (This is not like a video game kid) I do hope that NAMA sees the 'space program' analogy in the same way as I do.

It will be somewhere between 'Armageddon', 'The Right Stuff' and 'Space Cowboys' as I see it. Youth and age, working in a healthy and productive relationship together.

http://www.imdb.com/title/tt0120591/

http://www.imdb.com/title/tt0086197/

http://www.imdb.com/title/tt0186566/

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Re: National Asset Management Agency

Postby subtraction » Wed Aug 05, 2009 9:38 pm

I'm curious as to how NAMA operates once the asset transfer takes place. Based on the little I know, I'm becoming disheartened. I really need to take a look at the legislation. But in the meantime, here’s how I think it works:

+

Lets say I'm a developer. A few years ago I borrowed €10m from AIB to buy a site, and I intended to build an office block. Construction costs, fees, etc. were €5m, and I was going to make €20m over seventeen years in rental. All fine so far, and I've made a €5m profit. But now, things have gone pear shaped. I'm left with a €10m site, and no way of borrowing the €5m I need to complete the scheme. Without a revenue stream, I can't even begin to pay back the original loan.

I manage to cling on for a year. I restructure my debts, and the €10m loan gets taken over by NAMA. They give AIB €5m in bonds in exchange for the loan. AIB take that €5m, and give me a call. Guess what? They're willing to loan me the €5m I need to complete the scheme. And maybe it works out. Maybe things are on the up generally, I can rent out the office block, and I make a decent return. In fact, I’m making more than I thought I would because construction costs have fallen in the meantime and I only need to borrow €3m. AIB jacked up the interest rates it’s charging to the ordinary punter to make up the €5m hit it took from NAMA. Everyone’s smiling.

+

So... my question is this - What happens after the bit everyone is talking about - after the price is fixed? Is NAMA is basically just a big holding tank just to get debt out of the banks?

If that’s the case, there will be no role for anybody within NAMA except land assessors. There are no assets, and they will not be managed. A price will be set, and then NAMA will sit on the land until the developer is forced to move on it, because he's still liable for the original loan.

If things don’t turn around quickly enough we're twice as screwed. Because this time, there will be no NAMA to transfer assets into. It'll already be full. The banks will just do the same lending they did before because the hit they took first time around from NAMA wasn't big enough, and in the end, their only function is to make a tidy return for their shareholders.

There's an estimated €90bn of impaired loans floating around. If the average value of an asset transferred to NAMA is €10m, there will be around 9000 separate pieces of land in various states of development to be managed. Who is going to manage this? 50 staff members? There will be no opportunity for a new paradigm, no development will take place within the compass of NAMA, and there is no future.
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Re: National Asset Management Agency

Postby gunter » Wed Aug 05, 2009 10:06 pm

subtraction wrote:I'm curious as to how NAMA operates . . .

Lets say I'm a developer. A few years ago I borrowed €10m from AIB to buy a site, and I intended to build an office block. Construction costs, fees, etc. were €5m, and I was going to make €20m over seventeen years in rental. . . .

I manage to cling on for a year. I restructure my debts, and the €10m loan gets taken over by NAMA. They give AIB €5m in bonds in exchange for the loan. AIB take that €5m, and give me a call. Guess what? They're willing to loan me the €5m I need to complete the scheme.


I don't think that'll be how it'll work subtraction.

''NAMA take over the loan, they give AIB €5m in bonds in exchange for the property''!

You're out of the picture.

AIB will be giving you a call alright, but it won't be to give you €5m ;)
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Re: National Asset Management Agency

Postby garethace » Wed Aug 05, 2009 10:22 pm

Lets say I'm a developer. A few years ago I borrowed €10m from AIB to buy a site, and I intended to build an office block. Construction costs, fees, etc. were €5m, and I was going to make €20m over seventeen years in rental. All fine so far, and I've made a €5m profit. But now, things have gone pear shaped. I'm left with a €10m site, and no way of borrowing the €5m I need to complete the scheme. Without a revenue stream, I can't even begin to pay back the original loan.


Thankyou for that explanation. I am familiar with the 'shipping dock' problem myself from my understanding of computer networks. Basically, where the dock side becomes full to capacity of containers in one harbour, but the entire contents of a shipping order have not been off loaded yet to the said dock. It results in a log jamb of the entire network system. Basically nothing can move off or on the dock, because there is no room to shift things about.

Your description of a typical Irish toxic debt, is quite similar to that from a system dynamics analysis point of view.

(Sorry for trying to sound so sophisticated, I am not really you know)

I manage to cling on for a year. I restructure my debts,


Lets look at consumer debt, something we are all familiar with nowadays. It can consist of many different problems: car loans, home mortgage repayments, credit cards, overdraft facilities, students loans etc, etc. Of course, the ads on the TV tell you, you can 're-organise' all of that into one easy payment per week, that is easy to manage. Effectively what the loan organisation is doing, is handling your administration for you, taking it off your hands. I call it 'managing your mess for less'. (That was always Sun Microsystem's quip about IBM)

In reality, NAMA is trying to re-organise all of those private borrowing, which were very inefficient and expensive in terms of interest etc and exposure. NAMA is trying to do on a gigantic scale what lenders do for consumer debt on a smaller scale. I imagine, that NAMA will focus on and tackle the kind of 'shipping dock log jamb' problem that you described so well above. NAMA is probably necessary to do that, to shake up the system again and clear the docks so to speak.

In fact, I’m making more than I thought I would because construction costs have fallen in the meantime and I only need to borrow €3m.


Some Irish developers were extremely lucky this way during the Celtic Tiger. Their inefficiency at securing planning permissions for sites, effectively meant that they held off long enough to make the windfall profits when the housing demand really spun out of control. So sometimes being a messer can be very profitable!

So... my question is this - What happens after the bit everyone is talking about - after the price is fixed? Is NAMA is basically just a big holding tank just to get debt out of the banks?

If that’s the case, there will be no role for anybody within NAMA except land assessors. There are no assets, and they will not be managed. A price will be set, and then NAMA will sit on the land until the developer is forced to move on it, because he's still liable for the original loan.


I recommend a reading of Bull, Balchin and Kieve's book on urban land economics. Available in good book stores. It is an old classic, but it does mention the problems that Great Britain had in terms of 'fixing' the price of land in the mid to later stages of the twentieth century. Successive Labour governments in Britain tried to do it, and most of them failed. There were a lot of interesting things that went wrong. I think in the end, the local authorities who had the authority to buy land at that fixed price, continually decided not to exercise their powers. Afraid that it might give negative signals to the private portion of the economy, not to get involved in that part of Britain as a developer etc.

An architect the other day mentioned to me a possible problem with NAMA. It might well prevent any private development in Ireland for a long time. Because NAMA is such a huge player in it all, there would be no knowing when NAMA would release a 'flood' of property onto the market, which would affect prices and plans of private developers etc. I could see the man's point to be honest. Who knows what could be waiting behind the hulking great dam walls that would be NAMA. That is why transparency and fore warning should be at the heart of NAMA and how it goes about things.

If things don’t turn around quickly enough we're twice as screwed. Because this time, there will be no NAMA to transfer assets into. It'll already be full. The banks will just do the same lending they did before because the hit they took first time around from NAMA wasn't big enough, and in the end, their only function is to make a tidy return for their shareholders.


That scares the living crap out of me too.

My conclusion I left the interviewer with on radio was basically, that no matter how you played the game in Ireland in property, no matter how well you played it, you were still bound to lose. It seems to me like playing against the house. Only in movies like Ocean's Thirteen does the punter get away with the money bags.

I think with Liam Carroll, when he had waded in for a cool billion, he was simply coerced by the banks to wade in even further. He was already compromised by that stage and losing a bit more wasn't going to improve or disimprove his reputation. So in total he ends up owing €2.3 billion. The radio interviewer pressed me on the point yesterday on radio and to be honest I wasn't prepared for that large a question. I don't know, if I ever will be.

If the above is the case of the Liam Carroll debacle, then the whole idea of NAMA stinks to high heavens. Worse than that, it provides no future lesson for which the Irish banks should live by. NAMA is by no means a done deal. The Irish people still have time to raise their point of view. I would fully support them in whatever direction they choose. But choose something now and stick to it.

You will see an August 5th entry at my blog entitled 'Renault Five'. Basically, there is no transparency whatsoever, in the €2.3 billion worth of dealings between Carroll and Irish banking institutions. If the Irish taxpayer looks set to take possession of that debt sum, then I believe the least it has earned the right to, is a full and proper account of exactly what happened. Otherwise, all of this time wasting by the Supreme Court about this rescue plan, or that rescue plan is simply a smoke screen in order to distract time and attention away from asking the real questions, the Irish tax payers has a right to ask now. What exactly did go on?

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Re: National Asset Management Agency

Postby Paul Clerkin » Thu Aug 06, 2009 3:14 pm

Impaired Assets Can be Catalyst for Economic and Urban Development Revival
http://www.irisheconomy.ie/wp-content/uploads/NAMA%20and%20Better%20Planning.pdf
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Re: National Asset Management Agency

Postby PVC King » Thu Aug 06, 2009 3:32 pm

Very good article putting across a very humanist slant on a business class that traditionally has focused on returns to developers/investors.

NAMA will by the end of the year be the World's biggest Property company by some way albeit as bond holder as opposed to asset manager per se. The clear mandate of NAMA will be financial and it will be to manage non-performing loans and making calls on whether specific assets are sold and debt paid down.

I do however agree with the authors that as this is taxpayer funded it should look at how society at large could benefit from altering land use in specific holdings to move away from the usual mix of industrial, shopping centre, housing estate to much more bespoke projects like the digital hub that was done.

When you look at a city like Boston you see how campus incubation units play a key role in start up companies some of which have grown to become significant regional employers. There is a lot of development land in this portfolio which will not be developed as standard housing for a very long time given the contraction in housing output. Building an infrastructure to support campus start ups affiliated to the universities and ITs and a higher quality of public open space in new developments would be a very good start.

Sitting on a loan book of that scale and not activiely manging the portfolio was you would imagine never the intention; the question is how wide will their mandate be and how much financial muscle will the body be given to create value to neutralise some of the poor loans taken on.
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Re: National Asset Management Agency

Postby gunter » Thu Aug 06, 2009 5:51 pm

PVC King wrote:Very good article . . .

NAMA will by the end of the year be the World's biggest Property company by some way albeit as bond holder as opposed to asset manager per se. . . .

Sitting on a loan book of that scale and not activiely manging the portfolio was you would imagine never the intention; the question is how wide will their mandate be and how much financial muscle will the body be given to create value to neutralise some of the poor loans taken on.


Maybe one of the key points to look out for will be whether NAMA will have the authority to account for the management of it's assets as a whole, or whether it will be bound to maximise the return on a site by site basis. If it's the former, then there will be every chance that strategic planning will enter the equation, for all the reasons the lads have said, but if it's the latter, there'll be no reason to believe that net result will be any better than it would have been if the bubble hadn't burst, only everything will take twenty years instead of five.

I think this is one of the key passages from the article:

[INDENT]''Having established itself as a strategic spatial planning entity, the first essential step for NAMA would be to establish a macro-spatial policy for its asset bank. The state needs to take a deeper look at our future spatial direction and this will require an updated version of the National Spatial Strategy and the National Development Plan.
Both are now out of date and inappropriate for the current situation Ireland finds itself in. The second step would be to liaise with planning authorities, educational & industrial bodies and communities to plan and deliver meaningful and appropriate spatial interventions that will prioritise our need to move to a sustainable economy and society.''
[/INDENT]

I mean we don't want the whole thing to become bogged down under layers of planning, but not to use the opportunity to plan, as opposed to weakly control what developers had planned (which has been the case until now), would be a crime.
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Re: National Asset Management Agency

Postby garethace » Thu Aug 06, 2009 8:07 pm

If it's the former, then there will be every chance that strategic planning will enter the equation, for all the reasons the lads have said, but if it's the latter, there'll be no reason to believe that net result will be any better than it would have been if the bubble hadn't burst, only everything will take twenty years instead of five.


Thanks for contributing this point. I was allowing my mind to wander around these same sort of issues today. I hope to blog something up shortly.

[ See the designcomment blog for something I wrote about 'far away hills' ]


Shareholders should take part of Nama pricing risk


I was reading Pat Honohan's piece in today's Times, in which Pat throws his best suggestion into the mix.

http://www.irishtimes.com/newspaper/opinion/2009/0806/1224252079786.html

I can well imagine that the hard-pressed drafters of the legislation may be reluctant to embark on incorporating this additional complexity. But we are not speaking here of an insignificant detail. The sums of money involved are so large that it is well worth getting the contract design right.


Even for Pat it seems quite difficult to insert changes, alterations or possible enhancements to the draft legislation. If Pat is reluctant to press something too far, then that counts out most of us too. What Pat described in his opinion piece in the Times newspaper, is very like what influenced the 'Design Build' contract in construction. In the traditional contract, the builder assumes most of the risk. All the designer has to do really, is to rent a little office and buy drawing pencils. The design consultant's outlay of capital isn't that huge. On the other side of the contract, the capital outlay of the contractor is huge compared to that of the designer. The risk the contractor assumes is very large indeed. What the traditional building contract attempts to do is to join those two parties together. Two parties that are very assymetrical in their motivations and their rewards.

Where did the Design Build type of contract originate from? The Design Build contract was designed originally to allow small communities in remote parts of the United States to provide themselves with basic school facilities and so forth for their kids to go to. The design build form of contract works really well when the brief is that simple. You are either getting a school this year or you are not. I guess in the United States, it is not like Ireland where it is taken for granted that the state will do something to provide a school. (Normally in Ireland a site becomes available from a convent or something, even if the money to build on the site is unavailable)

In the United States local communities found that by making a direct contract with a builder they could build a project within a tight budget. (Money they could manage to raise themselves through a bank loan, without exposing the community to too much risk) The builder assumed some of the responsibilities of a designer. I suppose it is a different way of distributing risk. I think the parallels between the Design Build contract as it originated in the United States and what we are doing with NAMA are quite striking. If you think about it, Ireland is such a small community. In ways it is like that small remote American community that had to make things happen for itself.

For more information see:

Design-Build: Planning Through Development
by Jeffrey L. Beard, Edward C. Wundram, and Michael C. Loulakis (Hardcover - April 13, 2001)



High-risk gamble on NAMA has to be about more than good luck


The Brendan Keenan opinion piece in the Independent newspaper is very well written and considered. It is probably the first time in my life I have read something from Mr. Keenan. Well done.

http://www.independent.ie/opinion/columnists/brendan-keenan/highrisk-gamble-on-nama-has-to-be-about-more-than-good-luck-1852433.html

We have seen already that the terms of the first injections of capital mean the taxpayer will not benefit from the recent rise in bank shares. It must be admitted that private capital holds most of the cards in this game. It knows the banks will not be allowed to fail, and it knows that nationalisation is a last resort.

Perhaps the Government let it know too much.


I have to agree with Brendan's point, that Minister Lenihan will have to exercise more of his role as a fund manager for the Irish people. I also understand that Minister Lenihan is like a tennis player at Wimbledon at the moment, having to play the singles tournament and the doubles at the same time.

But in terms of the banking crisis side of the tournament, private capital is dictating too much of the game to us as it stands. Private capital is holding too few of the important cards today to be allowed that latitude. Even though Minister Lenihan is sitting at the poker table and using government bonds to play doesn't mean a thing. He rightly deserves to be at that table and we need him to deal the best hand on behalf of the Irish people.

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Re: National Asset Management Agency

Postby garethace » Thu Aug 06, 2009 8:35 pm

Having established itself as a strategic spatial planning entity, the first essential step for NAMA would be to establish a macro-spatial policy for its asset bank. The state needs to take a deeper look at our future spatial direction and this will require an updated version of the National Spatial Strategy and the National Development Plan.


I would humbly submit a theory that much of the land assets available to NAMA now on the western side of the country are under a lot more stress than the eastern side. In plain terms, if the country keeps going the way it is, they will be worth shag all. It is a fact that Minister Lenihan is fighting a war on both fronts, to deal with public finance problems and deal with the banking crisis at the same time. It would appear to me, that in the western corridor, the problems for state spending seem to be particularly severe. I know that from talking to medical professionals who do get shifted around the western half of the country in a daft kind of fashion. Having to move home every couple of months. Effectively, some of them might be better off owning caravans. Perhaps the state finances problem needs to be divided into what the DIT school calls a western and a eastern corridor for development.

This is where the school of spatial planning at DIT has a real contribution to make. They have been thinking about this problem for a long, long time. I would submit the theory, that in the case of NAMA in dealing with its land assets on the western side of the country, it also takes on board very much the raft of problems the west is having to deal with in terms of basic social services. In that sense, the original thesis of the DIT school of spatial planning aught to be put into motion through NAMA. That Ireland in fact, should be developed as two separate corridors which are strong counterpoints to one another. This is where the brains at DIT and all of the other architects, engineers, surveyors and planners invovled at the Urban Forum need to come into play now. It is no real use ganging up on Mary Harney. I think this is a much larger and a much deeper problem than one Health minister has the ability to cope with.

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Re: National Asset Management Agency

Postby garethace » Fri Aug 07, 2009 8:56 am

Another look at the macro organisation in the country by Patsy McGarry in today's Times.

In it O’Toole plays the 14th Earl of Gurney, who happens to believe he is God. Queried as to why, he offers the perfectly plausible explanation that whenever he prays he finds he is talking to himself.


http://www.irishtimes.com/newspaper/opinion/2009/0807/1224252150115.html

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Re: National Asset Management Agency

Postby garethace » Fri Aug 07, 2009 11:58 am

-


The Roosevelt Solution


I am confident in my own mind at least, that all of the problems that I am aware of and have taken pains to describe through the medium of blog entries, have been adequately addressed in the scheme proposed by Cearbhall O'Dalaigh on his 'Celtic Meltdown' web site.

http://celticmeltdown.webs.com/nama.htm


The bankers have run their companies into the ground and they will do the same to the Irish economy if they are allowed.

Giving them €60 billion is the height of folly.

That may well be the last large tranche of credit available to the Irish state and to simply hand it over to the very people who created this catastrophy in the first place is sheer lunacy.



That which O'Dalaigh describes does conform very accurately to my own perception of the problem. My own perception of the problem, while being quite good and based upon first hand experience in the trenches, is much better than my perception of a solution. O'Dalaigh at least seems to have hit upon an idea, which I do find appealing. O'Dalaigh's idea does address the concern raised by Trinity Economics professor Pat Honohan in yesterdays Irish Times newspaper. I do like aspects of the solution prepared by Peter Bacon. But I am biased in that regard, being an Irish builder.

President Kennedy in the United States of the 1960s had the funds available to him to launch several Saturn V rockets. But the Irish state today only has enough fuel for one courageous attempt. Lets all hope it makes the right choice. The Minister for Finance and the Taoiseach have the facility of a 'cancel launch' button at their side. If the Zoe developments construction group goes down next Tuesday, then all NAMA bets are off and we are back to the drawing board.

I hope between now and next Tuesday, the Irish government uses the time productively to do the right investigation. Talk to the culprits responsible to uncover the sequence of events that led us to the current mess. The sequence is all important in deciding how we are to proceed. I do not believe Peter Bacon had the right information available to him in preparing the plan.


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Re: National Asset Management Agency

Postby garethace » Fri Aug 07, 2009 7:59 pm

gunter wrote:Maybe one of the key points to look out for will be whether NAMA will have the authority to account for the management of it's assets as a whole, or whether it will be bound to maximise the return on a site by site basis. If it's the former, then there will be every chance that strategic planning will enter the equation, for all the reasons the lads have said, but if it's the latter, there'll be no reason to believe that net result will be any better than it would have been if the bubble hadn't burst, only everything will take twenty years instead of five.


Bertie Ahern used a quite famous phrase, the boom is getting boom-er. That phrase suggested a well behaved upwards trajectory to the construction activity in Ireland. But that isn't what happened at all. The industry developed what I can only describe as a 'twist' to its flight path when it reached a certain velocity.

I blogged something on this last night at Designcomment, entitled 'Far Away Hills'. Where I suggest that some designer and builder teams are better at working on a site by site basis. Some others have the expertise at strategic planning. I don't think it is down to doing one or ther other. I do think it is important that people who know how to do one or the other, stick to what they are good at. That is the only way to avoid this self destructive 'twist' in the construction industry's behaviour I observed during the Celtic Tiger.

While reading the analysis piece by Conor McMorrow, Political Correspondent for the Sunday Tribune newspaper, I was again reminded of this factor in the behaviour of the Construction Industry.

'There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don't know. But there are also unknown unknowns. There are things we do not know we don't know. And then there is the future of Nama."


http://www.tribune.ie/business/article/2009/aug/02/nama-the-known-unknowns-and-the-unknown-unknowns/

It is this self-destructive 'twist' in the behaviour of the construction industry, which I believe was an unknown unknown. It is a factor that threatens to return to haunt us again with NAMA. I hope that people have taken note of it and it has now entered the knowledge sphere as a 'known known' before we embark on building our next paper airplane. I hope we will have learned to improve our design.

I believe myself, based on my own observations that many builders who could do the 'large stuff' very well. That is, they were builders with patience and were observant of the 'bigger picture'. But they got sucked in by something I call the 'Bertie Factor'. They saw amateurs making off with fast wind fall profits doing real mickey mouse kind of construction. That is I believe how we ended up with this 'rash' of small stuff all built in the wrong place.

For instance a man who owned and operated a gravel and stone quarry all his life. He understood the big picture and how large government contracts work. What was he doing suddenly taking a lunge into the unknown world of housing estate construction?

On the other hand, those who knew the game of building housing estates became over ambitious and leaped into the world of high capital, high investment projects such as shopping centres. What was that in aid of?

There was a lot of money flowing around the system in Ireland, but most of it was stupid money. Stupid in the sense, it was given to sensible people to take care of, but those people put it into projects they really did not understand.

It would not really matter, but it happened at the same time, on such a large scale that it now a huge problem. This is the 'problem' which a body such as NAMA will have to untangle.

We are all well aware of the subtleties of making paper airplanes which are able to do the job they are supposed to do. It is annoying to have worked hard to create something out of paper, only to realize your design exhibits this kind of flaw. I think that is exactly what the Irish construction industry displayed in the end. An unstable behaviour, an irrational over adjustment of some kind. Something that made it flip back over itself and fall out of the sky.

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Re: National Asset Management Agency

Postby garethace » Fri Aug 07, 2009 8:13 pm

Mr. Strategic planning himself, Frank McDonald wrote this recently.

http://www.irishtimes.com/newspaper/ireland/2009/0730/1224251671431.html

The objective is to “position the Dublin city region, the engine of Ireland’s economy, as a significant hub in the European knowledge economy through a network of thriving sectoral and spatial clusters providing a magnet for creative talent and investment”.


No deeds

I had forgotten about the fact NAMA isn't getting any deeds. Constantin Gurdgiev's point in relation to deeds was highlighted in Conor McMorrow's Sunday Tribune piece.

We are being sold a product we cannot see, in a quantity unknown to us, for a price we cannot access, with no deeds on this product passed to us


Constantin Gurdgiev's Irish Independent article:

http://www.independent.ie/opinion/analysis/reasons-to-fear-trust-me-sales-pitch-on-836490bn-bet-1847596.html

Here is Morgan Kelly's opinion on the matter from the Irish Times.

http://www.irishtimes.com/newspaper/opinion/2009/0703/1224249965637.html

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Re: National Asset Management Agency

Postby gunter » Fri Aug 07, 2009 9:48 pm

garethace wrote:
No deeds

I had forgotten about the fact NAMA isn't getting any deeds.

Brian O' Hanlon


Who gets the deeds?

Explain this, . . . . but as if you're talking to someone who doesn't understand any of this.

. . . . in two paragraphs, maximum.
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Re: National Asset Management Agency

Postby garethace » Fri Aug 07, 2009 10:26 pm

I haven't got a bull's clue myself. I hope someone out there knows more than the two of us.

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