Liam Carroll: I did it my way?

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Ghost Towns

I think NAMA might be going off course. I think NAMA might be missing the point. Mixing up what is ‘good’ or sustainable development and what is ‘bad’ or un-sustainable development. The ugly, we can live with, as long as it is built in a sustainable location.

There is a lot of talk in the newspapers today about Liam Carroll’s property loans going into NAMA. I think there is absolutely nothing wrong with the Zoe developments property portfolio. It is one of the healthiest in the country from many points of view. Even if you were to exclude the ‘hope value’ as Fine Gael’s Richard Bruton described it. The Zoe portfolio is eventually going to come out on top. There should be no real rush for NAMA to deal with Liam Carroll’s loans, other than the fact that he made a royal mess out of his company.

Liam Carroll engaged in a very un-orthodox method of development, as I described briefly in a Sunday Tribune article.

http://www.tribune.ie/article/2009/aug/23/developing-on-the-back-of-a-cigarette-box/

But that is an entirely separate issue. It does not say there is something ‘bad’ or otherwise with Liam Carroll’s property portfolio. The distinction needs to be made. To an extent, the NAMA plan and the Liam Carroll case are totally separate issues.

The first loans I would move into NAMA, if it was up to me, are those really un-sustainable ghost towns and so-called ‘development lands’ speculatively purchased in the upper Shannon region. Which may take decades and decades to work through the system and be worth anything, if at all. If there was some way we could get them moved in the NAMA vehicle first and simply bull doze the construction, which is never going to pay for itself, I would be all for it. I don’t know how you do that in legal or financial terms though. Buying something simply to bull doze it down.

A problem with NAMA is, the big boys will be the first to be taken care of. The smallest of the 1500 lenders in the NAMA portfolio, hold those bad developments in the upper Shannon ghost towns. Unfortunately, it is the ghost towns of the upper Shannon region, and in places like the ‘Ring of Kerry’ that are causing the worst fears and doubts in terms of the bank loans. But those will be last in the queue to go into NAMA.

I don’t think there is any real risk with Liam Carroll’s property. We all know it is going to recover, be developed, leased or sold at some stage. I don’t think there need be any doubt about that. It is only a discussion over whether a private interest or a public one, gathers the most benefit from that transaction. But it is not a transaction we should worry about, it is going to happen one way or another.

The side of the portfolio that really worries me, is where a transaction may never take place. The ghost towns which were built way out in the sticks of NAMA land. The only purpose of the ghost town was to fool the droves of settlers coming out of Dublin, who were searching for the ‘good life’. They were moving into the western wilderness with bags of money having sold their home in Dublin. They were being ambushed by speculative developers in the upper Shannon region and elsewhere in the hinterland. A failure to use ‘mark to market’ methodology with that sort of rubbish, both on the buyer and builder side of things, will upset everything in property market.

I know one enterprising hair dresser in Dublin city, who purchased 10 acres of bogland in County Laois. The man still believes it is worth building a house there. Despite the fact, the site is land locked with no road into it. (Unless the occupier buys a helicopter, they are snookered) That man is not a stupid guy. He has run his own sucessful and viable business all his life in Dublin. But he is a player in the ‘property market’ who needs to be given a firm signal, of what the real value of his property is. So that he can absorb the write down immediately and move on with his life. Chalk it down to experience, or whatever way you like to put it.

Brian O’ Hanlon

@missarchi wrote:

Do you think Liam would do well with major infrastructure?

There is a difference between civil and structural engineering. No I don’t think LC would do well with major infrastructure at all. There are only a couple of things, his kind of operation works for. He would do a good job of completing a project such as North Wall Quay. He is fine at doing that sort of thing.

What I don’t really like about the Zoe group, is that they wish to ‘add value’ to land, which they will sell later as part of their business plan, but having obtained planning permission for schemes on the land first. That is okay if they mean land in Dublin City Centre. But if they mean land which has never been touched or serviced, then of course they are going the wrong way about it. A lot of the Zoe group’s land, or more specifically the Dunloe land is un-serviced land.

An Adamstown kind of approach would be required in their of advance civil infrastructure. I think that Zoe are playing catch up to others like Castlethorn construction, in that regard. You need a strong culture of project management to achieve was Castlethorn did at Adamstown. I don’t believe the project management culture exists in its full extent within Zoe at all. They are short personnel in that regard.

Brian O’ Hanlon

Here it comes, Fingers Fingleton.

http://www.rte.ie/news/2009/0904/irishnationwide.html

RTÉ News has learned that Irish Nationwide directly received a cut of profits from successful developments that it had financed.

My question is simple, and it relates very much to the concerns of Simon Coyle, an accountant with Mazars. Why the heck weren’t Zoe management able to shout up and command a ‘piece of the action’, if the suits over beside the Grand Canal in Ranelagh were able to demand their’s?

On that point alone, I would question the ‘capacity’ of Zoe’s management. There is nobody really left in Zoe with a stake in the operation, now that the man in charge is out of the picture. This was the entire problem all along. Everyone was contented to be polite with Mr. Carroll as long as he wrote them pay cheques at the end of the month. There was no one at Zoe with a large enough stake to put into the pot themselves, in order to take charge in the company’s operation and direction. There still isn’t.

With Finger’s Fingleton, and the other Irish banking institutions filling the role of the ‘Liam Carroll’s partner’ in Zoe developments, there was no way that any of Liam Carroll’s directors could even mount a challenge. This is what is bad about Irish banks being so involved in Irish property development, to the extent to which boundaries lines were rubbed out for good. We are now left with a complete ‘vacuum’ in the terms of management in the biggest property development liability in the entire state.

I drank pints with John Pope. I put up with dirty tackles from David Torpey playing five aside soccer on Astro turf. I took no crap whatsoever from Liam Carroll. But the fact remains, all three of those people, whom I knew, were hardly running anything in their company for a finish up. It was all the banks direction. I said this from the start. Bankers have to go back to being bankers, and architects should be the architects. Otherwise, why do we even bother to train architects in Ireland?

I have been linking to Ruairi Quinn’s blog entry for quite some time. Deputy Quinn raised an important point not too long ago.

We need a fresh start and a new framework of regulation, transparancy and accountability. Banks must return to being service providers to our economy and not speculative players in their own right.

http://www.ruairiquinn.ie/?p=18

Brian O’ Hanlon

I know the Fingleton stuff is old news for anyone ‘in the loop’ of Irish property for heaven knows how long. I learned about Fingleton relatively lately myself. Only last January to be exact, from a life time civil servant.

But you have to put on your ‘politician’s hat’ to look at this. This is the ‘political dynamite’ that Steven Collins in the Irish Times wrote about, not so long ago.

We all looked at Prime Time yesterday evening and witnessed our minister for Finance struggle to deal with an RTE lacky, is all I could describe it.

The latest breaking news on the Irish Times website as we speak is this:

http://www.irishtimes.com/newspaper/breaking/2009/0904/breaking54.htm

You don’t have to be a razor sharp news reporter to join up the dots.

This Fingleton story is breaking. The fact is this Fingleton story might as well be ‘hot off the press’, because it will be breaking news, as far as the Irish public are concerned.

I have been waiting all along for this banana skin. It is the kind of one, that minister Brian Lenehan could finally slip on. In fairness to the minister, he has played an outstanding part for FF all along.

Brian O’ Hanlon

This is a pile of BS. It is all to do with optical illusion.

Mr Shipsey said the evidence now before the court in this second application has more than adequately addressed the insufficiencies the Supreme Court identified in the first application.

http://www.rte.ie/business/2009/0907/carroll.html

Council for Zoe developments is telling us they are entitled to be ‘economical’ with the truth, they ‘ration’ us with the facts and figures and ‘deny’ us what we are entitled to. A full and and comprehensive overview of the operations of the Zoe group.

Very, very disappointing for myself as an Irish citizen. But given the fact that AIB bank hasn’t been willing to put all of it’s cards on the table in relation to the banking crisis, in the hope they can sell all of their rubbish to the Irish taxpayer, I don’t suppose it should come as any surprise the KPMG plan for the Zoe group only presents half the picture as well. That is why I am supportive of the Fine Gael proposal to establish a good bank, and make both AIB and BOI suck on it, along with Zoe developments.

There is no other way to look at it, other than the fact that NAMA is a bail out for companies like Zoe developments. Furthermore, it is a bail out at a time when the Irish people can least afford it. Having been over-charged for a decade for rubbish property products, we are going to have to face over-charging a second time around, to the same people. To take senior counsel Bill Shipsey’s own remark, that never before have the interests of the wider Irish community been so much to the fore. I do not believe council Shipsey understands himself the full implications of what is in that statement. I feel it is disgraceful how little of the evidence was presented before the High court.

Not to mention the fact, that Liam Carroll himself did not even show his face.

But he said people working for the companies are not in such a fortunate position.

I lost my position working for this company. I cannot see anything wrong with ACC bank’s approach. I’m sorry. Provided that a foreign bank isn’t allowed to run off with the Irish Continental Group share portfolio. Which no Irish government member seems capable of going out and buying today, in order to keep intact a necessary strategy to upgrade the facilities at Dublin Port. The Irish government has no problem spending €100 billion needlessly. But seems to find it very difficult to spend €100 million in the right way. That is going to prove very under-mining of confidence in Ireland as a country, capable of supporting itself and its economy.

What we need right now are leaders – not PR stunt men and women. We need a general election.

He said there were a number of compelling reasons why the court should use the discretion it has allowed in the appointment of an examiner – most particularly that the application for protection enjoys the overwhelming support of most of the companies’ banks.

It was the banks themselves who ensured that the Zoe developments court presentation was as bleak and depressing as they could possibly make it, in order that they can sell all of their worthless sh**e into NAMA. Along with prime real estate which Zoe developments built up over two decades of very hard work.

Mr Shipsey said support could also be found in the detailed independent accountants’ report submitted as part of the application, and it was unlikely such a compendious report has ever been seen by a judge of the High Court before.

An ‘asshole statement’ right there.

Never before has a property empire which owes close to €3.0 billion to the banking system appeared before the courts either. We are not talking about some ‘corner shop’ here, which cannot pay its bills. The Liam Carroll empire is likely to comprise of 10% of the total write down the NAMA plan needs property developers to take, in order for the NAMA plan to work. More has been concealed from the court than has been revealed all through this case.

The whole thrust of the Zoe developments defense is rather like one of those tribes in the African plains, who lined up one behind the other in other to conceal their numbers as they march from a great distance. The purpose of the Zoe defense, was to conceal the true size of one third of the entire Liam Carroll property empire. We are not even being allowed to contemplate even the extent of a third of the entire empire. The purpose of this, is to make us believe that the problems, or potential liabilities and risk, are much smaller than they are.

Much in the same way as we have been told that Irish property developers only took out 75% mortgages during the Irish property bubble. The real figure, is probably somewhere between 100% and 200%, with some more added on. We are being fooled into believing that NAMA is a much smaller risk than it actually is. I would contend, the Irish people may feel a lot better, and the world markets too, if the full extent of things was revealed. Instead of all of this ‘optical’ BS.

He said in the last referendum, voters had sat on the fence, and in the companies’ first application, the banks had sat on the fence.

The first honest statement I have read.

Making his closing comments, counsel for ACC Rossa Fanning, said there was no evidence before the court to suggest the bank opposed the petition for anything other than rational commercial reasons. To suggest otherwise, he said, was unfair.

I would agree, with the one qualification mentioned above in relation to the Irish Continental Group share portfolio. ACC Bank are entitled to the Greencore portfolio, for all I care, if they can spilt it down the middle with Ulster bank. It is the ICG shares I believe either Michael O’Leary himself of Ryan Air, or minister for Energy Eamon Ryan must buy now. I suspect it will be Michael O’Leary given the fact, paying a toll charge to import fuel into Ireland, is not in his best interests.

He also claimed it did not make sense for the companies to argue that NAMA is not relevant to their application. He said the loans in question are prime candidates for transfer to the new agency, and there may be a good reason for the supporting banks to want to see those loans transferred into NAMA.

Yes, because the Zoe portfolio is one of the few potentially good loans in the entire €90 billion’s worth of thrash. If the NAMA project, did not receive the Zoe loans, then the entire NAMA plan is as good as dead now.

But he said that reason was ‘light years away’ from the intention behind legislation allowing companies to enjoy protection of the courts.

Agreed.

Brian O’ Hanlon

Isn’t this a real jem:

Remarking a bank’s interest is to recover as much as possible of its debt and it “would be mad” for a bank not to go along with a scheme to that effect, the judge asked was it reasonable for the court to infer the banks’ did not think this scheme was stupid but not to further infer they believed there would be a company at the end of it? Mr Shipsey said he could not disagree.

http://www.irishtimes.com/newspaper/breaking/2009/0907/breaking81.htm

Read it several times over, it does make sense, in a far out kind of way.

Interesting point here:

Addressing the effect of a possible rise in interest rates, counsel said rates could be fixed and AIB was offering a rate of 2.7 per cent up to 2014.

Brian O’ Hanlon

I posted what is below, somewhere else yesterday evening. It is my definitive statement, which encapsulates most of what I have concluded with, in my thinking on NAMA. I stress, it is simplistic, reflecting only the views of a non-lawyer, non-bond trader, non-economist, etc. But I have found, it gets me by as far as my daily life goes. It is enough to allow me to ‘move forward’.

I deliberately use the term ‘move forward’ in a sarcastic sense. I agree with what Fintan O’Toole wrote in his Irish Times opinion piece.

http://www.irishtimes.com/newspaper/opinion/2009/0908/1224254064758.html

Brian O’ Hanlon

I stand to gain a lot more myself, working in the property area, if NAMA goes ahead. That is, if NAMA is a success and doesn’t break the country completely. Brian Lucey commented yesterday, that he is discussing NAMA in his sleep. Lucey said though, the definition of a ‘lecturer’ is somebody who talks in someone else’s sleep. Lucey might indeed, be talking in other peoples’ sleep at the moment.

But certainly, from my own perspective, I didn’t sleep too well this summer for some reason. Then it finally dawned on me. It does not sit well with me as a person, to think that I could support the NAMA plan. Since I have decided not to support it at all, in my comments and my own mind, I have slept a lot better. That doesn’t mean, if NAMA goes through, I will be disappointed. On the contrary, it could be good for me. However, disagree-ing with it, gives me more peace.

In order to disagree with NAMA, in my conscious brain, the really difficult work, was to find a sufficient number of points against NAMA, to tip that see-saw inside of my brain to either one or other side. I will proceed to describe the three things below. Brian Lucey in his latest Irish Times article, has hit on some additional factors, that I could agree with. They are things about bonds and what not, that economists do find interesting.

But the great thing for me, when I read Lucey’s latest article, was I realized, I don’t need his articles so much as I used to, to make up my mind. That, with the three basic ‘weights’ I have now placed on one end of my see-saw, I am happy that by brain is no longer under the same stress it used to be in, all summer. I don’t need to add additional weight to the see-saw to make a decision. Here they are.

(1) The FF government has commissioned numerous expert reports, none of which tie up together to form a cohesive strategy. NAMA in itself, is a wonderfully clever idea. Not to knock that idea, but it hasn’t been tied up with the rest of the consultant advisory projects. In other words, there is no clear overall architect. Which spells disaster to me.

(2) The banks are making their situation appear a lot worse than it is. They haven’t put their cards on the table. The AIB operations in Poland for instance, could be sold up to improve their position. They have not even gestured a willingness to look at that option as a last resort.

It is the same with the Zoe developments court case, the company I used to work for. They are careful to display only the portions of the company they want people to see, in the courts. I.e. In an attempt to say ’save us’, we deserve corporate wellfare.

(3) The €30 billion hit that ex. Ulsterbank economist Pat McArdle predicted the developers will have to take, in his article in the Irish Times newspaper. Pat called it, having some skin in the game.

I don’t believe the Irish developers ever had their own skin in the game to begin with. They were a miserable, impoverished bunch of guys, who never knew it was to have any real wealth. We won’t hold that against them, you are what you are. But NAMA hinges on the fact, that they were ‘real developers’ instead of developers of convenience the Irish banks needed in order to enlarge their loan books.

The three items above, are all that I really needed to make up my mind for good and glory about NAMA. I have read and listened to Gurdgiev, Lucey, Whelan, Burton, Bruton, Lee, Ryan, Lenehan and all the other excellent commentators to date. The list of people I know now, is far too long to list here. I know more Irish economists, journalists and politicians than I ever knew in my life, simply from following it all.

I don’t think I have purchased this many newspapers or watched the main evening news and studied as many blogs as I have, ever, as I have donevover the last 3 months. For what it is worth Greg, I have become a Fine Gael supporter. Even though, I never had a political opinion in my life. I used to go into ballot boxes and pick out a name basically. It was through listening to Fine Gael in particular over the past 3 months, that I really began to figure out how I felt about NAMA. For real. No more voices in my dreams thankfully.

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What of Royceton?

People often ask me, what was the purpose of including the Royceton company in the new petition for examinership in the High Court case involving six other Zoe group companies? I will go a bit further, and make this informed observation. I will tell you, I have looked at all the photos today in the papers. There is definitely something afoot in David Torpey’s mind. The reason I say that, is because I know the following. The master plan in Royceton towards the end of 2008, was to launch out in a new direction. To become an all-in-one provider of construction expertise and services to clients other than Liam Carroll.

A new business plan

The business plan had a lot going for it. Because the construction operation has now become very complex and sophisticated. Much more than an average architectural consultancy practice is able to manage. We will not see advancement in the construction sector until we see the elimination of some the traditional techniques employed in construction. It is important to understand, that such changes are not welcome at all, by the encumbants of the Irish professional construction services sector. But why would that surprise anyone? We all know about Pharmacy, Dentistry and many other vested interests. Why should construction be any different? Especially given the fact, the Irish government is a customer for construction itself. I would certainly welcome the competition that Royceton would bring into the Irish marketplace. Indeed, I view the services of Royceton as a potential export product also. David Torpey has always been a keen follower of football teams such as Manchester United and Real Madrid. He is also a very avid League of Ireland supporter. David would like Ireland to compete in Europe and stake it’s place. Like the inner city, shoe box apartment of the 1990’s, by 2008 Zoe was starting to incubate a new disruptive innovation for the new mellenium. The trouble with the concept for Royceton working for clients other than Liam Carroll, is that Carroll himself disapproved of the plan.

Carroll was in the way

Indeed, as long as the Zoe group remained in one piece, insolvent or otherwise, the position of Royceton grew weaker and weaker. They were stuck being dependent upon a single man, Liam Carroll. That man was not batting on their side anymore. Royceton could have a chance if it was launched on it’s own, but not remaining inside Zoe developments. This is why I believe David Torpey was smiling after yesterday’s High court decision. Liam Carroll is decidedly out of the picture, and Royceton may find a new investor yet. I would not be one bit surprised if deals have already been drafted up. The purpose of including Royceton in the High court petition this time around, is to ensure that Royceton was ejected from the Liam Carroll empire sooner rather than later. In order to give it a chance to execute it’s new business plan with new backing. To be honest, the Royceton guys are much too good to have lying around doing nothing. They are Ireland’s best team and they need to re-take the field.

Being the centre of attention

Liam Carroll developed a great dislike for this plan. He was used to being the sole focus of Royceton’s attention. The fact, he could not command their full attention any longer seemed to hurt him deeply. It wasn’t the profit making side of property development that motivated Carroll. It was the constant attention and interaction he got with his old colleagues. Perhaps owing to the state of his health and enormous stamina, things began to get sour through the later part of 2008 and on into 2009. Liam Carroll had fed the Royceton team with work for a decade or more. He was no longer up to that task. David Torpey had been Carroll’s draughtsman in Zoe from day one. What Carroll should have done, in the final years, was to give David Torpey an opportunity to be the best he could be. That would have been a fitting reward for many years of service.

Carroll and his team

The truth is, without Royceton, Liam might not have got far. Danninger, Carroll’s beloved construction company, were not capable of getting by on their own. They imagined that they were independent and liked to walk all over Royceton, as they felt like it. All they had to do was make a phonecall to Carroll and he would reprimand Royceton. Towards the end however, Royceton directors felt more like adults being beaten with a wooden spoon. That on equal terms with Carroll, in trying to solve problems. There was love lost on both sides of that increasingly growing fence. The truth that Danninger did not appreciate, was that without Royceton they would be out of runway faster than they knew it. It is not easy to combine the construction culture with the desk worker culture in the one company. I was often accused at Royceton of taking too much of the Danninger side on matters. I happen to like the productive exchange between the two cultures. But I understand, that in today’s context, construction really needs to become more professional.

How cheap is cheap?

To qualify all of the above a little bit, I would say the following. Having listened to Neil Callanan’s interview on radio one, Morning Ireland this morning, I would agree – Liam Carroll was savagely under-cutting the market. Carroll would offer rates at 50% of everyone else, making the initial lease of his constructed properties a ‘loss leader’. He then hoped to re-claim his costs and get into profit in the years that followed. That is, in the medium term. Instead, Carroll under-cut too much. He was badly caught out in the short term when credit stopped flowing in his direction. The point I want to make is the following. From the point of view of Royceton directors, they firmly believed in their minds, the reason they could undercut the market is they were so much more efficient than the rest of the construction industry. Certainly, they had innovated ways in which to save costs. I attempted to describe that in a Sunday Tribune article recently. But I think Royceton falsely believed that they could flex their muscles in terms of cost saving, enough to undercut the market by 50%. It is sometimes suggested that Zoe were the Ryanair of the construction industry. To that, all I can say is, you can believe too much of your own marketing waffle.

Pretending to be big

The other point I wish to make is this. Because Liam Carroll appeared to be such a large and powerful participant in the Irish property market, many consultant designers believed that Liam was a good client to have. Some consultants built their hopes entirely around Liam Carroll as their major client. But, it is easy for any player in the property industry to be a ‘big player’, if he can get away somehow with being insolvent. A lot of architectural consultants spent a lot of Carroll’s money on construction over the course of the Celtic Tiger. They so enjoyed themselves, spending Carroll’s money on construction, they convinced themselves they had a very sustainable source of employment in Liam Carroll. Which was a piece of bad judgement on their part. Similar to the way in which Fianna Fail, understood capital gains and stamp duties as a sustainable source of tax revenue. I did observe, Liam Carroll was able to fool people on two fronts. Both his own internal design team and his external design consultants were equally fooled in different ways, by Liam Carroll.

On to the super bowl

I do wish Royceton the best of luck, in anything they can salvage from the mess. It took a lot of guts to present the second petition to the High court for examinership. I believe that Torpey got the outcome he was looking for. His satisfaction did not go un-noticed by me, in the photos in the newspaper today. Whoever buys Royceton, will have bought the next super bowl team of Irish construction.

Brian O’ Hanlon

David Torpey has always been a keen follower of football teams such as Manchester United and Real Madrid.

Sorry for digressing from the main topic of your post but Dave Torpey absolutely hated Man Utd. and happens to be a very keen follower of Arsenal FC., so much so that he owned shares in the club and travels to see them play on a regular basis.
(I wonder how they are going for him).
He was once offered two free tickets for a Uefa champions league tie to see Man Utd play away to Inter Milan by a building supplier. Unfortunately for the genorous building supplier he couldn’t understand why Dave slammed down the phone on him in a rage.

Back to your views of Royceton becomming an independant entity within the construction industry, I would have to agree with you. I think Royceton had a unique insight into the workings of a building site and I would be encouraged if Royceton had to opportunity to go down this road.