National Asset Management Agency

@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.

Brian O’ Hanlon

@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.

@gunter wrote:

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.

From the Bill:

NAMA not required to register certain instruments, etc.
84.—(1) Where a bank asset has been acquired by NAMA or a NAMA group entity—
(a) notwithstanding anything in the Bills of Sale (Ireland) Acts 1879 and 1883, the
Industrial and Commercial Property (Protection) Act 1927, the Agricultural
Credit Act 1978, the Companies Act 1963, the Registration of Deeds and Title
Acts 1964 and 2006, the Patents Act 1992, the Trade Marks Act 1996, the Taxes
Consolidation Act 1997 or any other Act, that provides for the registration of
assets, security or details of them, NAMA is not required to become registered
as owner of any security that is part of the bank asset,
(b) notwithstanding sections 62 and 64 of the Registration of Title Act 1964,
NAMA has, in relation to any such charge, the powers of a mortgagee under a
mortgage by deed, even though NAMA or the NAMA group entity concerned is
not registered as owner of any such charge,
(c) NAMA has the powers and rights conferred on the registered owner of a charge
by the Registration of Title Act 1964.

My reading of this is that NAMA are taking over the loans as banks normally would ie they are taking over and managing the risk. In that case the deeds remain held by whoever holds them under the terms of the original loan. If the loan is defaulted then NAMA will act as if it is the original lender to secure the loan based upon its terms. Presumably then the deeds pass to NAMA? maybe it’s just a way of reducing the paperwork

or I could be talking bollocks

@wearnicehats wrote:

From the Bill:

NAMA not required to register certain instruments, etc.
84.—(1) Where a bank asset has been acquired by NAMA or a NAMA group entity—
(a) notwithstanding anything in the Bills of Sale (Ireland) Acts 1879 and 1883, the
Industrial and Commercial Property (Protection) Act 1927, the Agricultural
Credit Act 1978, the Companies Act 1963, the Registration of Deeds and Title
Acts 1964 and 2006, the Patents Act 1992, the Trade Marks Act 1996, the Taxes
Consolidation Act 1997 or any other Act, that provides for the registration of
assets, security or details of them, NAMA is not required to become registered
as owner of any security that is part of the bank asset,
(b) notwithstanding sections 62 and 64 of the Registration of Title Act 1964,
NAMA has, in relation to any such charge, the powers of a mortgagee under a
mortgage by deed, even though NAMA or the NAMA group entity concerned is
not registered as owner of any such charge,
(c) NAMA has the powers and rights conferred on the registered owner of a charge
by the Registration of Title Act 1964.

My reading of this is that NAMA are taking over the loans as banks normally would ie they are taking over and managing the risk. In that case the deeds remain held by whoever holds them under the terms of the original loan. If the loan is defaulted then NAMA will act as if it is the original lender to secure the loan based upon its terms. Presumably then the deeds pass to NAMA? maybe it’s just a way of reducing the paperwork

or I could be talking bollocks

You would think it is to give Nama a waiver on having to register a charge on the deeds of each loan that they are taking over which is secured on property be it real estate, chattels or intellectual. I am sure the Incorporated Law Society are not best pleased to not grant the exemption would have created a lot of work for solicitors.

My understanding of Nama (I could be very wrong) is that the banks in return for taking a haircut in line with the perceived risk will walk away from the loans and have no further exposure. To create a superior interest you would ordinarily need to register same on deeds.

This whole discussion about the deeds reminds me of something. I fully recognize the fact that Archiseek readers do not wish to listen to me pontificate down from the high altar of: This is how we would do it at Zoe developments. I promise I will not do that to you guys any longer.

But here is the thing, it is what I call the ‘systems engineering’ idea that directors at Zoe tried to implement. It wasn’t Liam Carroll who was the brains behind it. Rather Liam did everything in his powers to smash up whatever system or organisation we as employees tried to create to deal with complexity and introduce logic. But often, because of the kind of company that Zoe was, we would be looking at problems very similar to the one described on deeds for NAMA property loans.

For sure there is a huge raft of administration work and difficulties that can be created for NAMA around this one part of the production line. Getting it incorrect could prove to be very, very costly and jamb up the production line entirely. At Zoe developments we did the following. We used the ordinance survey maps to do our planning applications. Those ordinance survey maps are inaccurate remember. But they are used by the land registry for legal purposes.

So we would get a digital survey of the site done after receiving planning. Then, we would do the construction drawings on the digital survey and everything would be set out using GPS on site. But somewhere along the line, someone would have to do a ‘best fit’ between the ordinance survey map (onto which the planning application drawings had been drafted) and the ‘correct in real life’ digital survey drawing. Zoe’s planning drawings were never actually continued into real life construction stage. What would happen is that an architect would print a hard copy set of the planning drawings and re-draw the entire development into CAD on the ‘best fit’ digital survey. While ‘looking’ at the printed hard copy set of planning drawings on his or her desk. In other words, the entire project was drawn twice on the computer by separate individuals.

(That is an added cost the average consultant architect could not bear when doing a project, but it was worth Zoe’s while to do it because it avoided a problem further down the line, when they as a client wanted to register the built properties)

The advantage was when it came to legal drawings further down the track, the planning drawings would serve as the basis for the legal drawings for land registry purposes later on. In the mean time a building had been constructed on the site, to the accuracy of the digital survey based on what we had received planning permission for. I know this sounds complex and obscure, but it demonstrates what Zoe were thinking about in terms of their ‘systems engineering’ point of view. They were motivated to do things like this and think in this fashion because they were client, builder and designer.

Now I want to make fully clear to all readers, that Liam Carroll had nothing to do with the above. He was bending himself over backways to build as many projects as he could, as fast as he could and didn’t give a constitutional f*** how we did it. But because we were playing the role of designer, client and building contractor, we were motivated to find efficiencies in the pipeline. We had no choice but to handle a huge burden of ongoing administration anyhow. But we tried to handle it in a way that didn’t create more work for ourselves than was absolutely necessary.

That didn’t mean that we cut any corners. But it did mean that we tried to work intelligently, seeing the whole process instead of only the small segments such as in a consultant and client arrangement. That is why I wrote about the ‘engine of Zoe development’ etc in the Designcomment blog entry about the Ford Cobra. I suggest, we can re-build a logic and an efficiency into the NAMA engine if we use our noodle fully. There are a number of the Zoe architects and engineers out of work currently who would be useful people to talk to. I was only there for two years myself, but their way of handling the administration work load was clever in many ways.

Brian O’ Hanlon

@garethace wrote:

This whole discussion about the deeds reminds me of something. I fully recognize the fact that Archiseek readers do not wish to listen to me pontificate down from the high altar of: This is how we would do it at Zoe developments. I promise I will not do that to you guys any longer.

But here is the thing, it is what I call the ‘systems engineering’ idea that directors at Zoe tried to implement. It wasn’t Liam Carroll who was the brains behind it. Rather Liam did everything in his powers to smash up whatever system or organisation we as employees tried to create to deal with complexity and introduce logic. But often, because of the kind of company that Zoe was, we would be looking at problems very similar to the one described on deeds for NAMA property loans.

For sure there is a huge raft of administration work and difficulties that can be created for NAMA around this one part of the production line. Getting it incorrect could prove to be very, very costly and jamb up the production line entirely. At Zoe developments we did the following. We used the ordinance survey maps to do our planning applications. Those ordinance survey maps are inaccurate remember. But they are used by the land registry for legal purposes.

So we would get a digital survey of the site done after receiving planning. Then, we would do the construction drawings on the digital survey and everything would be set out using GPS on site. But somewhere along the line, someone would have to do a ‘best fit’ between the ordinance survey map (onto which the planning application drawings had been drafted) and the ‘correct in real life’ digital survey drawing. Zoe’s planning drawings were never actually continued into real life construction stage. What would happen is that an architect would print a hard copy set of the planning drawings and re-draw the entire development into CAD on the ‘best fit’ digital survey. While ‘looking’ at the printed hard copy set of planning drawings on his or her desk. In other words, the entire project was drawn twice on the computer by separate individuals.

(That is an added cost the average consultant architect could not bear when doing a project, but it was worth Zoe’s while to do it because it avoided a problem further down the line, when they as a client wanted to register the built properties)

The advantage was when it came to legal drawings further down the track, the planning drawings would serve as the basis for the legal drawings for land registry purposes later on. In the mean time a building had been constructed on the site, to the accuracy of the digital survey based on what we had received planning permission for. I know this sounds complex and obscure, but it demonstrates what Zoe were thinking about in terms of their ‘systems engineering’ point of view. They were motivated to do things like this and think in this fashion because they were client, builder and designer.

Now I want to make fully clear to all readers, that Liam Carroll had nothing to do with the above. He was bending himself over backways to build as many projects as he could, as fast as he could and didn’t give a constitutional f*** how we did it. But because we were playing the role of designer, client and building contractor, we were motivated to find efficiencies in the pipeline. We had no choice but to handle a huge burden of ongoing administration anyhow. But we tried to handle it in a way that didn’t create more work for ourselves than was absolutely necessary.

That didn’t mean that we cut any corners. But it did mean that we tried to work intelligently, seeing the whole process instead of only the small segments such as in a consultant and client arrangement. That is why I wrote about the ‘engine of Zoe development’ etc in the Designcomment blog entry about the Ford Cobra. I suggest, we can re-build a logic and an efficiency into the NAMA engine if we use our noodle fully. There are a number of the Zoe architects and engineers out of work currently who would be useful people to talk to. I was only there for two years myself, but their way of handling the administration work load was clever in many ways.

Brian O’ Hanlon

We get the digital survey done before design – its “frozen” and use same for all subsequent stages planning,tender,construction,legals,lade registry etc.

How mad is that ?

@Cliff Barnes wrote:

We get the digital survey done before design – its “frozen” and use same for all subsequent stages planning,tender,construction,legals,lade registry etc.

How mad is that ?

Yeah, I was used to that system myself Cliff.

I couldn’t understand myself what Zoe were doing messing around with ordinance survey maps for the planning applications.

It seemed entirely illogical to me.

But if you accept the fact that the architect is trying to optimise their race over one mile, and the property developer is running a much longer race, I do believe that Zoe managed to claw back the apparent in-efficiency of doing the drawings twice on different surveys . . . . . later on, when they had to do three or four hundred individual legal maps to produce for the land registry.

We are going to be dealing with similar problems in relation to NAMA lands. That is really, why I posted the above example from my days at Zoe developments. To illustrate that sometimes what one thinks is efficient, in the long, long, long run . . . as in the case of NAMA for instance, may not be the case.

You are still entitled to your opinion Cliff, and either way, I probably would not argue.

But do bear in mind, the legal side of the process is not based on digital surveys.

(Don’t ask me why that is, I haven’t a clue)

Now that I think of it . . .

I think it was to do with the fact that Liam Carroll’s sites were made up of a maze of small plots all joined up together in a weird and Byzantine maze of legal agreements and clauses.

You see, sometimes Liam would buy the ‘airspace’ overhead existing shops and so on, and after construction was completed, give back the ground floor of the development to the original shop owners, with other add ons such as car spaces, a couple of apartments and so on. The deal was never, never straightforward.

That is why it made sense to stick to the ordinance survey for planning and legal stages of the pipeline. Even if it meant a lot of extra work, the waters did not get as muddy. You could say we were trying to avoid unnecessary overheads of time and money in court with solicitors being paid by everyone.

Even at that, we still did spend enough of time in the courts, with everything running smoothly.

I don’t know if that will apply to NAMA or not, but in certain cases it might. Especially where NAMA is attempting to make good on toxic assets by acquiring the right neighbouring properties and so forth to make the scheme viable.

I know that NAMA are promised some extra powers in that regard, which Liam Carroll would not have had access to.

But nevertheless, in common with Liam Carroll, NAMA still needs to get the best possible value back from investment in construction on behalf of the client, who is the taxpayer.

Not only in terms of overall project viability, but also in terms of project administration overhead.

That is the point I am trying to emphasize.

Brian O’ Hanlon

Economists whilst acknowledging that this was the only course of action made one negative observation of this process; namely the ‘Knoweldge deficit’ which was created by breaking the direct linkage between the portfolio and the people managing the portfolio who better than anyone knew its strengths and weaknesses.

This was the thing with Liam Carroll. He knew his portfolio backways. Even with the example of Dalymount park, a site that will potentially end up in NAMA. In that instance, Liam used no more than the change in his pocket to ‘test the waters’ and see how the local authority would react to his name alone being attached to the site in the form of some land deal. All he bought though was an option to buy. Like I said in the post above, developments where Liam was concerned were never straightforward.

I would strongly argue that in the case of Dalymount park, the local councillors made it un-economical for anyone to develop the site, with the Local Area Plan they introduced into law. That of course, was based on a false assumption that Carroll was the outright buyer. We will meet a lot of situations with NAMA, where we will have to go back to the drawing board again to come up with better schemes. In order to recognise the fact that now, we ourselves are effectively, the outright buyer. It is a kind of socialism in anything but the name.

I know NAMA will have powers to acquire land beside their sites etc. But in the past in Ireland we witnessed a time in which developers could be seen to have added some value to the process, by being the ones who made all of the deals, to acquire a site necessary to build on. It also meant of course, that the Irish government did not have to be seen, to be dealing with that sordid kind of stuff. We avoided any stigma of socialist type government intervention. We wanted to portray an image to the world of a country that was ‘free’ from socialism. That is probably why NAMA is not going to handle any of the deeds either. That would be a clear statement that private property was being socialised.

In the case of a lot of Dublin sites, I don’t think NAMA is getting the site nice, fresh and clean. If my experience working for Liam Carroll is anything to go by at all, what NAMA is getting is something that is a very complex set of relationships between interested parties. Take Cherrywood Science and Technology Park as a perfect example. With the local authority even ‘claiming’ a third of the land. How do we even begin to define what third is their third? That is the kind of legacy that Irish developers have left NAMA to deal with. That is why I don’t understand how 50 lads in the National Treasury Building are going to deal with it. They won’t be able to.

Brian O’ Hanlon

@garethace wrote:

This was the thing with Liam Carroll. He knew his portfolio backways.

The large developers all do know their assets backwards.

To be highly sucessful you don’t need a large number of assets; take Paddy Kelly buying the Saratosa scheme in Florida for €47m in 2004

http://archives.tcm.ie/businesspost/2004/02/22/story580533292.asp

He could spot a bargain and if he had spent more time developing that scheme quickly and getting it to market a couple of years earlier he could have made mega bucks from that one project alone.

Other really good investments include Gareth Kelleher taking over the Chicago Spire which will reap the benefits of the rebound in US sentiment or Derek Quinlan buying into Paddington Basin in London which is securing a really impressive tenant line up against a lot of competition or Dermott Desmond buying and selling London City Airport not that DD would ever end up anywhere near NAMA.

Even the aptly names Chinese Real Estate Oportunities Fund spawned by Treasury Holdings to become one of the largest European funds active in China.

A lot of Irish people are very talented when it comes to Real Estate.

The problem came for some when they left their core business and played the stock market or were unlucky with their timing like Paddy Kelly with the Florida development where the local market collapsed around the time he needed serious unit sales; which would have been very easy to attain in say 16 of the past 20 years and probably 15 of the next 20 years.

@garethace wrote:

In the case of a lot of Dublin sites, I don’t think NAMA is getting the site nice fresh and clean. What NAMA is getting is something that is a very complex set of relationships between interested parties. Take Cherrywood Science and Technology Park as a perfect example. With the local authority even ‘claiming’ a third of the land. How do we even begin to define what third is their third? That is the kind of legacy that Irish developers have left NAMA with.

It is well known that Cherrywood was set up in the mid 1990’s as a joint venture beween Dunloe House, British Land and the local authority. The local authority have always been difficult on that site even with the previous owners where it is well known that the council objected to the Dell letting on technical grounds. Not being funny but how anyone can object to a deal with Dell; particularly as they were the hotest thing in computing at the time 10 years ago; I will never know.

But to move away from the past we need to look at the future and how the €90bn is going to be made back. It is certainly not going to be made unless an active asset management strategy is put into place.

1. Hiring staff from the key groups to fill the knoweldge deficit

2. Strategic planning based on key exisitng employment locations and existing transport corridors

3. Completing part complete developments at almost all locations and inject / guarantee construction finance to commence developments at locations identified in the strategic plan e.g. North Docklands, James’ St area proximate to Heuston

4. Maximising income from completed developments to offset NAMA interest costs; As rental values have held up remarkably well so the presumption must be that there is if product goes to market the potential to secure income and build credit histories for the tenancies in new properties under management to reduce the perceived risk profile.

5. Spinning off portfolio’s of performing assets to the investment markets either as REIT’s or individual assets; preferably the former in a phased fashion where a series of percentage based Initial Public Offerings would be made followed by a planned disposal of stakes over a period of time. There would be a strong appetite for above government debt returns from private investors chasing yield.

The principles driving NAMA should be more Temasek than Northern Rock; they should move with the economic cycle and ramp up production and disposals when the cycle permits and cut head count when demand falls. I doubt anyone predicts any further falls in demand; regardless of country of residence it will be a vry long time before any of us see a 24 months resembling July 2007 – July 2009

@garethace wrote:

In some ways the NAMA process will be like floating Russia’s national oil industry assets into a new private economy. We all know how that turned out. In other ways the NAMA project, will be the opposite. It will be about placing assets into some national hold all.

Other than Liam Lawlor I doubt any of us would ever be able to adopt the Russian model culturally and in terms of governmental infrastructure we are simply too different.

Thankfully unlike Russia there is also the existance of a large, (over an economic cycle) solvent and educated middle class which comprises the majority of the population.

The key will be identifying what demand the demographic position can produce over a series of cycles and maximising value from what already exists to facilitate that process.

It is not rocket science to

1.Identify demand,

2.Complete half built units for the two years and rentalise where sales are not acheivable

3.Best placed units from the extensive landbank over the next three thereafter.

4. Have developments adjoining key infrastructure projects such as interconnector, Northern Line, Adamstown ready for delivery to coincide with the project.

The only way to realise the full value of NAMA will be to trade out of the postion over a 15 – 20 year timeframe. The sooner International markets see a detailed action plan the sooner the spread between NTMA bonds and Bund will shrink to the 50bps target and thereafter below; clearly that is something all want to see – throwing assets into a hold all to rot will not solve anything; conversely NAMA should

1. Hire senior investment and construction managers to repair the knowledge deficit as a lot of developers will be doing other things in the future

2. Immediately investing in completion of projects that have a viability taken on a land value of zero and renting those units out into the medium term until values recover or rental values rise year on year to produce an investment yield that creates value exceeding the total of all input prices and the return produced over the period by the risk free investment i.e. government bonds.

3. Extending finance to developers in Joint Ventures to develop schemes where demand clearly exists and where the land value’s NAMA paid the bank can be exceeded allowing a fair margin for both parties to receive a return to cover profit for the JV partner and a profit to be set against losses for NAMA on less viable projects.