National Asset Management Agency
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@PVC King wrote:
I do think we have heard enough about Zoe developments;
yep
I appreciate the case you presented above. I know that someone has to put forward the case for NAMA. To articulate and show how it could work.
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.
I can see that NAMA would be crucial to getting us around the present land valuation problems. Basically, at the moment there isn’t any sensible way to value land. No one could tell you what it is worth. Lets remember, that with Irish developers it was access to that one key commodity, land, which appeared to give them such tremendous bargaining or ‘strategic’ influence in business. That was the common perception of developers during the Celtic Tiger. That perception is what drove most of it. But it ensured that Irish developers relied too heavily on the factor of land being worth so much. They didn’t manage to extend their talents in other dimensions. I suppose that is a legacy of the corrupt political land game in Ireland. We only developed skills there, no where else.
I call it the ‘Bertie Factor’. It sort of bent economics out of shape. Now that key advantage has been taken away from developers, they are rendered powerless, or so it seems. It shouldn’t be that way. Developers should be able to add value in other dimensions other than having ‘the inside track’ in terms of access to the land commodity. Those dimensions were not exploited at all by Irish developers. They never learned how. One could argue that the current depression in the Irish property cycle, is a result of a false counter-perception. That developers who have lost the value of their land are now powerless. Yes, losing value to one’s land is a massive hit, but it should not render them entirely impotent either. Irish developers seem to be shell shocked at the moment. They seem unable to fight their way out of this, because the one dimension they understood, that of land value is not working for them anymore.
I always made the argument, that one has to add value to land by the way in which you do something on it. That is where I do get into such conflict with the architectural profession whose ideas of what you do on the land, and how you do it are different from mine. But then again, I have gone through different schools. I wrote something about my time developing industrial zoned land at Designcomment blog, entitled ‘Far Away Hills’, which I am quite proud of. I know it is written in somewhat colloquial terms, but I think it conveys the key points and my ideas about different ways to develop land. Personally, I didn’t see much point in someone who understood stone quarries becoming a house builder. But I might be wrong on that score too.
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.
I take your point about NAMA profits being set against less viable projects. For sure, Gerry McCaughey could see that potential even on the scale of a single scheme. Whereby the British government would allow you £60k stirling per S&A dwelling unit. Basically, the profit from the project was off setting the loss on the S&A units. Some builders were good enough at what they did, that they could still make it work.
Brian O’ Hanlon
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Reality Bites
For my money the really important piece written in yesterday’s newspapers was by Dearbhail McDonald, Legal Editor of the Irish Independent newspaper.
A high-level working group yesterday called for a referendum on a new intermediate court that would act as a final court of appeal for all civil cases, unless they involve cases of major public or constitutional importance.
But attention was drawn by a radio interview this morning to Stephen Collins ‘Inside Politics’ in yesterdays Irish Times.
Sadly, the history of independent Ireland has proved that his confidence was misplaced. The dominating feature of Irish politics has been a short-sighted scramble to placate vested interests with public spending programmes that have regularly undermined national policy on almost every front, from health to industrial development.
http://www.irishtimes.com/newspaper/opinion/2009/0808/1224252236325.html
Certainly, there is a debate starting to emerge on the notion of ‘getting back to reality’. That is what ACC bank have been tremendously helpful in doing in Ireland.
But the only point I would like to make, is that we cannot get back to reality in Ireland, because there was never a great deal of reality to begin with. In my Designcomment blog entry about ‘Adding Value’ I refer to the price the Irish nation paid for its corrupt history in relation to land. It has had the impact, that now that the land dimension to ‘adding value’ has been extinguished, we are flat footed. We were a one trick pony.
Then in the Designcomment blog entry about ‘Paper Airplanes’ and ‘Far Away Hills’ I argue that the market was distorted by the Irish Taoiseach of ten years, Bertie Ahern. Ahern created an environment in which expertise and skill wasn’t valued so much as small time, opportunism – with a hint of Ponzi scheme-ing into the bargain. That is what made Ahern so popular for so long. The ‘little man’ could see he was harvesting the benefits of Ahern being in power.
In fact, in the end as I argued in ‘Far Away Hills’, even the big boys tried to be the little man in the end. With disasterous consequences, because the big boys really ‘organised’ production on a vast scale. When the little boys were making hay it wasn’t too toxic because they were only chipping away at a reduced scale. But when the big boys became the little men, it really became toxic for real.
Ireland is such a small island with such a small population density per acre, there is never going to be ‘reality’ in the sense that everyone craves for. We are going to have 2 no. major banking players and no more. We are going to always have ‘un-reality’ in the property market. But in reference to the Sunday Tribune article by Conor McMorrow:
‘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/
This aspect of Ireland and the market, the strange way in which it behaves should be a known known today. Ireland is the land of magic and make believe. We should understand what exactly did happen. Shane Ross was very descriptive in his explanation of it here:
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
We should not attempt to speculate. Now that this fantasy in relation to Anglo Irish bank has entered the domain of the ‘known knowns’ (something that was unsure when the government offered its guarantee to the banks last Autumn) we can use this knowledge to make a properly informed decision that Anglo Irish bank indeed has no future in this country. It’s only future potential way to source funding is through the Irish taxpayer.
That is why we do need a supreme court that is able to do it’s job. Rather than having to handle a case load of 200+ cases a year. We do need a referendum on the issue of an intermediary court in the land. In order to go forward and to progress.
The Liam Carroll case up coming is important to the social, political and economic well being of Ireland for the future. The fact it is being shoe horned in with 200+ other cases to me is the real problem. Companies such as Zoe developments know the legal system is broken. They know they can throw as many shapes, and blow as much smoke in everybodies face as they wish.
Because the fact is, the Irish people is about to accept €2.3 billion worth of Liam Carroll’s debts. But we will never get a faithful and correct transcript of what did happen between the banks and Carroll, in order for us to make a better decision in regards to NAMA going forward. We are working with an incomplete picture of the past, at best. Companies such as Zoe will do everything in their power to ensure it stays that way.
Brian O’ Hanlon
@garethace wrote:
You see, this is the same point I was making to Kerry Bog late yesterday evening in the ‘Liam Carroll’ thread, about Economist professors and commentators (Constantin Gurdgiev, Pat Honohon, Morgan Kelly etc intelligent as they may be) who write articles and blogs about NAMA.
Garethace,,
I’m putting this here as it is more appropriate. It is nonsense for O’Dalaigh to now , after the creation of NAMA, talk about what could/should have been done ; it wasn’t, we are stuck with what we have and we must make it work. What we need to do is to ensure it gets full support and both positive and negative criticism.What O’Dalaigh has to say is on his site is interesting, with McWilliam-esque quotes, albeit to promote his book. From what I could read, (here in the vastness of my Kerry estate, my dongle is limited to dial-up speeds) I agree with O’D on many aspects, such as fiduciary duty (which I earlier wrote about as financial probity) and on the need to fire all senior lending bankers, which I also mentioned earlier in a comparison to the firing/retiring that happened when Insurance Corp. of Ireland failed.
Gurdgiev is an academic, free to say what he wants without toeing any party line, unlike economists from the IAVI or the financial institutions( a class of financial prostitutes). The merit of Gurdgiev’s freedom is counterbalanced by a lack of inside knowledge on what is taking place at a senior level in those institutions which forces (allows?) him to speculate on gossip, such as the rumoured acquisition of ACC by BoI/AIB. There are lots of bored underworked bankers out there with nothing to do but gossip, so speculation is rampant. Most is plain BS.
The notion that Ireland has just one bullet in its NAMA gun is both correct and very scary – the old shooting maxim of “Never hunt a bear with one bullet in your gun†comes to mind and Ireland is deep in the bush with lots of bears. For me, Scary Item No. 1 is that nobody yet knows anything of worth about NAMA. To date, never has so much been written by so many who knew so little. NAMA has to work, or Ireland Inc. is screwed for many generations. NAMA has to work, because it is the only hope we have, as we already are financially committed. The big question is how long it will take? The longer there is inactivity the closer the time to intervention by the IMF. It must be got right (not just launched) soon, and already it is months behind schedule. It cannot work in isolation; many other inputs are necessary to create an economic microclimate surrounding it.
What needs to be done 1 – Communication
The first item on the agenda is communication. Neither the Govt, Opposition nor NAMA (now gagged) has said anything of merit on the “What/Where/When/How†of the NAMA solution. Part of that communication is to gain public support. Without communication there cannot be public support and NAMA will be mired.What needs to be done 2 – Rolling Heads
Heads need to roll. I’m not suggesting a bloodbath or a witch-hunt, but the level of incompetence shown by politicians, bankers and regulatory bodies is enormous. Even today, right now, imagine any CEO & top management of a business deep in the organic fertilizer going off on several weeks holidays ? If the Opposition and minority party were any good they would be in Kildare St NOW and shouting ‘Where is everyone?’ Bertie can say goodbye to the Park (which is why Mammy O’Rourke is sniping away and yapping at every opportunity), Cowan should go; he, (like Noonan was) is a nonentity, no vision, out of his depth and there only because of popularity within his party. Bankers – where rules/probity/fiduciary duty have been broken they should be fired. A board approves lending guidelines, a credit committee signs off on them and an audit committee monitors them. What in God’s name was happening at Anglo? BoI? AIB? Nationwide? ILP? Regulator – I do not buy the story that Neary knew nothing. Banks of necessity have recordings of key telephone conversations. There are minutes of meetings. Where are they? Have they been demanded? Are they under lock and key? Have they been wiped/shredded? How complicit were/are the Regulators & government in a cover-up? (“Ssssh, it’s in the National Interest.”)What needs to be done 3 – Triage
NAMA needs to assess the developer and construction sector like a battlefield medic, sorting the victims into leave to die, leave aside for non-urgent treatment and those needing immediate attention to survive their wounds. Somewhere you wrote suggesting bulldozing some developments was overkill. I disagree; here in Kerry many villages have large numbers of new houses either part-built or finished and unoccupied. There is no local village industry other than declining tourism, so no employment. Often badly sited, too frequently badly built, no one wants to buy those properties or can get the money to do so; an option of a co.co. buying them exists, but who can rent them, with no local employment or transport to a bigger town? (Q. ‘What time is the next bus to Killarney?’ A. ‘Next June. Sir.’) Leave them and they will become a blight, spray painted ghettos, playgrounds for unemployed teenagers. Leave those that are roofed, bulldoze the rest.What needs to be done 4 – Foreign Banks
The most foolish mistakes are made by new market arrivals. British banks and insurers are the worst – (‘We’ll show Paddy how it is done by professionals’) – and they bugger about and create havoc with the market. Back in the late 80’s when Barclays entered it did exactly that, before retiring bloodied and bruised to wholesale banking in the IFSC. Foreign banks led the way on crazy lending, joined by bonus-hungry unethical lenders in Irish institutions. We have too many banks. The govt. should state that the govt. guarantee to foreign banks will expire now, existing deposits at today’s date being covered..What needs to be done 4 – Debt management.
NAMA must actively manage its portfolio and while it needs input from experts many of those are strongly tainted and probably to sharp for public servants. Outside help should be hired on contract with non-compete clauses. Banks must not be allowed roll-up interest without permission from the Regulator and must actively pursue delinquent developers (which is what ACC is doing.)Loans with breaches of covenants should be called and guarantees enforced. The difficulty – and it should not be underestimated from a timescale perspective – is the corporate structure of the developer groups. Most have entities with ‘unlimited’ status but invariably the ultimate holding company is limited. A softer approach on personal guarantees should be taken with those who cooperate, make full disclosure, etc.
What needs to be done 5 – Public Service
Public servants have taken to describing themselves as ‘managers’ and now delegate everything to consultants who often provide the politically required result, not necessarily the correct one, nor the one the consultants believe to be the most effective. Public servants should do what they are paid to do – work. No more consultancy reports without a definite and publicised reason as to why public servants cannot produce them. We cannot afford the existing number of local authorities. Merge them, three would be enough Connaught/Ulster; Leinster; Munster. Cut the staff as part of the process. The average number of ‘Sick days’ per employee in every Govt Department should be displayed on all that Dept’s correspondence.What needs to be done 6 – Redundancy payments
Redundancy payment should be capped at 6 weeks per year to a maximum of one and a half year’s salary, for everone, public servants, bankers, etc. How Neary was treated after the total mess he made of supervision makes me want to puke.What needs to be done – construction professionals
We have enough office space and residential units to keep us going for a few years. We need to export jobs or import services – i.e. lose some professionals to work overseas and those who remain will have to develop an export business to survive. Tough, but that’s life, lots of us had to do it in the 80’s.Rs
K@PVC King wrote:
The principles driving NAMA should be more Temasek than Northern Rock;
I agree fully, I’ve long admired the Singaporean model. However, with personal experience of Temasek and public servants in both Ireland and Singapore our guys would just not measure up to what Temasek does. Not a hope.
Rs
K.Of course, it is not really in China’s interest to stop the scheme, even if it wanted to, because its own economy would likewise blow up. Satyajit Das, a credit derivatives expert in Australia, likens this to stepping on one of those land mines that are activated by the weight of a victim’s body. As soon as the weight is lifted, the mine explodes, and the person’s leg is blown off.
China is thus frozen in place, damned if it does and damned if it doesn’t. It’s a classic Catch-22. China’s cache of U.S. bonds isn’t worth anything unless the bonds are sold. But selling them on any kind of scale will gut their value.
how does this relate to nama? should the value be 0 until they are sold?
The big question is how long it will take? The longer there is inactivity the closer the time to intervention by the IMF.
Nice way of putting it. The dogs are at the door quite literally. I think it is a real pity the intermediary court of appeal isn’t up and running. It would offer a very useful service to the Irish recovery strategy. It would enable us to sort out the companies who really created terrible example for business as a whole in Ireland. That element will not be a part of this recovery in Ireland, more is the pity.
So it means that many companies will go into the next upturn, not being fully equipped in terms of corporate morals. It is a younger bunch we will be sending out the next time too, who would have benefitted enormously from the added back bone in their boot camp training. I hope that the universities and business colleges at least can take up some of the slack here.
I sometimes wonder what were we doing during the Celtic Tiger, when we had all of the money in the system to tackle a number of key things such as that. Things that would help us out enormously today. It seems like Ireland Inc. is scrambling to dry land, on a number of fronts, while still battling against a raging torrent of bad chance. (A perfect storm in the case of many Irish builders)
A quite elderly friend of mine raised a point not so long ago. That Ireland should have been taxing itself more when it had the money. In order to be able to tax ourselves less, to give ourselves some breathing space now that we are drifting at sea again.
It must be got right (not just launched) soon, and already it is months behind schedule. It cannot work in isolation; many other inputs are necessary to create an economic microclimate surrounding it.
I think myself – and I would love to spend my time poking holes in NAMA, and analsing its obvious weaknesses – this is the kind of program management view we need to take today. We need to stay somewhat on program.
Even today, right now, imagine any CEO & top management of a business deep in the organic fertilizer going off on several weeks holidays ?
You are right, I can’t imagine it.
What in God’s name was happening at Anglo? BoI? AIB? Nationwide? ILP? Regulator – I do not buy the story that Neary knew nothing.
I can tell you when I knew there was something strange afoot. I hadn’t been watching too much news, or reading too many papers at that stage. Last September 2008, I were sitting on the top floor at Debenhams in Henry Street eating some lunch, while gazing out at the crowds streaming up from the Ha’penny bridge. There were a lot of people on the street that day all going about their business. It is a funny thing, I managed to pick out one of the financial directors from Zoe in the crowd from a mile away. I knew he had the inside view of what was going on. He begged for all the cheques that he received from Liam Carroll.
But on that day, he was easy to pick out of the crowd, because the sheer stress had become part of his stride, part of his own body. He seemed to have aged twenty years all of a sudden. It was frightening to be honest. There I was sitting up in the top floor of a building, and I could pick out easily the one guy down there who could see it all collapsing. He was probably thinking about his own reputation and his future career. He was far too young to be caught in this mess. I don’t know. I said it to him later on that day, to relax, he looked very tense. He was doing the best he could to cope, but I knew he had reached the end of his patience with everyone he was dealing with.
NAMA must actively manage its portfolio and while it needs input from experts many of those are strongly tainted and probably too sharp for public servants.
I wouldn’t want them to be my public servants at all. But then again, there is no point in our public service wasting another 2 years trying to figure out the ropes, while the time is against us. A difficult balance will have to be struck between existing knowledge of how the building system work(ed) and introducing a fresh layer of over-see-er’s who are competent enough and confident. Hopefully we will see fresh new talents emerge from all of this, who will be able to lead the way into the future. Bearing in mind though, whoever deals with the ‘toxic material’ is going to be exposed to an unknown degree of sleeze and rubbish, not meant for human consumption.
Peter Bacon should have made a ‘Y’ for that factor in his NAMA report, to go with the ‘X’ factor in relation to the haircut needed for NAMA to take possession of loans.
Chances are, out of the rescue-ers at NAMA we will probably see the next Charles J. Haughey arise, who knows every trick in the book. That is part of my motivation for wanting some of the older, existing players to be supervised and paid to go in and sort out the toxic waste. I would like to get involved in some capacity there. We simply cannot afford to expose some of our brightest and best (a club which I never claim membership of) to some of what will be uncovered. It is too risky. The toxicity levels are simply too high. We have to do more than Russia did with Chernobyl: they gave guys a shovel and an ID badge.
Public servants have taken to describing themselves as ‘managers’ and now delegate everything to consultants who often provide the politically required result, not necessarily the correct one, nor the one the consultants believe to be the most effective. Public servants should do what they are paid to do – work. No more consultancy reports without a definite and publicised reason as to why public servants cannot produce them.
I agree.
The OPW being a prime example. The OPW needs to work. I used to meet my friend who works in St. Stephen’s Green OPW at Stillorgan for lunch on a regular basis. Driving to Stillorgan for lunch time. Now if that isn’t ‘fifty years ago’ I don’t know what is.
Or else what is the OPW doing there? I know it pays out wads of fees to consultant architects and engineers who proceed to squander the money in the state’s coffers. I wouldn’t mind, but the OPW have some of the best trained staff in the entire country. Doing nothing except creating Bebo sites. We have backed our public service into a complete corner as regards to their being able to contribute to society and to the economy. It is all bullshit.
We cannot afford the existing number of local authorities. Merge them, three would be enough Connaught/Ulster; Leinster; Munster. Cut the staff as part of the process. The average number of ‘Sick days’ per employee in every Govt Department should be displayed on all that Dept’s correspondence.
It is the building professions in my experience are the most to blame. They have wrapped up this cosy little deal between themselves and the Irish state very nicely. Yes it makes the professions viable, but it doesn’t make any economic sense for the Irish state. It doesn’t make economic sense for the professions anymore either. Because the State will not have any money left to pay them after NAMA gets started up.
So all bets are off. Until the private sector of the economy which has shrunk down to a third of what it was (Irish Stock Exchange fell from 66 billion in value down to 20 something billion, losing 44 billion in the process) is able to recover, the public service cannot expect to return to it’s business as usual. I hope it will never again return to it’s business as usual either.
How Neary was treated after the total mess he made of supervision makes me want to puke.
I’m sorry I didn’t follow that story at the time, but I will take your word for it.
We have enough office space and residential units to keep us going for a few years. We need to export jobs or import services – i.e. lose some professionals to work overseas and those who remain will have to develop an export business to survive. Tough, but that’s life, lots of us had to do it in the 80’s.
I think the existing model for construction professionals was un-sustainable long before the crash had finally occured. I still believe we need some projects to go ahead. They only get more expensive as we delay building them. That is a fact. Think about all of the underground line that the Irish pony boys built over in London of the sixties. Yeah, it was before a lot of mechanisation and technology. It happened slow and on/off. But it did happen.
We can wait another 20 years in Ireland to do certain projects, that are going to be needed by then anyway. It is going to cost us an arm and a leg to bring back everyone and grow the industry necessary to support certain project undertakings. We have that industry in Ireland now, that is one of the few benefits of the Celtic Tiger. I agree with you, develop an export model and send our industry on foreign contracts, where speed, ability and quality is required. We can compete anywhere in the world. But in the meantime, lets do a couple of the most needed projects in Ireland and finish them out.
By the time 20 years passes and we are on stronger economic footing, we will need to be paying down what is left of the NAMA project. Clearing that debt for good. So it would be a pity in 20 years time, if we had to pump massive amounts in one short period into necessary projects for the good of the country. When I believe, we could be planning and going ahead with them now, at a much cheaper albeit much slower rate. You are right, the export orientation is the way to go. But a balance will need to be struck with national needs too.
The problem in the Celtic Tiger was the ‘big things’ didn’t happen. Because for 10 years that clown Bertie Ahern made the environment such that it was more profitable for all the big men to behave like little men. I worked with some of the best project managers we have in this country (not at Zoe, Zoe didn’t have any of those kinds of men) and they were reduced to flogging off two storey houses to make a few bob. It was way beneath what there capabilities are.
There was nothing happening for them on a larger scale that they could manage and use the skills they were born with. Then the little men, (such as Zoe developments) got all sorts of notions above their station and went off building shopping centres etc without a bull’s clue.
Now that does make me want to puke.
There is nothing wrong with being a small man, like Zoe developments were very good at doing, if you stick to that. That is why I made my blog entry about the Ford Cobra. But to try and go after the big stuff, and believe you can do it, because of some s**** about your being the ‘Ryan Air’ of the construction industry, is completely off the rocker.
You are absolutely right in your analysis. Liam Carroll drove a second hand Japanese car. So what? He ran the best [little] company ever created in this country into the ground, and didn’t give a damn for the men and women who had served him in what capacity they could for 20+ years.
Enough said. It feels good to be awake now, finally.
Brian O’ Hanlon
Something in today’s Independent newspaper about the department of Finance.
The creation of NAMA is another, even more spectacular example, which saw Peter Bacon tasked with the job of saving the country.
Dearbhail McDonald, Legal Editor in today’s Independent newspaper:
“The NAMA bill introduces sweeping changes to legal practice in the areas of litigation, corporate recovery, banking/security and property law,” said Mark Woodcock, head of corporate restructuring and insolvency at law firm McDowell Purcell. “It appears to attempt to greatly facilitate the daunting task facing the agency.
http://www.independent.ie/business/irish/nama-to-be-protected-from-raft-of-lawsuits-1855532.html
Brian O’ Hanlon
Step back and see the wood for the trees. Would anyone agree that all this talk of Nama is irrelevant in any medium term outlook. Our era of cheap credit, where ‘Growth’ was predicated on increasing oil production is over, Oil production has peaked and now we are on the down side. In a contracting economy, asset prices will further devalue. Are we not best to abandon the illusion of growth? We need to resist the impulse to continue this charade untill the foretold impending recovery, which in actuality is likely to be a mere ‘dead cat bounce’. The 4 horsemen of the Apocalypse; Peak oil, climate change, groundwater polution and limits to growth will define the next half century. The collapse of our speculative land market and its associated equity’s is only the harbinger of the challenges ahead. We need to adress new problems with new solutions, not the mindset that created this problem. To say that we will never see a period as bleak as 2007-2009 is laughable. Before the decade is out we will wish that things were merely this bad. Our economic and political experts know only 2 approaches, 2 forward gears, Keynes and Smith, they fast need to learn Descent economics (de-growth).
Faq’s Some department of finance propaganda.
http://nama.ie/Publications/2009/NAMAFAQs.pdf
Nama and planning.
http://www.irisheconomy.ie/wp-content/uploads/NAMA%20and%20Better%20Planning.pdf
Keating,
Yes, we do need to stand back. I agree with you. The whole NAMA project, as large and all as we imagine it to be, is contained within a much, much larger picture which you properly point out.
I hope your kinds of brains are on board with NAMA. I really do indeed. It is not really my department. I am most comfortable down at the other ends, where the plumbers, brick layers and electricians do their stuff. I have their interests in the back of my mind most often. Like I have said elsewhere, to maintain and manage a tidy and efficient production line. But from time to time, I do raise my head above all of that.
Reinventing Collapse
Feasta had invited Dmitry Orlov, author of Reinventing Collapse to speak at their conference this year.
http://cluborlov.blogspot.com/2009/06/definancialisation-deglobalisation.html
I read some of the transcript of his lecture to Feasta. I had to say, I found his points very useful indeed in my only [small] life where I converse on a regular basis with other simple folk such as plumbers and electricians. I found Orlov’s arguments excellent in conveying to other partners in the construction industry, what our collective future may indeed look like.
Particularly in relation to the points about peak oil and peak credit. I think that Orlov wraps them together quite interestingly in his writing.
Thanks for raising this point and making the contribution. I don’t know if Archiseek already has a National Spatial Strategy thread, but in any case, I began one for general comment or contributions here:
https://archiseek.com/content/showthread.php?t=7765
My real 4 horsemen of the Apocalypse are:
– Better education for architects about Energy Conservation and Energy generation. Architects need to get informed when it comes to energy. To achieve the most efficient expenditure of scarce available capital, a deal will need to be struck between services engineers and architects. In many cases, a more efficient boiler, though it might not last as long as a less efficient boiler, will be a lot cheaper than energy conservation measures that are purely about walls and architectural stuff. I am all for passive design, but lets be realistic in terms of investment.
– Better education for architects about the Smarter Economy, much like a generator in its own right. I look forward to the day when Sean O’Laoire writes his blog about the workshop he attended with Frank Duffy of DEGW consultants in the UK.
– Much better education for architects in relation to urban land economics, and therefore of smarter and more intelligent planning coming from them.
– Better education for architects in efficient use of the scarse capital we do have available, such as the skill displayed by Turner and Townsend program management consultants to Dublin Airport Authority.
Education for Architects
In short, education (of architects in particular) is a big part of the solution I describe. There will be work for a lot of architects. We need to change the way we go about our business though. Architects in the future will be able to communicate better which a much wider spectrum of other educated individuals and groups. That will enable architects to move deeper in business itself, and probably into government or politics also. I think that was the basic program that Sean O’Laoire tried to bring to light twenty years ago or more. It would be nice to see some of that come to bear fruit.
Brian O’ Hanlon
@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
I’m not a lawyer so I’m open to correction.
Deeds show who owns an asset, charges show the extent of the financial interest somebody has in an asset..NAMA it appears will be able to take ownership of both without having to register its interests as owner and/or mortgagee.It actually makes sense to me – NAMA just steps into the shoes of the lending bank on the same terms and conditions and with the same rights that currently exist on a mortgage. It also can take title, if done amicably, or go to the courts to foreclose on a mortgage. It is not clear if NAMA effectively becomes a silent partner, pulling the strings that make the bank act as directed or if NAMA will take over the actual management of the account themselves – I’d hope it is deliberately open to allow them the option to do what suits.
No harm in non-registry as an owner or mortgage holder, but some benefits would acccrue – no additional paperwork (requisitions on title, certs, etc.,) no tax or stamp duty liabilities on acquisition or transfer. On the sale of the asset nobody would know whether or not it was a NAMA /developer or a bank sale, which could make a difference to price negotiations. Clauses (b) and (c) copper-fasten NAMA’s rights contained in the above.
In the unlikely event of second bank lending on an above-described asset, there is no difference either, as the first charge held by the original bank is one and the same as the unregistered rights of NAMA and the new lender’s charge would, as anticipated, become a second charge.
Rs
K.Deeds show who owns an asset, charges show the extent of the financial interest somebody has in an asset..NAMA it appears will be able to take ownership of both without having to register its interests as owner and/or mortgagee.
There is a crucial aspect we need to remember in relation to the Celtic Tiger development boom. That many borrowers were using their lands as a collateral with which to obtain loans for development, or to buy more land. Of course, those developments and land deals ‘forward’ from the collateral land went bad also. When things became difficult or impossible to ‘value’ the whole lot became poisoned at once. The good and the bad. We have no idea of what is what any longer. There was a vicious circular kind of habit surrounding land that gained popularity in Ireland. I think it happened with the Dutch Tulip mania too, where people were buying shares in the Tulip bulb. That is basically why Irish banks cannot raise any finance today. It is no coincidence at all that a Dutch owned bank can see things a lot more clearly than we can see ourselves.
Where land is concerned, especially land on rail lines, roads, on the out skirts of towns etc. Mostly its only purpose was to use as collateral in obtaining finance. As the ‘value’ of that collateral increased you were on a winning streak. Every so often one could extend one’s credit line that little bit further if your land was re-valued upwards. Of course, when the land was de-valued downwards the credit contraction that happened domestically on this island was savage in it’s nature. It must be akin to the storm that hit Long Term Capital Management bank in the 1990s when the sea changed against it.
While a lot of that ‘strategically located’ land appears to be nice from a sustainable development point of view. Say, when an architect or planner looks at where we aught to build. The big problem is, exactly that land is the most toxic in terms of trying to untangle it and release it back into the private portion of the economy. Either as ‘land’ or with some form of development on it. It has been messed up beyond recognition. It wasn’t that builders ever wished to ‘build’ on these strategic land banks as I call them. They were the apple of most builder’s eyes. They were so beautiful the builders would go to their graves without so much as touching a sod on the land. The land bank was their life line to securing credit. If you didn’t have the credit, you were out of business.
The land banks was much more useful by not been occupied or developed, as you could place multiple ‘charges’ on it with various Irish and foreign lending companies. The fact is that, all of that toxicity has now to be un-wound over a period of time. Time is something that Ireland doesn’t have enough of right now. This is what I think is one of the key strength’s of the NAMA idea. NAMA will give us the time we need to figure out how we can unwind these positions in some kind of an orderly manner over a longer period of time. It is like one poster commented about the China purchase of US government bonds. If it releases the bonds on to the open market, the market will collapse. NAMA has to figure out a way to do it that will not precipitate a huge and sudden collapse. It is like that kid’s game where you pull out all of the pins, and eventually all of the balls come tumbling down.
Worse than the above of course, is that in certain circumstances the land was in the hands of joint venture partnerships, where one partner obtained additional charges on the land unknown to the other party. So if a charge can be defined as the ‘extent of the financial interest someone has in an asset’, then you can imagine how difficult it is to understand the extent of the financial interest in an asset, which is part of a joint venture partnership! As builders backs were against the wall towards the end of the Celtic Tiger there was enormous pressure upon them to grasp at any kind of straw at all, to extend their life span. I would submit that most of the real toxicity was created in the closing chapters of the Celtic Tiger. As builders struggled to artificially ‘support’ their interest in a land bank with more credit extension and thereby stay in business.
What we don’t know is how much of the above, has been uploaded onto financial markets in some kind of instrument there also. Then throw into the mix, the fact that the original land might be a confused set of legal agreements between partners who gave in the original deeds to make up the ‘landbank’. The mind simply boggles, it is like molecular biology. This is why ‘land taxation’ is so valuable – it is worth all our whiles paying a €600 fee per year – because it avoids much of the above. With little young turks over extending themselves in all kinds of weird directions, in order to own land or become a stakeholder in land in some way. Because we had no form of taxation on land in Ireland, all of this house of cards was possible to build. No one’s hands were burned by owning land. Land it was assumed, was safe. That was inbuilt into the Irish psyche. We never thought that something so close to our hearts would jump up and bite us.
It actually makes sense to me – NAMA just steps into the shoes of the lending bank on the same terms and conditions and with the same rights that currently exist on a mortgage. It also can take title, if done amicably, or go to the courts to foreclose on a mortgage. It is not clear if NAMA effectively becomes a silent partner, pulling the strings that make the bank act as directed or if NAMA will take over the actual management of the account themselves – I’d hope it is deliberately open to allow them the option to do what suits.
Speaking with a lot of people in the trade, I do get the impression that certain builders were more opaque in their dealings with their creditors than others. I do get the impression that those projects, where the main contractor plainly said to those involved and affected, the spout has ‘run dry’ are probably those projects which are not ‘toxic’ in any real sense, except that they are in limbo as a result of the credit flow problems.
We can debate at great length as to whether the credit problems are the result of only international turmoil – as the government understood the case to be last Autumn when the offered their guarantee to depositors – or whether many credit problems stem from domestic mal-practice in Irish companies who simply owe too much, they will never repay. That is a debate within itself. But what isn’t in much debate judging by the people I have spoken to, is that some projects could simply be started in the morning and progress without too much difficulty.
The point you make about NAMA requiring to have a number of options open to them, is a very good point indeed.
Brian O’ Hanlon
@garethace wrote:
………….It is no coincidence at all that a Dutch owned bank can see things a lot more clearly than we can see ourselves.
The conspiracy theory people would say that the Irish banks are doing what they are being told by the Dept of Finance and the foreign banks are outside that fold.
@garethace wrote:
……..Every so often one could extend one’s credit line that little bit further if your land was re-valued upwards.
That happened. It should have stopped when developers could not meet repayments and the banks then started to re-appraised upwards the land value to enable the developers remain within their loan covenant ratios. Inevitably the new credit was used to finance debt, not work. That was the start of the cancer.
@garethace wrote:
………..It wasn’t that builders ever wished to ‘build’ on these strategic land banks as I call them. They were the apple of most builder’s eyes. The big problem is, exactly that land is the most toxic in terms of trying to untangle it
No. Those land banks were the equivalent of ‘raw material in stock’, the basis for production next month/year/whenever. Fine, as long as they were not a depreciating asset. I dislike the word “toxic†in this meaning. Those land banks have a value, albeit at a lower level. Toxic is a word seized on by tabloid journalists because it sounds nasty. Correctly it refers to the securitized mortgage bundles on people who are jobless and have no hope ever of making repayments. Thankfully, Irish banks have little exposure to them.
@garethace wrote:
………… in certain circumstances the land was in the hands of joint venture partnerships, where one partner obtained additional charges on the land unknown to the other party.
I don’t see how this could have happened and if it did, one would have a very difficult task proving legality. Joint ventures invariably require joint signatures; charges must be registered and therefore are public. If Bank A has a charge on a site and Bank B lends on a secured basis, it registers its charge which becomes a second charge, unless Bank A agrees to it becoming a joint first charge on a parri passu basis, an event that usually is unlikely.
@garethace wrote:
…………. certain builders were more opaque in their dealings with their creditors than others.
Yes, that is why I said in an earlier post Ireland Inc needs to be stricter on the laws governing unlimited company status. Apart from the banks, it would have been helpful if many suppliers – including architects, engineers and QS’s – had a modicum of cop and basic credit control procedures. From what I’ve seen few of them did.
@garethace wrote:
……….We can debate at great length as to whether the credit problems are the result of only international turmoil – as the government understood the case to be last Autumn when the offered their guarantee to depositors – or whether many credit problems stem from domestic mal-practice ………
We had a property bubble. It cracked and in the scale of things it could have been repaired, with some pain. This was the expected so-called “soft landing.†However, the crack coincided with turmoil in money markets caused by the CDOs scandal in the US. That dried up liquidity. Then the world learned about the shenanigans at Anglo, Nationwide, ILP, etc., and very lax (or absence of?) Regulatory control. This was not long after the stink internationally over what happened in the IFSC on Parmalat and the German Landesbanks, so Ireland was not a place anyone could recommend lending into, thus Irish banks could not get cash and the taxpayer had to put its head on the block.
Rs
K.No. Those land banks were the equivalent of ‘raw material in stock’, the basis for production next month/year/whenever.
I mean, if the above was true, then look at middle tier property developers in Ireland. The middle tier development area is where the real skills are to be found surprisingly enough. The reason being, that many of those guys had quite successful and lengthy careers as professionals and consultants before they got into the property game late.
Bucket of Nails
The guys who started with the bucket of nails and a tin of paint made it to the first division yes. But they hadn’t an opportunity to learn and improve their minds, while fighting their way up through the leagues.
To the best of my knowledge the middle tier developers didn’t make the same monstrous mistakes either with regard to land. In fact, they operated on a different model whereby they disposed of land with planning permission attached for quite extensive developments. That is how they made their cut. Rather than wading in the whole way and ending up with unsold houses.
You could say they were like Japanese car makers, they needed less raw material and operated on smaller lots. Or even more accurate, they were like Nike who designed the runner shoe and got it made somewhere else.
Irish Towns
Of course, rarely were the schemes they gained permission for ever realized. There are thousands of them. You can check in the planning departments if you like. The Irish construction industry was getting efficient by 2006 certainly. But it wasn’t good enough to munch its way through a fraction of what was granted permission.
That was part of the point that Paul Keogh made remember in his essay about sustainable land development. That zoning in many Irish towns is much larger than what the tiny population could support.
It might be of interest to know that the architectural profession operates on a similar model. The successful architectural practices are successful and profitable because they never build anything. They get paid to come up with designs. They would rather they took something to planning stage and never heard or saw it again.
That is how the middle tier property developers made their turnover. They never laid a single brick often.
Making Masterplans
A lot of first division developers had ‘access’ to thousands of acres of land. But had not even got a developed stage masterplan for one tenth of it. Architects cost money. On the other hand, the middle tier developers had maybe 100 acres on the edge of a town somewhere, and a fully developed masterplan up to full planning permission grant approval stage.
But their plan wasn’t to hold onto the land for long. Only long enough, to sell to someone else with PP.
You see the difference? Different skills entirely. I would like to maintain the ‘classical economics’ position that land is a ‘raw material in stock’? I really wish it were so simple.
Owning IP
Intellectual property for instance is the best kind of property to own. You can sell it as many times as you like but you never give it away. (Within a 25 year period at least, but large media companies want to own Mickey Mouse and Donald Duck for ever)
You see a lot of fabless silicon chip companies today. Intel are one of the few left in the business who own and run their own fabs, while still designing the chips. But that model is getting tired also.
Classical Economics View
Sure land was a raw material in the neat theoretic sense of it. But the trick was to try and build on it in such a way that one did not sell the land, but earned as much rent as one possibly could with as little tenant administration or servicing as one possibly could.
Get the local authority to build and take charge, free of charge, as much of the basic civil infrastructure as one could. The developers didn’t want to build any roads. That is the only reason why local authorities were even tolerated and allowed to become joint venture partners. The local authorities thought it was to do with their ‘having a say’. Some hope.
Let the rabbits live on it
In a lot of cases, it was easier if you could hold out and not build on or touch the land at all. You will see the local authority kept their end of the bargain by laying the road and infrastructure. That is about it.
Building on the land and selling solved a minor cashflow problem today. But it didn’t solve anything tomorrow. Whereas holding onto the land and allowing lenders to take a charge against it, left you with a lot more options in the medium term. Even if you ended up losing the entire landbank eventually.
In the meantime, by not developing it, it was helping to keep you solvent. It bought you precious time, which struggling Irish builders badly needed towards the end of the Celtic Tiger.
Every 10 years or so the staff in the local authority would roll over and a new fad would emerge. Something like the ‘low carbon city’, so that planning directors could go to conferences and make a speech about some great new idea.
Still the land bank sat there and rabbits thrived in the weeds and long grass. Pheasant shooting was available in the more wooded areas and un-claimed horse populations roamed the plains. Architects went on making sketches to visualise even more ambitious plans in full pixel perfect photo representations.
Land Taxation
Land tax would put a stop to builders doing that. We could use profit from developing central and strategic land banks in order to offset the losses in the NAMA portfolio in locations where use reverts to agricultural. I would disagree. I believe we should take the hit up front where it reverts to agricultural values.
But then use the profits which NAMA can generate in order to ‘buy out’ any joint venture partners, legal deed interests or other charges against ‘abused’ land banks that are in the prime and sustainable development locations.
You would have to work with developers on a daily basis for a number of years to know how capable they are of ruining a perfectly good asset with all kinds of messing.
But in some cases unfortunately, like a true Ponzi scheme of things, the scandalous complexity of ownership and legal rights associated with our land banks may have began with the third last previous ‘owner’ of the lands.
But heck, you know we can agree to disagree on this little item. It can only make it more interesting. I think we are working towards a common understanding on most other fronts.
We had a property bubble. It cracked and in the scale of things it could have been repaired, with some pain. This was the expected so-called “soft landing.” However, the crack coincided with turmoil in money markets caused by the CDOs scandal in the US. That dried up liquidity. Then the world learned about the shenanigans at Anglo, Nationwide, ILP, etc., and very lax (or absence of?) Regulatory control. This was not long after the stink internationally over what happened in the IFSC on Parmalat and the German Landesbanks, so Ireland was not a place anyone could recommend lending into, thus Irish banks could not get cash and the taxpayer had to put its head on the block.
I like the way you layed out the sequence of things very correctly there. It is indeed interesting when you see it like that.
Thanks,
Brian O’ Hanlon
@garethace wrote:
I mean, if the above was true, then look at middle tier property developers in Ireland. I mean, the middle tier development area is where the real skill was to be found surprisingly enough. The reason being, that many of those had quite successful and lengthy careers as professionals and consultants before they got into the property game late.
To the best of my knowledge the middle tier developers didn’t make the same monstrous mistakes either with regard to land. In fact, they operated on a different model whereby they disposed of land with planning permission attached for quite extensive developments. That is how they made their cut. Rather than wading in the whole way and ending up with unsold houses.Perhaps I should have been a bit clearer. Land banks ARE the equivalent of ‘raw material in stock’ for developers and every investor examined the landbank held for e.g. by McInerney in the UK as it was an indicator of pipeline availability and the impact it could have on future earnings. That type of holding is quite different to what Paul Keogh described as “larger than a tiny local population could support.†A personal anecdote on this –speaking with a developer’s project manager on a local development, I said what they had planned was totally unrealistic for the area, as an ordinary businessman I could not see how it could be profitable and if developed would at best detract from and more likely devalue their other assets in the area. His response? “It is my job to get it built on time and on the budget I’ve been given; it is not my job to make that decision or make it work when built.â€
@garethace wrote:
The guys who started with the bucket of nails and a tin of paint made it to the first division yes. But they hadn’t an opportunity to learn and improve their minds, while fighting their way up through the leagues.
Not quite. This happens everywhere. It’s an old model that will always work at a basic level. The middle tier guys rarely get caught out on innovation. The old way is to say “he’s a great farmer/builder/whatever with 40 years of experience†but in reality he is someone who has 40 years of repeating the same thing, over and over. Those guys rarely fail because they never take a risk. “Be not the first on whom the new are tried nor yet the last to leave the old aside.â€
@garethace wrote:
…………Or even more accurate, they were like Nike who designed the runner shoe and got it made somewhere else.
Agreed. They did outsource, which is why we have no idea yet of the depth of the crap the construction sector is in. Lots of subbies are waiting for payment on sitework, blockwork, plumbing, etc.and hoping (in vain) that it will happen. It won’t. Developers continue to say “We are trading profitably†which possibly is true, but misleading, as they are describing earnings before interest, tax, amortization and depreciation. That does not mean a black bottom line or payment to suppliers.
@garethace wrote:
Then all of that became ‘securitised’ on the international money market, against future rental incomes off of this product.
I wonder. Really, was there that much rental securitization happening in Ireland? My guess is very little, if any. None of the factoring companies would touch rental factoring, afaik. None of the payment protection insurers were doing it, afaik. Unless of course there were some dodgy SPVs out there? Any examples?
@garethace wrote:Still the land bank sat there and rabbits thrived in the weeds and long grass. Pheasant shooting was available in the more wooded areas and un-claimed horse populations roamed the plains. (I am describing Cherrywood in case you haven’t noticed)
C’mon, that’s a bit OTT. The Foxrock/Carrickmines tinkers had/have a bit of grazing nearby; there has not been a bit of (game) shooting in the area for years, although I concede Loughlinstown once was a renowned foxhunting area back when the hunt met in Stillorgan (where the shopping centre now stands.)
@garethace wrote:
You mentioned elsewhere that we should use profit from developing central and strategic land banks in order to offset the losses in the NAMA portfolio in locations where use reverts to agricultural.
Not I (I think :))
@garethace wrote:
But then use the profits which NAMA can generate in order to ‘buy out’ any joint venture partners, legal deed interests or other charges against fecked up land banks that are in the prime and sustainable development locations.
No hope of NAMA generating profits – ever – unless it takes on assets at a deep discount, which seems unlikely on the available information.
Rs
K.Lots of subbies are waiting for payment on sitework, blockwork, plumbing, etc.and hoping (in vain) that it will happen. It won’t. Developers continue to say “We are trading profitably” which possibly is true, but misleading, as they are describing earnings before interest, tax, amortization and depreciation. That does not mean a black bottom line or payment to suppliers.
That avalanche is waiting to happen I can assure you. I had no more motivation myself, in raising the issues I have raised here at Archiseek, other than to dodge this problem in some way. I don’t think we will dodge it. A lot will depend on the Liam Carroll case today, and how much ‘reality’ is brought to bear in court. The subbies really make up the bulk of the industry. They may work on razor thin margins a lot of the time. But the bulk of the numbers of construction jobs are in that sector. I hate to see it collapse in such spectacular fashion.
The speed of the turn around was savage in the extreme. I guess, that is where the hopes of all of the subbies were wiped out too. Even if they got out with some of what they were owed it would be something. But as it stands they have to pay for legal council and stand at the back of a very long line in order to get anything. I know Ireland isn’t renowned for group claims. But is there some way that all subbies could group together in some way to make a case on an individual developer? Something that would enable them to skip a couple of places in the queue?
The construction industry federation should be doing more to help. Instead of making bald statements about the fragility of the market if Zoe goes under.
I wonder. Really, was there that much rental securitization happening in Ireland? My guess is very little, if any. None of the factoring companies would touch rental factoring, afaik. None of the payment protection insurers were doing it, afaik. Unless of course there were some dodgy SPVs out there? Any examples?
We were a year or two away from doing it. The schemes being drawn up towards the end, were designed to take advantage of it. Like I said, it reminded me of the V2 rocket episode in WWII. Of course a production line had to be built. That was going like hammer and thongs. I wouldn’t say it was a product the Irish institutions offered. The reason securitisation would have worked is because, there were some larger tenants who were looking for a large developer to do business with.
But finance really dried up to even do stuff like pouring foundations. There were no developers left by then, in the sort of shape financially wise to answer the calls from the market. Those large tenants are still out there. Expect some deals to be done in the next couple of years as valuations undergo a re-jig. I might not be surprised if things get bad enough, that tenants will buy sites outright. They could always re-mortgage the site later on, if they need to release some finance and eventually dispose of the asset completely in a more favourable market. But I know those large tenants are out there and need their premises to operate. Their facilities are already a few years out of date as it is.
If possible, those large international tenants do not want the asset on their books. I presume that is their interest in renting. It could have suited developers if a securisation mechanism had been in place to enable them to retain ownership of the land bank against which the charges were being placed. (You can pin down the larger tenants in lease agreements to insure yourself against defaulting on rental payment . . . it is harder to arrange that for a lot of small tenants) Developers wanted to use land banks to gain access to future rental income streams. It was on the cusp of being organised. I know that much, because it affected awfully the way in which masterplans were being conceived and developed.
Now that I think of it, with closures some vacant premises may appear on the market which suit the needs of potential tenants. But the locations might not be right. With the new science of logistics and supply chain management, operations are done on very slight margins. This was my own argument for developing some of Cherrywood for logistics in the short to medium term. Make it attractive, open up the space to make it public. Do the civil and infrastructural work now, (the local authority JV partner could look at it as a way of stimulating the local economy by spending) as the NPV will beat us the longer we wait around.
If you take Keatings point above, that international flow of capital will never again return to the levels of where it was. Then the right move for Ireland today is to develop the means and know-how to use what scarse capital will be available and make it work as hard as possible. That is why I think securitisation was being so carefully considered towards the end of the Celtic Tiger. There simply wasn’t another way to look at the problems facing capital and land resource intensive activities.
The logistics building stock on a site such as Cherrywood could be designed to be collapse-able (in a safe environmentally friendly way . . . as little embodied energy as possible should be used in initial assembly and construction) in a number of years, as development gathers steam and needs this land to build on. Or not as the case may be. We can still accomodate plenty of horses. It is akin to what you said in Kerry where un-finished houses need to be bulldozed and the land returned to amenity space or nature or both. Our architects and landscape architects working together are great at coming up with clever solutions here. It would keep them off the dole queues also.
Apologizes, It was PVC King (who has a fine healthy optimistic attitude) above who suggested offsetting losses in the NAMA portfolio against profits elsewhere. But I guess you are correct, without enough discount, NAMA is set up to fail. It will never generate a profit, but merely allow us all to ‘lose’ in a controlled manner.
Oh, you will find the shot gun shells at Cherrywood if you know where to look.
Brian O’ Hanlon
Guys….I’m sorry. I have tried really hard and concentrated. I’ve tried different times of the day, I’ve tried breaking it up into small pieces – I’ve done everything – but garethace I cannot get past two paragraphs of your posts without losing the will to live!
You seem like a very intelligent chap and you are passionate about the topics, but please…..take more time and write shorter pieces – its harder but will get your point across better and to more people. At the moment it seems like a stream of consciousness and is just too daunting.
Kerry bog – you’re in danger of heading the same way!
Sorry Cork blow-in. I agree completely, it is sheer ridiculous our continuing an extended conversation like this. I am about all out of steam. I was completely out of steam a month ago, but kept going on momentum.
Thanks for taking your time to express your view. What you describe on the receiving end of things – trying to read the material – is almost the exact same for myself on the production end too. Because one has to spend an age, trying to go over every last detail to make sure the argument pulls together in some kind of cohesive, if indeed very long winded kind of way.
The real bottom line is though, there is no money in the newspaper business any more for serious investigative journalism. (Where you have an editor to engage in the ‘hacking down’ process you describe) The business community out there are aware of that, which leads to their taking more risks with our future.
The newspapers and the media do good work in general, but don’t know how to join up the dots. (Look at how long it took for Anglo Irish bank to be exposed here in Ireland) I suggest that the media hires the people who have worked in the real world, or visa versa.
The honest truth is I don’t know what the best answer is.
Brian O’ Hanlon
The Sunday Tribune reporter Neil Callanan had indeed found one of the biggest ‘dots’ in the whole story. But joining up that ‘dot’ with something else is the real difficulty that newspapers are facing.
After receiving the securitised income he went on a share-buying spree, investing in everything from sugar to ferries. Millions were invested in Greencore, Irish Continental Group, McInerney and Aer Lingus, stocks that had little in common other than the fact that they had land banks, and land was what Carroll understood.
http://www.tribune.ie/business/article/2009/jun/28/where-did-it-all-go-wrong-for-carroll/
If you read the above long stretches of text, you will find that Carroll wasn’t intending to understand land, or build on land, or anything like that. Carroll was only a lowly construction manager like myself. He wasn’t in a class that he could successfully develop a fraction of the land he owned. It was something different, something more to do with financial innovation and scarce flows of international capital going into the future. In that respect, I imagine he was no different to other Irish developers. I wish land had been a simple factor of production, but in reality it ended up being used for a different purpose. That is the heart of the problem that NAMA has to figure out.
If we had some form of land taxation in Ireland, it might stabilize land values and we wouldn’t be stuck with the hassle we are in with NAMA. The land banks were being used to capture value increases in the asset, and then used to extend financial leverage, (€2.3 billions worth) . . . not to build on. That is why land was so attractive to Liam Carroll, not because he was a builder or anything like that. That was a pure smoke screen in the end.
I wonder how many houses in Kerry were built, for local populations to consume? None? This is my point in a nutshell. There was nothing to ‘burn the fingers’ of wealthy Dublin blow-ins who travelled down to Kerry every summer for three weeks and owned a second house. If that isn’t a recipe for vast over production of a commodity such as housing, I don’t know what is. Worse, we had 300,000 people involved in producing a product that was in the end un-saleable! At least that number of people still invovled in agriculture can get some sort of price for what they produce. A price can be put on the thing at the very least.
Sorry to people who own summer houses in Kerry btw, I would love to own one myself to be honest. But it is deeply unsustainable for all the reasons I have tried to outline above.
Brian O’ Hanlon
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