31 Jul 2009
Reading the Nama legislation is like staring at the sky on a clear winter’s night: before us a universe of bullet points – scattershot, random and infinite – each of them at first appearing whole and discreet but, when put to the lens, revealing a multitude of hidden meanings - just as the specs in the night sky turn out to comprise entire galaxies of limitless solar systems each with their countless retinue of stars, themselves swarmed by masses of planets, and all of them hostile to the human condition.

How do you begin to get your head around Nama? How do begin to get your head around the universe?

Ignoring for a second the black holes of ‘asset valuation’ and ‘how do we know this will get the banks lending again?’ (although I will touch on the former a little later) lets ponder the infinities of some of the lesser astral puzzles to be found in the Nama Bill:

How big will Mama be?
Absolutely enormous. A behemoth, a leviathan. And if we compare it to other similar international property conglomerates with their workforces of thousands, it will probably need more than the fifty full time employees that the Government have been suggesting. Consider this very basic, very crude workload calculation: €90 billion’s worth of sundry assets parcelled into 10,000 loans, of which 1,500 may be considered dodgy. If we assign a project manager to each of the dodgy projects (average worth of  project, say, €30M each? That’s a full time job (plus administrative assistance, offices, faxes, computers, mobile phones, travel, expenses, etc.)) and expect him/her to somehow manage both the dodgy loan as well as the other 8 plus projects in his/her portfolio during a forty hour week for seven and a half years and at a salary of €70,000 a year – why, we’re already talking about the best part of a billion (making the €10B Nama budget look a bit small (not to mention, where will be get all these project managers?)).

Getting Things to Site 
Apart from the mountains of work involved in inspecting long abandoned sites to see if weather exposed structures might still be suitable for reuse (and, if not, condemned, demolished, removed and replaced), how will we engage the architects, engineers and quantity surveyors to design, specify, price, approve, etc. all the work that remains to be carried out? Not the way the Nama Bill suggests on page 99. Even if we architects handed over all our drawings and specifications to the Nama people and sat dutifully at our desks to resume work as the Bill proposes, we still couldn’t organise and mobilise the way the Bill framers think. Aside from the logistics, think of the money. If a design team gets about 13.5% of the final project cost, and if we presume that a very conservative €30B worth of construction work will be carried out over the envisioned five to ten year period, we’re already talking about €4B in fees alone, which we can be sure the struggling developers are not now and will not be in a position to pay. And before you say ‘joint venture!’, think Dublin City Council/Bernard McNamara, circa 2008. (The good news for design professionals who’ve lost their job in the past couple of years is that they’ll soon be able to come back from Dubai and settle into something permanent and pensionable.)

Compulsory Purchase
There are many reasons why Nama may need to take advantage of its wide ranging compulsory powers of purchase – here’s one: imagine a Nama site with planning permission for a large scale development separated from the main road by a site owned by a third party. In order to realise the development potential of the dodgy asset, there would be excellent reasons for Nama to force the third party to sell. However, with about thirty percent of the Nama projects said to be located outside the State, will these compulsory purchase powers extend to, say, sites in Moscow? (I wouldn’t compulsorily purchase a site from a Russian even if that site was in Connemara and it was just him versus me and the Canning brothers.)  

Planning Permission
The Minister can come up with whatever formula he likes come September to value our dodgy assets. But his formulas won’t mean nuttin if the relevant sites don’t have planning permission. Without planning permission, billion dollar dreams are just REPS funded meadows. Some folks were speculating a while back that Nama would be given DDDA type powers (grant planning permission as you wish) to get over this MASSIVE FLAW in its plan. The Government ruled the idea out, but there are some curiously phrased references to planning, scattered with eerie nonchalance throughout the text.
‘Nama may make any planning application in relation to land, and intervene in any planning application made by another person…’
‘The Minister may make regulations providing for the taking into account by NAMA, in determining the acquisition value of a bank asset, of any report of an expert (whether prepared before or after the commencement of this Act) concerning factors or matters relevant to the determination of the value of property or property of a particular type or in specific locations or with specific features or benefits, including—
(a)    Zoning...’
and
‘The Minister may make regulations providing for the adjustment factors to be taken into account in determining the long-term economic value of a bank asset and the property comprised in the security for a credit facility that is a bank asset. In making (these) regulations under… the Minister may have regard… in relation to the determination of the long-term economic value of the property comprised in the credit facility that is a bank asset, to land and planning considerations (including national, regional or local authority development or spatial plans) that may exert an influence on the future value of the asset concerned…’
I might quite rightly stand accused here of quoting these lines out of context but I searched the document high and low and could find their context nowhere. And, with or without context, it’s pretty difficult to write phrases so elegantly vague and so secretly open to future interpretation.

Experts
Experts experts everywhere. Everywhere there will be experts to advise on everything. Who will these experts be? Well if we lived in a country with a strong executive branch of government, the Minister for Finance would, by definition, have a proven pedigree and background in his/her field. A Minister for Finance with a smattering of published academic papers, chairs in various universities, honorary degrees from overseas institutes, etc., would give us the comfort we need to know that our man had  the right names in his Rolodex. But we don’t live in that kind of country. In Ireland, like elderly nuns seeking advice on the disposal of a convent, the Cabinet will inevitably consult party suck ups for recommendations on which of the D4 cadre of mandarins and eminences grises should be dug up  warmed over and recycled. We all know who these occasional Morning Ireland contributors are. My eyes are drawn to the section in the legislation which describes the skills and competencies which members of the new Nama Board will need in order to be considered for appointment by the Minister. The ‘planning/construction’ board member will, I have no doubt, be filled by one of a half dozen candidates – former presidents of institutes, survivors of failed but forgotten committees, golf club habitués and dullards. When the name of this board member is finally announced, building professionals all over the country will utter sighs of anticipated resignation. I feel confident that you folks in the banking, finance, legal and economic walks of life will feel the very same sense of anticipated resignation when the least inspired and the least inspirational of your number are chosen to join the board charged with leading the country out of the underworld.

Am I exaggerating? Perhaps in tone. And maybe the little scenarios I've sketched are a bit OTT. But the extent of the project and the kinds of problems that will accompany it are, I think, accurately described.   

The Minister said he was looking for suggestions on how to make Nama succeed, so here’s mine: in the month we have been given to reflect on the Nama proposals, is there any way he could assemble in one room a dozen or so of the biggest construction/legal/accounting curmudgeons in the country and have them throw darts at the proposed legislation by testing it against a ‘notional’ dodgy project? It would give us the chance to identify at least some of the potential pitfalls and make the necessary adjustments before the courts make them for us.

And here's another suggestion - publish a separate Bill for how the banks, the developers and the other assorted greedy guts will never ever be able to pull this crap again. It doesn't have to be fair or balanced or follow due process: biased, prejudicial and disproportionate will do fine. And we'll all get behind it.

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