31 Jul 2009

…in a week when the board of the DDDA spent a long Tuesday evening searching the office high and low for those goddam 2008 accounts, and as an air of giddy expectation descended on the mouth of the Liffey in anticipation of a Bord Pleanala decision on a northside development, what are the odds that Liam Carroll’s property development empire would come tumbling down two days after the Wednesday when the CEO of the DDDA would choose by mutual agreement to take early retirement?  

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.

28 Jul 2009

The process of repossessing the homes of another 83 families for failure to meet mortgage payments commenced at the High Court yesterday. The ‘83’ figure was a record. But don’t worry if you missed it – it’ll be broken again next Monday as it has been for more Mondays than you can count.
 
Most of the big lenders (AIB, IIB, ACC, etc.) were in some way involved in yesterday’s proceedings. But one lender above all others – Start Mortgages – jumps off the list for the frequency with which it is mentioned: of yesterday’s 83 homes, Start is looking for possession of 29 of them. Checking through the list of High Court proceedings going back for months it seems that Start (who’s motto is ‘Open Minded Lending’) have had the worst luck in getting people to pay them back what they think they're owed.    

As everyone knows, Start specialises in charging people with dodgy credit ratings way over the odds for property backed loans. This is from their website.

But I had no idea that Start gives back to the community by sponsoring soccer teams for homeless people:


So they’ll take your home away from you but, don’t worry, you’ll get your game.

I think I'm representing all the open minded people of Ireland when I say we should kiick Start out of the country, take over the mortgages they've issued on family homes, let the families involved stay in these homes, and have them (the affected families) pay the rest of us back whatever they can afford, whenever they can afford it.

Anyone with a Start story to relate? info@garrymiley.com

28 Jul 2009
28 Jul 2009

This useful piece of background information on  what 'Nama' really means comes courtesy of a correspondent:

... shared land ownership... praise poetry...

Everybody but everybody seems to already know what’s in or what isn’t in the proposed legislation on the establishment of the National Asset Management Agency. Don't expect anything too Pulitzer-Prize-winning-worthy when we see the draft on Wednesday: by all accounts even the people involved in putting it together know that the document doesn't come anywhere near to dealing with the problems it set out to address. 

First, there’s the matter of assessing the value of the assets that Nama will buy from the banks. Now, this isn’t just one single problem all on its own, it’s actually a whole bunch of idiosyncratically screwed up situations. Contrary to what’s been reported in the general media, value assessment is way more complicated than things simply being worth 'half of what they were worth two years ago’.  While some of the alleged assets were the product of relatively responsible exercises in capitalism and might end up someday being worth something to somebody, others were the result of speculation that was so beyond belief that there was every chance they would have failed even if the Age of Collective Madness had continued. The chances of these latter alleged assets ever being worth anything to the Irish taxpayer within the next twenty years are slim to none.

Then there’s the question of planning. Many of even the most secure alleged assets have a ‘the project will be viable provided we get permission for the tall bit’ clause. As I mentioned on this site in the past, in order to get over this problem, the folks advising on the set-up of Nama have already sought powers for the new agency to award planning permissions in much the same way that the DDDA currently does (i.e. by bypassing the planning process and avoiding pesky local authority policies (not to mention the entire democratic process)). While the Indo said at the time that the Government had rejected such an idea, its rumoured that that Nama will have some recognisable-through-the-disguise DDDA-type characteristics.

Other problems the legislative framers are having difficulty with include: the government says that the success of Nama will very much depend on people not tripping it up by bringing their personal beefs to the courts: this is a totally unavoidable scenario. There are an infinite number of cases where members of consortia, partnerships, etc., who were all kissy-kissy when the alleged assets were being put together, are now at such loggerheads that staying out of court simply isn't a possibility (industry people are aware of situations where, for example, the line of connection between the owners of troubled development sites and the folks who ended up with the money isn't al that direct. Hopefully, Nama will know how to avoid ending up with responsibility for these kinds of projects.) Then there’s the question about the legal proceedings Nama itself might have to pursue if it discovers that alleged assets in its possession are more ‘alleged’ than it originally thought (where, for example, the bank involved in organising the loan may have actually contributed to the difficulties of a particular asset before passing it on). And its also worth mentioning that not even the most optimistic of real estate speculators supports the Government's idea of paying above current market value for alleged assets on the basis that they'll probably be worth more in five year's time - there's every possibility that these same assets will be worth less. 

The Irish people are completely ignorant of what Nama is about. They've no idea what's coming down the pike.

16 Jul 2009
16 Jul 2009
Many thanks to a friend who found this article in a German newspaper about life in Limerick and went to the trouble of translating it into English for us. There's nothing in it you don't already know, but its still quite chilling to read an outsider's view of the society we've created for ourselves. Details after the jump.
16 Jul 2009
Hey. My little numpties.

I’ve been back and forth to London lately…  where walking barefoot around Knightsbridge, speaking Portuguese and being intimate with a man just to prove to yourself that you’re really straight are so ‘tomorrow’ (which, for your information, isn’t a good thing because ‘tomorrow’ is this season’s ‘five minutes ago’) (and, yes, I am aware that Shoreditch is the new Knightsbridge).

Ohh, London. All I can say is, thanks be to the lord Jesus that that roof closed over Centre Court the other week. It was one of those nation defining events: the tension was tense, the palpitations palpable as the BBC commentary team made occasional references to tennis in between shots of: The Roof. Honestly. London would not have been the place for this type of Irishman to have found himself if The Roof thing hadn’t gone off without some kind of drama (as it added another icon to London’s iconography). It was a bit like, you know when you coincidentally happen to be in England on the day their soccer team have been beaten by Moldova in a crucial World Cup qualifier and, even though smirking is the furthest thing from your mind, you’re terrified that you won’t be able to fight back an unwanted facial twitch as you stroll through Heathrow immigration because even the very remotest possibility of a smirky attitute will have you – on production of your passport - dragged off to the side and engaged in the following:
‘So, how long will you be staying in London, sah?’
‘About an hour. I’ve a connecting flight to Tokyo.’
‘And do you have an address in London where you can be reached during your stay?’

Meanwhile, the other day I had a deep thought. Do you know this famous map


which shows the distribution of medieval tower houses around Ireland? And do you know the way no one has so far come up with a really convincing argument as to why the distribution of these magnificent structures should have taken on such a pattern? Well, how about this: aren’t the tower houses everywhere where people play hurling?

What do you think, eh? Am I on to something here?

3 Jul 2009

Having reached the half way point in 2009, I thought I’d have a quick look at a few planning application numbers from around the country for January to June.

In Clare, there were 680 planning applications to the end of June. This compares to 1750 for the same period in 2007. On quick perusal, applications are for no more than extensions and retentions.

Galway City had 250 applications, down from 500 in 2007. Cork County is down from 9200 in 2007 to 6100 this year. In both cases, very few applications were for anything more than a house or an extension. Dublin City Council, too, has very little going on: 3350 applications this year down from just over 3950 two years ago. Not much difference numberswise, big difference scalewise.

From what I can make out on Limerick County Council's website, there were about 740 applications to the end of June 09 compared to 1400 for the first half of 08.

2 Jul 2009

Many thanks to Deputy Terence Flanagan for his relentless efforts in obtaining answers to some questions I put to the Public Accounts Committee on the cost overruns on the Ballymun Regeneration Project. It took him two years.

I’m not going to go over the whole thing again but, basically, the project to complete the reconstruction of Ballymun is years overdue and hundreds of millions of Euro over budget. Many moons ago the Comptroller and Auditor General published a report which, in my view, kinda pulled its punches in explaining what is an epic of tiger era indulgence and mismanagement. So, I composed 14 questions which I thought the Comptroller’s report had failed to address and sent them, via Terence, to the PAC.

Earlier this week, we got a response from Ciaran Murray, Managing Director of Ballymun Regeneration Limited. I won’t bore you (yet) with his ten page reply. Here’s a little amuse bouche.

Around about 2000, and amid a great deal of fanfare, it was announced that a €1 point something billion business and technology park would form a 100 acre centrepiece to the larger Ballymun regeneration project. It was to be co-developed by Green Properties and Ballymun Regeneration Ltd.

It went by the wall.  But not before Green Properties had run up some costs. I wanted to know how much of these costs the taxpayer had handed over to Green.  This is how Ciaran Murray responded.

'... A sum of € X  (see footnote) million was paid to the Developer on dissolution of the proposed joint venture.  €Y million of the figure related to the actual costs incurred by the Developer in acquiring 29.6 Acres of land, the title to which has been transferred to Dublin City Council and is an asset of the Regeneration Company.  The balance of €Z million was paid to the Developer representing 50% of the actual third party professional fees incurred by the joint venture in developing a Local Area Plan and obtaining planning permission on the lands.  As part of the Dissolution Agreement the Regeneration Company acquired the sole rights to use any designs developed and the benefit of the Planning Permission obtained.  All of this expenditure was funded through internal capital receipts generated by BRL through property disposals and only actual vouched costs were recouped in exchange for the acquisition of valuable assets.'

Foornote: Confidentiality clause inserted in joint venture Dissolution Agreement (settlement of high court proceedings) at the request of the Developer.

The developer was Green Properties. X is said to be somewhere around €6 million but I’d be interested in hearing what the exact figure is.

The €X million cost to the taxpayer doesn’t, of course, take into account the amount Ballymun Regeneration itself spent on wages, administration, legal fees, consultants fees, etc. before the business was wound up. What are we talking about here - €2m maybe €3m? We’re getting into electronic voting territory on this one element of the project alone.