In his presentation to the Licensed Vintners Association earlier this week, the NAMA chairman, Frank Daly said that “it is likely that enforcement action will follow for some of those in negotiation [six developers] as some debtors are making little effort to progress matters and have not yet adapted to the new realities some three and a half years after the property market collapsed.” NAMA, he said, had already appointed receivers in two cases, not specified but understood to refer to Bernard McNamara and Liam Carroll.
Credible sources are claiming that NAMA has today appointed KPMG as receivers to companies in the Paddy Kelly group. Laois-man Paddy (67) is one of the most high-profile property developers whose loans have transferred to NAMA. In recent times he might have been most associated with the repossession/return/repossession of his/his wife’s black 2003 BMW 7-series but during the boom his companies and those of his children, notably Simon, David and Chris and in particular the Redquartz group were major developers with commercial projects at Smithfield Market and Sir John Rogerson’s Quay and leisure projects which included Tulfarris House hotel and golf resort in Blessington and Carton House golf resort in Kildare. One of the most expensive acquisitions was Burlington Plaza in Ballsbridge. In 2007 it was, according to Paddy Kelly, valued at €350m by NAMA’s Head of Portfolio Management but back then Jones Lang LaSalle supremo, John Mulcahy. It seemed last year that there was little or no love lost between Paddy and his former valuer.
According to Paddy last year at the MaGill Summer School, he was developing projects outside the country in the US, Malta, Canada and Africa. It is unclear what the rest of the family is doing though his son Simon published a book “Breakfast with Anglo” last year and was a contributor to the Sunday Tribune until it folded in January 2011.
NAMA has not yet confirmed the appointment of receivers. It is understood that Savills will be managing the assets under the auspices of the receivers. It is further understood that the receivership will extend to a relatively small proportion of Paddy’s assets but will include the Marriott hotel in Ashbourne, the three Clarion hotels in the IFSC, Liffey Valley and Limerick, a car park/retail development/gym in Smithfield. This post will be updated later.
Update: 25th March, 2011. RTE is now reporting the appointment of Kieran Wallace at KPMG to a number of Paddy Kelly assets. RTE say that it is a consortium of some 100 investors to which the receivership applies – Paddy has worked with the movers and shakers in Irish society so this list will be of interest. The properties that RTE claims are subject to receivership are:
(1) an hotel in Ashbourne, Co Meath, operated by Marriott
(2) an hotel in Talbot Street Dublin, operated by Days Inn
(3) three hotels operated by Clarion, at the IFSC in Dublin, at Dublin airport and at Liffey Valley
(4) an hotel operated by Maldron in Citywest, Dublin.
(5) hotel suites in Maldron hotels in Cardiff Lane Dublin and in Limerick
UPDATE: 26th March, 2011. The Irish Independent features the headline that NAMA has “swooped” on Paddy’s hotels. The facts would, however, suggest that NAMA’s decision to appoint receivers yesterday was some time in the making and Paddy is understood to be philosophical about it all. “The family understands the need for NAMA to put them into receivership and we support NAMA in their work” says the Independent citing a spokeswoman for Paddy who adds that the relationship between Paddy and the agency is “very civil”. Hmmm. The Independent does reveal the new information that Savills is actually acting as a “property receiver” (like a conventional receiver, specialising in property management and supposedly far cheaper than a conventional receiver) in its own right on certain properties as follows:
(1) Smurfit Kappa Headquarters in Clonskeagh
(2) an office block in Blackrock
(3) a medical centre, leisure centre, car park and seven shop units, including two Paddy Power shops and one operarated by Polonez in Dublin’s Smithfield
The claim by the Independent, presumably quoting NAMA or the receivers is that the only change tenants will see will be to the name of the landlord to whom the rent will be paid. What the paper doesn’t say is that tenants may find some degradation in the management of the buildings and that repairs/maintenance are not carried out to the same standard by the penny- (or cent-) pinching receivers. The Independent claims that over 1,000 staff are employed at the hotels now subject to the receivership but they are unlikely to be affected since their employers are the hotel management companies which are Paddy’s tenants. There is a further story in this receiveership that will be of much interest and that is the identity of the 100-odd investors in the consortium led by Paddy that was put into receivership yesterday. The Independent names three – former Ireland rugby manager (and NAMA client in his own right with Steamboat Developments) Pat Whelan and his business partner Pat Chesser, a well-known auctioneer and developer in Limerick city. Builder, John McCabe (also in NAMA in his own right) is also named as an investor as are three of Paddy’s children, Simon, Christopher and John and Paddy’s brother, Liam. Simon is said to be “Porsche-driving” – the BBC (!) reported in January 2011 that NAMA had taken his 1994 Porsche 911 (cost him €14,000) which last time it was pictured last year didn’t look too roadworthy. These days he is understood to be driving a 2001 Land Rover but what would be the point “swooping” on that.
UPDATE: 1st April, 2011. The press release from Statutory Receiver, Kieran Wallace of KPMG, is now available here. It doesn’t really add anything to what has been reported above.
UPDATE: 27th July, 2011. RTE is this evening reporting that NAMA has appointed receivers to a further 16 properties controlled by Paddy Kelly and other unnamed borrowers. The 16 properties are not itemised but are reported to “include offices and a number of pubs in Wicklow, Dublin and Kilkenny.”
UPDATE: 28th July, 2011. There is the usual standard of reporting – that is, missing a lot of detail and padded out with yet another historical review of NAMA – in today’s Irish media on yesterday’s enforcement action (see here and here). Of the 16 properties subject to the action, they appear to include
(1) Grey’s of Newmarket pub in the Coombe area of Dublin
(2) the Chancery Inn pub close to the Four Courts
(3) the Legal Eagle pub close to the Four Courts.
(4) 61 acres close to Mt Usher in Wicklow
(5) a 32-acre site in Co Kilkenny
(6) an office block in Deansgrange in south Dublin
(7) offices in Sandyford
(8) two suites at a hotel in Liffey Valley in Dublin. (Kieran Wallace, KPMG)
(9) site in Trim, Co Meath,
(10) site at Lusk, Co Dublin
(11) A property at Pembroke Road in Dublin
Savills is named as the property receiver of all of the above, save no 8 where Kieran Wallace at KPMG is reported to be the property receiver.
The Irish Examiner, without citing sources, says “almost a dozen other high-profile developers are also being targeted and may have control of their businesses seized over the coming months unless they agree to sell off assets to repay their debts.”
The borrowers subjected to yesterday’s action by NAMA are reported to be Paddy and son, Simon and “about eight other borrowers”
NAMA Wine Lake 
This is an interesting action by Nama from several perspectives.
First, it obviously heralds the beginning of a major offensive against the developers to bring them into line.
It also seems to indicate that Nama will choose to take a salami slicer approach to the appointment of receivers to developers’ assets rather than taking control of them with one sweep.
On the PR end, the action is to encourage the belief in their new political masters and the public in general that NAMA is actually doing something.
So to set this example they “spun” the lie that the Kelly family were non-compliant. Anyone who has listened to Paddy Kelly’s speech at the MacGill Summer School, read his interview with Fintan O’Toole or read Simon’s columns in the Tribune will see the fabrication for what it is. Very few have been more compliant with NAMA than the Kellys. It is not in their interest to be otherwise. They have already admitted their insolvency.
It is obvious that this action (and others in the pipeline) has been planned by NAMA for some time. Closely connected parties that I have spoken with assert that the Kellys had been invited several days previously to come in for a “chat” on Friday with “no particular agenda”. On the eve of the meeting they received an email from NAMA requesting that the appointment be changed from 11 am to noon – obviously, in NAMA’s sole knowledge, to coincide with the appointment of their receiver.
It needs to be asked “Which party is acting with open co-operation here?”
Does this type of deception epitomise the moral compass of NAMA and its board? If so, it represents a very low standard for NAMA’s actions and opens them up to all sorts of queries.
The actual operation began at 8 am the following morning and was carried out like a CAB maneuver in keeping with the culture at the top of NAMA. All those involved received coordinated knocks on their residences and hand delivered letters giving them 4 hours to pay up.
You do not have to be a genius to realise that there are “sweetheart” deals to be done on some of the assets that could be particularly attractive to obvious purchasers.
Were there any direct approaches to NAMA from these parties on those assets prior to the appointment of the receiver? If so, did they influence the decision to appoint him?
If a party acts in a transparent honest and open fashion, it doesn’t need to answer these questions. If its culture is one of deceit – all bets are off.
@WSTT, taking the above to be the case and NAMA decided that it would appoint receivers to part of Paddy’s (leveraged) empire, then might NAMA have taken precautions to avoid any last minute manoeuvre on Paddy’s part? Paddy is by all accounts the gentleman of Irish property development but he has been around the block a few times, not just in the BMW repossessed/returned/repossessed, and may have learnt a few tricks along the way which might impede the appointment of a receiver.
Unlike the Bernard McNamara receivership last November where journalists were able to give an hour by hour blow by blow account of the appointment of the receivers, there’s almost been a news blackout on the minutiae of Paddy’s receivership. RTE, the Independent and the Irish Times carried the basic facts – some time after they appeared on here by the way – but there has been nothing about the co-ordinated service of notices and the choreography of the meeting on Friday.
And as you correctly say, the receivership applies to but part of Paddy’s portfolio. NAMA presumably would like Paddy’s co-operation on the remainder of that portfolio so if Friday’s manouevres were so underhand, is NAMA not undermining its own position in its dealings with Paddy in future?
The assets subject to the receivership don’t appear to be development assets – they’re rented hotels, shops, gym and office blocks as far as I can see so Paddy’s co-operation wouldn’t appear to be crucial for the optimal management of those assets. It sounds as if there is a story to be told about NAMA’s actions here but neither Frank Daly nor Brendan McDonagh is a banana and it is hard to understand why they might have acted in the way you say unless there were sound financial reasons in play.
Despite Bernard McNamara’s new-found reserve and his talk about prosecution for talking to journalists, I think we might get a better idea of what exactly happened last week in Paddy’s case, not least because there are reportedly some 100 investors involved in the consortia affected.
I think that as “poster boys” of the burst bubble Paddy and Simon were easy and obvious targets for NAMA. To accuse them of non-cooperation is risible. Of all the developers, they have been the most prominent cooperative entrants into NAMA, even to the extent of promoting the compliance ethic.
Charles Darwin said that “In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.”
Obviously Charles didn’t factor in deviousness.
I do not believe that the other Kelly assets will be left untouched by receivers. It is just a matter of time. I have no doubt that the next “slice” is already being prepared and that it will be as co-ordinated as the dawn delivery raids.
There is a strong rumour that a large Dublin residential developer is next in line.
What the cynical action does is send out a message to the other developers that is contrary to the one that NAMA wants to send but it is one that the developers have suspected from the beginning, and that is that “cooperation” is a fact seeking exercise by NAMA for the purpose of effecting a “self liquidating” process for the developers.
After this example of the results of open dialogue, I cannot see much cooperation coming from NAMA’s debtors. In fact I would expect the conversations in Treasury Buildings to become much more circumspect and legalistic.
There’s going to be a lot of new files piled on receivers’ desks in the coming months. Whether that is productive progress is a moot point. I see it as further “parking” of the property market. Time will tell.
@WSTT, can you think of any possible reason for NAMA effecting this receivership in such a surreptitious manner? If the aim was to make an example of Paddy, that hardly justified the secrecy in itself did it, NAMA could just as easily explained to Paddy on Friday last that it was rejecting his business plan and would apply to appoint a receiver this week. From what you say, it sounds as if NAMA was concerned that forewarning Paddy might in some way interfere with the receivership option.
No. In terms of logic – I can find no logic in it. There is not even logic in the mix of assets taken. Very similar assets were not taken. The Kellys were told that it was a board decision and given no explanation.
The only reason that I can think of why certain assets have not yet been taken is that NAMA have not actually got around to dealing with the business plans relating to them – but that is an assumption.
I believe that the Kellys were “marked men” because of their high profile and that the imposition of receivers to their assets was a PR exercise designed for maximum publicity for NAMA.
In the final analysis, the only reason I can think of for NAMA’s deceit is that they did not want to blunt the impact of their media announcement by “flagging” their intentions prior to the implementation of their action.
I wonder if that was the motivation though.
Paddy Kelly seems to have kept schtum in terms of NAMA for some months now, though I thought it wasn’t the wisest revelation last summer when he fingered NAMA’s John Mulcahy for the €350m valuation of Burlington Plaza, which incidentally I see John’s former employer , Jones Lang LaSalle is still marketing (see below).
Simon Kelly’s appearance on Prime Time just before Christmas seemed pretty low-profile and indicated an honest engagement with NAMA. His court case last month where fairly meaty private tuition fees were made public probably didn’t earn him much sympathy, though I would guess he would have kept that private if he at all could. The interview with Fergal Keane for the BBC’s Panorama where Simon claimed he “was suffering as much as anyone, maybe more than most” didn’t go down too well, though personally I got the impression that the full context for the claim wasn’t shown. And the last we heard publicly from Paddy Kelly himself was in December when the bank finally took back the BMW for keeps.
Surely Messrs Gannon, Ronan, O’ Flynn, Mulryan, Dunne are far higher profile developers than Paddy, though it should perhaps be said that we don’t know to what extent their loans are performing and from recollection, Michael O’Flynn has said all of his loans are performing.
http://www.daft.ie/searchcommercial.daft?id=36242
My information is that the portfolio taken last friday contained performing loans.
It may be the case that these assets are ‘pre-packed’ adminstrations/receiverships and NAMA has buyers lined up for the portfolio. My information is that NAMA has been more pro-active in engaging with external investors in the last few months and it is my understanding that there will be a major (€500m+) deal announced in the next 3 months in relation to asset sales by NAMA. The Germans seem to be particularly active in relation to this.
@NWL, You asked.. “can you think of any possible reason for NAMA effecting this receivership in such a surreptitious manner?”
I asked the question. I was told that NAMA wondered how the Kellys were still managing to have access to income. They concluded that it had to be from the cashflow in the hotels and decided to act surreptitiously to prevent depletion of bank accounts in the interim. True or false? Hard to know.
@WSTT, interesting though we’re unlikely to ever get confirmation from NAMA if true, or not. It’s of interest that when the EU was approving the NAMA project last February 2010, it specifically rejected Minister Lenihan’s proposal that NAMA should be able to access Revenue Commission records because in general terms it was felt that NAMA would then have an unfair competitive advantage over non-NAMA banks, eg Bank of Scotland (Ireland)/Certus. So NAMA doesn’t have pre-receivership enforcement powers not usually available to banks generally. To illustrate, the Criminal Assets Bureau (CAB) has access to the resources of the Gardai, Revenue Commission, Customs and Social Welfare. That access is not available to normal banks and it is not available to NAMA either.
That said, it won’t have been the first time that a creditor has summarily sought to appoint a receiver to protect assets. And apart from the land in Drimnagh, all the assets reported last Friday appear to be revenue generating. Still, it’s curious because although these assets are generating income it can’t be all that significant when measured agains the sorts of sums that other developers’ assets are generating.
EDIT: PS, it seems strange that NAMA has appointed receivers for assets whose loans are claimed to be performing. I’m still trying to track down any press release and Iris Oifiguil on Friday last has no detail on this receivership. So perhaps there were other non-performing loans in the companies in question and the companies weren’t Single Purpose Vehicles, but if a loan is performing you wouldn’t normally expect to see a creditor, even NAMA, being able to appoint a receiver.
Hi NWL. Following on from your last post and in particular your last paragraph, I have found out this evening from a very reliable source that the office block in Blackrock was classed as a Nama performing loan. Maybe one of their best performing loans. A debt
of 18m+ with all interest paid and nearly 200K off the capital of the loan per quarter. All rental income going directly to Nama. This is astonishing that a performing Nama asset would be put into receivership (note the Kellys are minor shareholders). What do you think are the reasons for this course of action? It does not make any sense and why appoint a Receiver to an asset which is repaying the loan as per all Nama’s criteria and mission statement. The costs of the Receivership alone will reduce the funds going to Nama. There does not seem to be a strategy to protect asset values on even the performing Nama loans.
@NAMAJew, that’s why it would be helpful to see what companies are subject to receivership. If Company A has two loans with NAMA – Loan B and Loan C. Loan B is performing in accordance with the loan agreement. Loan C is in default, In that case, can’t NAMA place the entire Company A into receivership and seek to use the good Loan B (and its underlying assets) to help mitigate the loss on non-performing Loan C?
Given the reported number of investors in these properties (100), I would be surprised if we don’t get the full story one way or the other soon.
Hi NWL, very simple, the office block in Blackrock is a partnership without any connection to any of the other assets/properties in the Kelly Receivership. I understand the Kelly’s have less than 20% of this entity. The office block has a very strong US tenant. and even though over 700K is paid off the loan as well as full interest each year Nama have now placed this asset in the hands of property agents/receivers, Savills !
I would think that Nama took over the loan for less than 9m euro so they should expect a profit on any disposal of the asset. However by appointing a receiver the value of this building will drop significantly. Nama has to protect assets if we are to have any chance of trying to pay off these property loans.
@NAMAJew, I can’t see any reference to an office block in Blackrock in the reporting of the receivership on Friday. But put that to one side – when you say the loan is performing, do you mean that it is (1) paying its interest but technically in default for non-payment of the principal or (2) operating completely in line with the loan agreement. To illustrate, Paddy McKillen was adamant at the High Court last year that his loans were performing even though he admitted that some were due for repayment and he had not repaid them. Paddy McKillen claimed that in order for there to be default the banks would need serve a default notice and the banks in his case had not served such notices and continued to receive interest on the loans.
So maybe NAMA served a default notice and demanded repayment of the principal in accordance with the loan agreement and maybe then decided to pursue receivership if Paddy and his partners couldn’t repay. Is that possible do you think?
NWL, the loan was performing i.e. paying interest and large amounts capital as per the submitted Nama plan. According to the Kelly’s, the letter from Nama demanded full repayment of the loan within two hours. None of the other partners (80% +) received the Nama demand letter. Why would Nama demand full repayment of a loan when it is performing by their own standards? If this is their strategy why would any developer submit a plan, repay loan and try to work with them when at any possible moment the full loan can be demanded with no reason given?
@NAMAJew, newspaper reporting last year suggested that Paddy Kelly was in Tranche 2, loans for which finished transferring to NAMA in August 2010. As I understand it NAMA has not entered into a formal agreement with *any* developer where a formal agreement comprises the three documents : Memorandum of Understanding, Heads of Terms and Final Agreement. So that being the case, Paddy has presumably been operating the loans as best he can since last August 2010 – repaying interest in full and repaying capital as resources allowed. If he was not repaying the loan in accordance to the loan agreement, and hadn’t signed an agreement with NAMA, then he would have been exposed to a default notice at any time, no?
In those circumstances, NAMA would be entitled to demand payment in accordance with the loan terms. I’d guess that any developer that hasn’t co-signed (with NAMA and his wife if necessary) each of the three documents, then that developer is presumably exposed to an immediate demand or two-hour demand.
Mind you if Paddy was given two hours, then wouldn’t that have given him enough time to “deplete” any bank account, which might render worthless NAMA’s surreptitiousness, no WSTT?
NWL, just for the record Paddy Kelly is not involved with any of the day to day operations of his Kelly (0017) portfolio and hasn’t been for a very long time. Either is Simon Kelly. I understand that Chris Kelly has been managing the business for several years. He has been co-operating with Nama by regular meetings, hundreds of emails, daily calls, sending them huge amounts of information/cash flows and executing very strong legal documents produced by Nama regarding the transfer of bank accounts, income and leases to Nama.
The information in the newspapers is just plain wrong and very misleading. The Kelly portfolio has been a model of cooperation and transparency with Nama. Deloitte’s acting for Nama agreed in writing the form of the business plans for the Kelly. This is a critical point. Nama and their advisors had agreed the strategy of how 0017 would be managed in 2010.
When Chris Kelly at the meeting on friday asked Nama for the reasons of the Receivership none could be given. As the Kellys are involved in numerous partnerships there are many other people caught up in the Kelly portfolio (over 2 billion euro in loans). Its vital that Nama act in a manner to protect the value of the assets otherwise Ireland inc is finished. Nama actions on friday seemed to be more focused on the media and the new Government. In some cases they placed performing assets into receivership for no logical reason. Is Paddy Kelly’s head in the news paper more important for Nama that making money for the state and protecting the Nama assets?
@NAMAJew, if what you say is correct then I guess that NAMA might say that an agreed strategy is not the same as a binding agreement, and until such time as there is a binding agreement NAMA can call in the loan in accordance with the loan agreement with the original bank assigned to NAMA, the terms of which were assigned to NAMA when NAMA took over the loan.
There is an emerging picture of Thursday and Friday last week which is showing that NAMA acted decisively but without informing the developer though it seems obvious that receivership was signed off at NAMA on Thursday at the latest.
I’d guess that Paddy Kelly might feel unhappy if NAMA now disposes of his property at this time. Although we mightn’t be at the bottom, Paddy might have felt that prices might have staged some recovery in the next 3-5 years and after all, it is common enough in the business for banks to roll over loans as long as the interest is being serviced. Instead NAMA may realise whatever it can now which may mean that Paddy loses his investment and won’t have any stake on the table for any upswing. Not a happy situation for the gentleman of Irish property development but with the IMF and government on NAMA’s back to generate sales and unfreeze the market, what was NAMA to do?
By the way, I haven’t really detected much developer-bashing with respect to Paddy, so am not sure if there is anything to the suggestion that NAMA just wanted a high profile scalp.
As I say, I expect we will learn a little more about this receivership in the coming days.
NWL, note numerous legally binding agreements were signed by Kellys (and partners) in December with regard to numerous properties in the portfolio. Another batch was sent over last thursday to Nama. Note the timing of the Receivership.
These documents assigned bank accounts, rental income and leases to Nama. That was the agreed strategy. To repeat thousands of pages of legally binding agreements were signed and sent to Nama.
Nama should have informed the 0017 debtor that they would like a the ultimate legally binding agreement executed and send one over because if they did it would have been signed by
the debtor and returned same day.
For the last year the 0017 debtor does everything Nama says and wants, sign documents, transfer funds and jumps every hoop. You would have thought that the 0017 debtor had joined the Nama circle of trust?
I wonders if debtors 0001 to 0016 and 0018 onwards are behaving as well because as you said no ultimate binding agreement has been signed.
Does this mean Nama is going put everyone into receivership? The professional classes must be weak at the knees with the thought of all those fee’s.
If I didn’t know (which I don’t), I would say that Emmet was spinning for NAMA. In Thursday’s Irish Independent:
“Kelly won’t be the only ‘non-viable’ borrower
While messy and not entirely satisfactory, NAMA is finally separating out viable borrowers from non-viable borrowers.
Crudely, the agency has put borrowers into three categories: those who have reached a memorandum of understanding with the agency (Treasury Holdings is one of them); those who have not (Bernard McNamara, Paddy Kelly); and those who are still in limbo, trying to get the agency to back their business plan.
Battling a perception that the agency is a bailout scheme for developers and trying to deal with a hostile incoming government, NAMA is finally taking firm action against groups who have no real way of ever digging themselves out of the debts they’ve accumulated.
The seizure of Paddy Kelly-linked properties late last week was a prime example. It is reported several of the properties are either breaking even or turning a profit, but the stock of debt behind them is not sustainable, NAMA appears to have concluded.
While it is relatively easy (though not cheap) to put the assets of so-called non-viable borrowers into receivership and or liquidation, the more difficult challenge will be rehabilitating those who are still viable, but damaged.
NAMA will shortly restructure the debts of this group, lengthening maturities on their loans, reducing repayment rates and effectively waving a magic wand transforming non-performing loans into performing loans.
But there is no certainty some of this group can reach their new repayment targets either and many of them may yet join Mr Kelly as simple bystanders in a receivership process.”
– Emmet Oliver
Johnny Ronan compliant? – Not in my lifetime!
@WSTT, “those who are still in limbo, trying to get the agency to back their business plan” – I thought agreeing the business plan was a two-way street. Plainly some of the demands by developers, the €1.5m salary claimed in one case for example, will not be acceptable but equally there will be a minimum acceptable to some developers. And if I know developers, and in some cases I do, their liabilities will be ringfenced in non-Irish registered Special Purpose Vehicles with limited or no recourse to other assets. And in those cases, the developers will just say “fine, liquidate the company and good luck to you”. On the other hand some developers will be completely exposed to the point of bankruptcy, but it’s a fact that others won’t. So presumably NAMA is going to have to treat the proposed business plans as a basis for dialogue in which both parties give and take to come up with a viable plan.
Oh…. and Frank “the wizard” Daly will wave his magic wand and turn all the bad loans into good loans. What tablets are you on Emmet? I suppose he can turn water into wine too.
If this is the drivel that NAMA hopes will impress the developers enough to get them to sign up, they must be getting desperate.