Archive for August 14th, 2011

On 29th July, 2011 NAMA made an application in Dublin’s High Court against Edward Keegan, John O’Connor and Liam Kelly (ref: 2011/3212 S to access the details of the case on the courts.ie website you may have to select “High Court Search”, then accept the terms and conditions, then enter 2011 as the application year and “national asset” as the plaintiff. Scroll down through the results to NAMA v Keegan and others, click on it and you will see a menu on the left hand side allowing you to see the filed details of the case) . The subject of the application is not clear but Messrs Keegan, O’Connor and Kelly had been directors of Capel Developments, a company to which NAMA appointed receivers in April 2011.

Last year NAMA sought a liability order inDublin’s High Court against developers Paddy Shovlin and brothers, Tony and Anthony Fitzpatrick. And it might be that a similar order is being sought in the current case against the directors of Capel Developments, but to repeat, the subject of the current application is not clear at this stage.

NAMA is represented by solicitors Byrne Wallace. Edward Keegan notified the court on 5th August 2011 that he is representing himself; details of the legal representation of the other two respondents is unknown.

Capel Developments was a reasonably high profile developer associated with Sandford Lodge in Ranelagh, Rathborne in Ashtown, Co. Dublin, Lyndon in Blackrock, Dunstaffnage in Stillorgan, Orwell Park in Rathgar, Hazelbrook Square in Churchtown,  the former Sunday World site in Terenure, Portmarnock Hotel and Golf links in Portmarnock, Co. Dublin.

NAMA rarely comments on legal proceedings.

UPDATE: 25th October, 2011. The Sunday Business Post says that the case against the Capel directors will be heard at the start of December, 2011.


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This modest blog doesn’t often get a mention in the mainstream media – not an objective of the blog, I might huffily add – so when Professor Morgan Kelly did refer to this blog as “by far the best source on the Irish economy” in his article in the Irish Times in May 2011, it was (a) noteworthy and (b) very flattering indeed. Morgan Kelly is an economics professor at UCD and had a bearish view of Irish property when it was not fashionable and incurred the wrath of Bertie for his trouble. His occasional speeches and presentations are followed with interest by many. And not that there is any feeling of obligation here, but a newspaper article today which implied the academic professor based his pronouncements on “anecdotes” did rankle, particularly when you delve into the criticism in some detail.

In today’s Sunday Independent, Ronald Quinlan denounces a claim made by Morgan in his recent  Hubert Butler Lecture at the Kilkenny Arts Festival on Saturday last 6th August (speech available here). Having discussed developer loans Morgan goes on (from 31:36 onwards)

“What worries me increasingly are mortgages, and in particular there is a group of mortgages, given out, interest only mortgages, that were given out to professionals, to lawyers, solicitors, estate agents at the peak of the bubble. And about 10,000 of these were given out, and this seems trivial, there are three quarters of a million mortgages out there, why should we care about 10,000 of them? However it turns out that these mortgages were for properties of €1-2m each. So these guys would put up like 20% of the price, 10,000 of these loans at €1.1m each which means that there’s like €11bn in loans to these high-rollers from the boom, most of whom couldn’t buy you a cup of coffee now”

(UPDATE: 15th August, 2011. Thanks to commenter “What goes Up” at thepropertypin.com for bringing to attention the youtube video of the speech here)

Not true says Ronald who seemingly forced an admission from Morgan during the week that the “10,000 of €1-2m mortgages at peak” had come from an Irish Times article in May 2010 by “the commercial property editor”. Presumably it is this report by Jack Fagan on 6th May, 2010 (you’ll need a subscription for the full article – UPDATE: 14th August, 2011 Thanks to commenter “What goes Up” at thepropertyp.com for locating a subscription-free copy of the article here ). That report in turn, claims Ronald today, was based on an Irish Brokers Association press release (not available online) which was in turn based on – to quote Ronald – “its own estimates, as well as “anecdotal evidence” and “internal conversations” with brokers”. The Irish Brokers Association represents insurance brokers (500 firms employing 5,500 people) but as insurance is part-and-parcel of mortgages and members also provide mortgage advice, the association probably has as good a handle on mortgages as anyone.

Ronald takes issue with the 10,000 figure and he claims that stamp duty returns “do not bear out” Morgan’s numbers. In 2006 there were only 4,496 stamp duty residential transactions above €635,000 (the highest threshold at the time attracting stamp duty of 9%). 2006 was the peak of the market says Ronald and because 4,496 is less than 10,000 Morgan is wrong.


Well, whilst it is true that in 2006 there were 4,496 stamp duty residential transactions – and further, those transactions generated €543.1m of stamp duty which given the stamp duty rate above €635,000 was 9% would equate to total value of these transactions of €6.033bn or an average of €1,342,000 – those are the stamp duty transactions. They exclude transactions not subject to stamp duty which would include first time buyers and also buyers of property in new developments where the floor area was less than 125m2. How many professionals finally took the plunge for the first time at the peak of the market? How many rich parents indulged their children with guaranteeing substantial mortgages perhaps on the back of their own property-derived wealth? Difficult to know but Ronald implicitly figures it was zero.

And how many non first time buyers bought property of less than 125m2 in new developments at €900 psf? Again Ronald reckons zero but there were quite a few developments of upmarket apartments and townhouses that would have had floor areas of less than 125m2 in the boom and which commanded prices north of €900 psf or €1,000 psm.

What we do know is that the Irish Banking Federation which represents organizations which handle more than 95% of mortgages in the Irish market say that in 2006 the total number of mortgages handed out totaled 203,953. That compares with the total number of stamp duty transactions in 2006 of 52,901. Of the 203,953 mortgages, 37,064 were for first-time buyers, 45,585 for movers, 28,141 for Buy to Let investors, 26,565 were for re-mortgages and 66,598 were top-ups. Stamp duty returns will exclude remortgages and top-ups. Again Ronald assumes these were zero.

I don’t know if 10,000 mortgages of an average value of €1-2m were given out to professionals at the peak. What is the peak anyway? Property reached its peak in September 2007 nationally according to the CSO thoughDublin apartments peaked earliest in February 2007. Is the peak a 12-month period or shorter or longer  But what we do know is that 4,496 will be the absolute minimum number of €635,000+ cash/mortgage residential property transactions in 2006 which will exclude first time buyers, buyers of upmarket sub-125m2 property in developments, remortgages and top-ups. Ronald implies these exclusions amount to zero which seems implausible but wouldn’t the Irish Brokers Association be in a better position to provide a more accurate estimate? Gotcha there Ronald!

As an epilogue to the above, I must personally say I found the speech given by Professor Kelly in Kilkenny to have been a little disappointing. The history of the crisis and the description of the present predicament and some of the future projections, were all engrossing and the audience overall appeared very pleased to have attended. What was disappointing was the absence of any real view on the forthcoming fiscal adjustment – the €3.6bn or €4bn to come out of the budget in December 2011, the additional €3.1bn in 2012 and the likely additional still €3bn to come out in 2013 and 2014. These adjustments are likely to be truly awful for the nation. But to counter these required adjustments, there is scope for major price adjustments in the State so that we begin to pay what is more a European average for goods and services. And there is a necessity for the reform of our bankruptcy laws and perhaps even extraordinary measures to cope with the exceptional levels of legacy debt in Irish society. Emigration as a short-term means of easing the strain but a long term obstacle to economic growth is also an issue of concern on here. Perhaps Professor Kelly might have some insights on these topics in his next public appearance later in August.

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