A large volume of private messages has been received on here over the past couple of days asking why there hasn’t been a blogpost on news coverage last weekend about NAMA paying developers large salaries – three developers are paid €200,000 a year and 66 are paid €100,000 each,. And the response is that there is nothing new in the latest coverage – okay, when last covered on here, there were only two (un-named) developers getting €200,000 and now there are three – and one of those three has been confirmed as Sean Mulryan of Ballymore – and previously we knew that 110-120 developers were being paid €70-100,000. But there is practically nothing new in the recent coverage, and that’s the reason there hasn’t been a blogpost. However the coverage in other media has yet again ignited the detonation cord to public outrage and prompted NAMA to defend the payments, and it is gobsmacking on here to see the same unchallenged rubbish being spouted by NAMA and the media, so this blogpost merely looks at the myths and realities
Myth: NAMA is paying a maximum of €200,000 salary in three instances.
Reality: I’m willing to bet that Sean Mulryan, whose assets in NAMA are said to worth billions, wouldn’t get out of bed in the morning for €1,000 a day gross which is what €200,000 a year represents once you deduct weekends, holidays and normal absence from work. But what he will get out of bed for, I would bet, is a bonus if his assets are sold for a price in excess of NAMA’s target. So Sean Mulryan may well have to do with just €200,000 for the time being, but he may be in line for millions, if not tens of millions and possibly even hundreds of millions if he reaches certain targets. Remember that alongside developers’ salaries, NAMA is offering developers a profit share scheme if their assets sell for a price in excess of a target agreed by the developer with NAMA. You won’t have heard much from NAMA about this scheme in recent days…
Myth: NAMA is actually saving money – when compared with the alternatives – by paying developers €200,000 a year
Reality: NAMA is paying FAR MORE than developers’ salaries – developers’ salaries are just the tip of the iceberg. NAMA is paying entire overheads for developers’ companies. Earlier this year in a Dail Parliamentary Question, we learned that NAMA is paying €55m in overheads to 41 developers – that’s more than an average of a million apiece. It’s still less than the 1.5% annual fee – the 1.5% is calculated on the value of assets managed – that receivers typically get, but remember that the developer’s salary comprises less than an average of 10% of what his development company is getting paid by NAMA in overheads. Add in the profit share to the salary and overheads and the cost-saving argument becomes questionable.
Myth: At 8am on any given morning of the week, you could go down to the Boardwalk at O’Connell Bridge in Dublin, pick up any random heroin junkie waiting for the methadone clinics to open, give him a shower, a suit and a mobile phone and a couple of hours of training and by 5pm, hey presto! you’d have a property developer. Shure what is there to it?
Reality: Take a look again at the Prime Time Investigates special on developers which was broadcast in December 2010. Take a look atCorkdeveloper Michael O’Flynn filmed taking off in his helicopter from his palatial home to go to the races and watch how his horse performs. Scandalous, isn’t it? Take a closer look, and you’ll see Michael and indeed most of the other developers in the programme with a mobile phone constantly glued to their ears. Now of course, they might be talking to the proverbial bookmaker or mistress, but the betting is they’re working. And that’s a mystery in the whole Irish property boom and collapse – how the public was never provided with real information on what the business of a property developer involves. Planning, construction, economics, financing, accountancy, tax, law, marketing, sales, architecture, personnel selection and hiring and firing, design, asset-management, project-management, politics, history and geography are SOME of the disciplines which developers need – or at least need be able to call on, thus the glue-on mobile phones – to be consistently successful on a large scale. Yes, anyone can buy a field in a rising market where credit is freely available, and maybe even build a dozen houses on an estate though even that requires some ability, but to build multi-billion euro businesses requires a lot of smarts. And that has never been really publicly recognised in this country. But nonetheless, the myth remains that ANYONE can do property development – ANY type of property development, residential, commercial, public in ANY location, Cork, Dublin, Ballyjamesduff, Beijing. Just try it.
Myth: No-one should get paid more than the Taoiseach
Reality: Even in autocratic China, you have billionaires whose wealth far exceeds that of anyone in the state party. Tom Cruise, Jay Leno and David Beckham earn multiples of Barak Obama’s salary. That’s not to say a country’s leader doesn’t have a more challenging, responsible or stressful job or that he/she needs more ability to do it well, compared with an actor, singer or businessman. But in a free and open society, people get paid what the open market will bear. And frankly An Taoiseach is getting paid more than many in his market think his job is worth – he gets paid more than the leaders of the UK and Denmark, for example – two countries providing us with bailouts. What’s the going rate for a developer? Well if that developer’s assets are limited to a few fields in rural Ireland, then not very much. If the developer has billions of euros worth of assets across the globe, then the going rate is going to be hundreds of thousands and probably millions. And if Ireland is broke and can’t pay, then the consequence should be that we lose a multiple of what is paid to the developer, as a result of failing to deliver a completed asset at its optimal worth. And for political reasons, maybe that will happen, but don’t think there won’t be financial consequences.