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.
The flaw in your homage to Irish developers skills is that w/o Nama they would have no salary.
If they’re all so smart, then why are so many now bankrupt?
You could say that they must be smart since they’re broke and yet they’re still getting big wads of cash from the hapless taxpayer. But this would only be correct up to a point.
The fact that the taxpayer is paying them professional levels of social welfare shows not that they’re smart, but more reflects “modern” day Ireland. This remote little island & its collective mindset remains at a primitive stage of development, where big & strong is still equated with ability & intelligence.
@Kieran, so don’t pay developers, appoint receivers who charge 1.5% of the asset value – for a €1bn portfolio at today’s values, thats €15m per annum. So pay Ernst and Young, PwC, Grant Thornton, FGS or the rest €15m per annum for managing a €1bn portfolio. Or pay the NAMA developer €200k plus overheads plus profit share. Or head on down to O’Connell Bridge…
Spot on! Tribal numbkins!
@nwl
Relax. I’m just making a simple point that paying failed developers €200k per annum (+ incentives) out of public funds says more about Ireland than it does reflect the apparently brilliants minds and the 12-hour-a-day work ethic of these individuals.
Me think you doth protest too much…
@Gombeenland
Really? So without NAMA, developers would have no salary from NAMA?! Can’t argue with that!
That’s not the same as saying they wouldn’t have a salary though, is it?
How much are ACC, Ulster Bank, BoSI paying developers?
None of your (or our) business of course, because ACC, Ulster and BoSI are not in NAMA. But you can bet they’re paying, and probably more than NAMA because of NAMA being a politically sensitive agency.
Of course ACC, Ulster Bank and BoSI have foreclosed on loans also, but so has NAMA.
But if there was no NAMA, then the original banks, Bank of Ireland, AIB, Anglo, INBS and EBS would be paying developers in the same way as ACC, Ulster Bank and BoSI do.
Independent banks are desperately trying to get rid of so called Irish developers, hence steady drip drip of bankruptcies etc. They mostly think that these developers are incompetent. Probably right don’t you think? Nama on the other hand is v well connected to existing Irish tribal mindset and is getting caught up! Nuff said
@Gombeenland, have you any solid evidence that “independent” banks are making developers bankrupt to a greater extent than NAMA, or are you guessing? Remembering of course that we own 99% of AIB/EBS, 15% of BofI and 100% of IBRC so those mightn’t be totally “independent”. But what about ACC, BoSI and Ulster Bank? Any evidence?
Yes of course.
@Gombeenland, great, let’s see the evidence. As far as I can tell from Iris Oifigiuil and it is studied twice a week, there doesn’t appear to be any significant difference between NAMA, state-controlled banks and “independent” banks, though there are no €values shown on Iris Oifigiuil.
But wonderful if you have evidence to the contrary.
Absolutely no chance, some day hope to return. But value is important and obviously the overall size of the loan portfolios and the relative amount of actions. Remember a lot of actions are given as agreed or voluntary, but of course are not.
Stomach churning….we knew it to be the case…but when set out in black and white…it’s difficult not to feel extremely ill. Well done NAMA wine lake.
@Namawinelake. To me it was new that 66 developers are being paid more than €100,000. Never had that been written before. Never too had the breakdown of salaries to the top 168 been laid out as it was on Sunday.
You are correct in saying that the salaries are only the tip of the iceberg as it emerged at previous Public Accounts Committee meeting that 41 developers are sharing out a pot of €55m in “overheads.”
I think you miss the point that it is stomach churning to know that guys who contributed to the mess we are in, are now essentially some of the highest paid state employees.
@Mccond,
I believe it was this PQ in March 2012 which uncovered the €55m in overheads referred to in the blogpost above
http://debates.oireachtas.ie/dail/2012/03/22/00067.asp
http://namawinelake.wordpress.com/2012/03/25/sinn-fein-splits-nama-wide-open-with-trenchant-questioning/
Not a “previous Public Account Committee meeting”
I’m pretty sure if the league table of €200k-plus salaries in the public sector
(last published here
http://namawinelake.wordpress.com/2011/06/22/uninspiring-government-announcement-to-reduce-some-senior-public-sector-pay-levels/
)
was published here every month, then every month, it would generate similar levels of outrage.When was the last time the Sindo did a developers salary story? It wouldn’t be so bad if the Sindo reminded us that developers can walk away with millions if they reach sales targets, millions that would dwarf €200,000 per year.
Maybe the Sindo might do a feature on what developers actually do that could justify a €70-100,000 salary or a €200,000 salary.
I’ve seen this line of reasoning – ” 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” and also daily rates charged by receivers. What I haven’t seen is the cost of NAMA taking charge of properties and employing project managers to do the work.
There are fraud risks or risks of shady side deals in leaving Developers at the helm. Money can go missing, certain subbies may get paid very generously or dubious ‘consultancy’ fees may be paid.
The idea of paying bonuses and significant debt forgiveness is wrong when the rest of society are picking up the tab.
@Ahura, what do you think a typical 12-hour day at work for a developer overseeing a €100m mix of development/investment properties entails?
I’m not sure how they’re working 12 hours a day. I doubt they’d be more than 2hrs a day on the phone to NAMA. I guess they could travel around their various sites, but that’s not exactly productive. If they have tenants they could phone them for a chat. Look at helicopter brochures maybe. If they get a bit of money from NAMA to develop, hire a project manager, recruit sasles agents etc and keep an eye on the spending.
Will check later today,but one wonders what the CEO of say of a company like SiteServ was making,whilst drowning in debt to Anglo,if memory serves it was in excess of 200,000.Taxpayer took 100million hit there,be great to have a Sindo update on how it’s doing these days.
NAMA does not pay salaries,it approves a “plan” with targets,the developers are allowed deduct overhead including a salary.
The much bigger “number” that is not disclosed involves leasing and property management fees and the carried interest or back end piece.
With a projected spend of 2 Billion there will also be considerably fees for construction and development oversight.One Sunday paper leads with a non article about salaries,another one concerns BK developers fleeing to the UK.
If NAMA is such a great gig,why are so many emigrating and filling BK?
@John, the Siteserv CEO was on €400,000-plus.
Bank of Ireland allows €300,000 salaries for developers at <€100m broke companies
http://namawinelake.wordpress.com/2011/12/15/nama-allowed-e300k-salaries-at-modest-development-companies-which-made-a-e30m-loss-last-year/
Of more interest might be the number of ex development company employees that are now working in NAMA and what level of salary plus performance bonus they are being paid. There is not much transparency on how the reward system is designed not to encourage prolongation of the asset management phase of the NAMA project.
Big problem with all of this is that we the taxpayers are paying for all the fun and games. NAMA is nothing more than an off Balance Sheet scam funded/guaranteed by Irish taxpayers and adding to the growing list of overpaid Irish “public servants”. I suppose the selected developers qualify for a pension after 5 years in case their second shot at development doen’t work out!
We can probably keep this charade going for another while until Spain or Italy crashes or if the ECB monetises all the outstanding debt. In similar vein ECB lends to EU banks who then buy government debt. The mad hatter’s economic tea party! Eventually the ECB will have to lend us the money to pay off our debts to the ECB.
The up skirt picture of a reality TV star perched on a Irish developers lap,almost ruined my breakfast.Hes into Anglo for “only” 10 million does not appear to have cramped his style too much.If this fashionable chap,can raise 50 million,I think Sean Mulryan on 200,000 a year is a fantastic deal.
http://www.independent.ie/national-news/irish-developer-philip-marley-meets-reality-tvs-hot-property-3168539.html
Who was it that absolutely insisted bondholders get paid in full,contagion and all that.DB is a ‘big bank’ very active in the distressed Irish debt space.It would be good for Kennedy Wilson and the overall economy to have more competition,specifically indigenous developers.If it was up to me NAMA would be competing here and snapping up some of these deals at rock bottom pricing.
“Kennedy Wilson has been one of the emerging winners in the current European bank deleveraging cycle, having won Lloyds Banking Group’s €360m Project Prince portfolio, following last autumn’s $2.1bn Bank of Ireland UK loan portfolio win.
Both wins are understood to be in partnership with Deutsche Bank, the two are also in the running for Lloyds’ £645m Project Harrogate, as well as being in the first round for Allied Irish Bank’s £340m Project Pivot and the €675m Project Kilidare.”
http://costarfinance.wordpress.com/2012/07/16/2304/
Project Prince-17 cents yep,paid 61 million.
BofI Deal-handpicked by Keegan x BofI…
“The structure of the deal is different to both RBS’s Project Isobel and Lloyds’ Project Royal in that the loan portfolio was handpicked by Kennedy Wilson, alongside Bank of Ireland’s acquisition manager, John Keegan, who came across to the international real estate investor as part of the deal in July.”
http://www.costar.co.uk/en/assets/news/2012/January/Inside-the-Kennedy-Wilson-UK-loan-portfolio-financing-deal-with-Deutsche-Bank/
NAMA is NOT the problem,the country and its banks are getting asset stripped by off shore funds and your European partners banks!
“No-one should get paid more than the Taoiseach”.
You are correct to criticise this particular oft-repeated idiocy. First, the Taoiseach should be paid much less than the post pays now. And second, positions outside electoral politics should be paid according to supply and demand, which means that sometimes high-skilled internationally mobile professionals will need to be paid much more than the Taoiseach.
@Kieran Sullivan who would you have build these, Kennedy Wilson,some UK companies or Irish based developers ?
Stephen Donnelly had some interesting observations regarding the stigma in Ireland about “failure”.
“We need to learn a lesson from America, where commercial failure is nothing to be ashamed of. Indeed, successful entrepreneurs I have heard talk there usually start their speeches by stating, proudly, that their current venture was the first to succeed after several failures. And, they say, it was the lessons learned from their initial failures that equipped them to finally get it right. Maybe that’s a particularly pertinent lesson for a small island nation that fell on hard times and needs to get back on its feet and start to succeed once again.”
http://www.independent.ie/opinion/analysis/stephen-donnelly-insolvency-bill-has-ring-to-it-but-needs-tweaking-3168387.html
“IDA is confident of securing, in the medium-term, significant investments that will require large scale office space. While there is currently an adequate supply of office space in the Dublin area the property sector needs to start planning for future demand. Availability of suitable modern office space, of scale, is strategically important for winning substantial projects. IDA has already held discussions with NAMA on providing solutions to meet this future demand.”
http://www.idaireland.com/news-media/press-releases/strong-flow-of-foreign-di/
@John
I would say there is a natural fear of failure in any environment where opportunities are few and the market is small.
Comparing ourselves to America doesn’t help much, considering the fact that Ireland is a small island, with a small population, no natural resources to speak of, and no legacy of industrialisation. What do we have in common with America, aside from the fact that we both speak English?
Naturally, failing doesn’t matter as much in the Land of Opportunity. But this is exactly what Ireland is up against – failing does matter here because the what-I-have-I-hold brigade have hoovered up the few opportunities that do exist. As a percentage, how many self-made men/women are there in Ireland compared to those born into the right families/dynasties/professions? It would be interesting to compare that figure with its American equivalent.
I’m not a defeatist by any chalk – I just think we need to deal with our geography and our resultant mentality before we start to try and rebuild the country.
Larger developer with staff of say 50ish costs maybe €20M pa to run, add that to your €200k for swinging dick principals who believe that either loud talking (euphemism for shouting) or alternatively talking endless gobbledygook get before share payments / bonuses and then you starting to get a better idea.
@Gombeenland, €20m to run company with 50 staff. Ah go way out of that. NAMA costs about €45m with 210 fairly well paid staff and which includes bought in services from NTMA for finance and IT.
Now you are way off, what you don’t seem to understand is that Nama does nothing, there’s more to development than salaries, if you aren’t spending money you aren’t taking risks, w/o risk no mun!
@Gombeenland, have you a link to a company’s accounts with 50ish personnel where overheads are €20m per annum?
No comment on fishing.
One last thing before the bar opens, this debate about receivers is too simplistic. There are different types of receiver appointments including a “light touch” approach where fees are much reduced and can be better controlled and a lot less than above mentioned. Add that to new “proper” management that is not tainted and is more professional and you have an alternative to keeping morons who caused the problems in the style they have become used to, goodnight all!
no natural resources…
fishing rights, landed fish estimated at €2billion/yr – double that for processed fish.
Agriculture, grass grows like a weed (no pun intended) in this country.
@Kieran there are tremendous opportunities in Ireland,specifically in the distressed debt and Real Estate space.
NAMA legislation prohibits existing borrowers from purchasing their assets at a discount,what purpose does this serve,other than clearing the playing field for off shore hedge funds and German banks.
A lot of RE developers were/are self made one of the few sectors where it is possible to seriously accumulate wealth, contrary to popular opinion,some of the Irish developers are world class.
Sean Mulryan would have no problem raising any capital he requires,whatever happens to Treasury, Richard Barrett is and will be extremely successful in China.
According to the IDA,you are looking at a possible shortage off top class space,if the ‘slash and burn’ mentality continues,who is going to build it ?
Stephen Donnelly’s comments were quite insightful and point to a particular aspect of Irish society, gratuitous kicks when the man is down.One example is the incessant and salacious reporting on Brian O’Donnell and his family.Hes not exactly enjoying himself now is he,its a non story the man and his family should be allowed settle it without this amount of reporting.
http://www.independent.ie/national-news/courts/case-of-solicitors-luxury-homes-is-getting-curiouser-and-curiouser-3171003.html
Jeez, nearly opened the bar, then saw the bit about great opps in debt thing, your average fund takes one look at Ireland and quickly moves on, why? Governance for one thing, not reliable or trustworthy including crazy carry on of so called “world class” developers. We haven’t got that yet as a nation have we? Next thing of course is risk. Too risky by far. Now for a reliable Irish sector a cold drink. Cheers, keep on dreaming!
@gombeenland here is 2 BILLION reasons to disagree with you!
“Beverly Hills-based global real estate investment and services firm Kennedy Wilson has set up a partnership with Deutsche Bank to seek out and purchase €2 billion in European real estate loans”
http://www.perenews.com/Article.aspx?article=68272&hashID=38BB610F2B11272B343CBBBAA69ACC597081735E
I am impressed with the list of talents skills and accomplishments that you say property developers need. The fact that almost none of them actually had the required skills seems to me to make a nonsense of your point. They really were just a crowd of chancers whose only talent was an inability to assess or even recognise risk and a willingnessl to borrow as much as the silly bankers were willing to loan them so that they could pay silly prices for things in a rising market. Anyone who has seen the full video of the most successfull businessmen in Ireland (at one point) i.e. the Quinn boys, negotiating with some minor Russians will recognise what level of expertise and talent our “developers” had. They looked and sounded like they had spent their lives selling cattle wormer out of the back of a van in Cavan Mart. So dont come telling us that our developers were world class.
The K name? Remember that? Let’s see what they do with their mun first.
Have no problem with any debtor drawing down a salary 100k+ if he is working out his loans and getting the best return for the taxpayer.But this talk about ACC Ulster approving the same rate as NAMA is totally wrong,Wouldnt be near what nama approves.
KBC provide the loan here,despite slow condo. sales its a world class development by Sean Mulryan and Ballymore. Admittedly,Irish developers lacked some capital markets skills,very few had the discipline or ability to de-leverage in time.
Great project here by an Irish born developer !
http://www.treasurychinatrust.com/shanghaithehqextension.htm
The Quinn’s were never property developers,investors yes but developers no.
Always sad to see the vitriol and focus directed at the salaries of developers, rather than look at the larger picture and benefit for NAMA/taxpayer/us. The salaries are a pittance when viewed against the size of the portfolio managed. Unfortunately its good tabloid fodder and appeals easily to the baser instincts. The Irish/American comparison is a good one. The yank looks up at the big house on the hill and says -”someday i am gonna be just like that”. The Paddy looks up at the same house and says… ” someday I’m gonna get that f#*¥er”.
Every street in Ireland is probably populated by a few “developers”. Not the NAMA variety but more likely the couple who took an equity release to pay for the deposit on a holiday home or the young professional who borrowed to buy a few flats or the tradesman who bought a fixer-upper with a loan. The difference is the quantum and scale. The developers did it bigger, better (not), and with more bankers. But lets not kid ourselves, the whole country got caught up in the excitement and predictable consequence. The Chinese-take-away satisfaction of lashing out at the salaries canard means the sindo etc have to keep re-hashing it so we can refill over and over.
Wow! All you have to do to rouse the rabble is to write a non-story about paying developers a salary to work out their assets. For the record, most small time developers came from the ranks of engineers, tradesmen, surveyors or those connected in some way with the construction industry. Towards the end, there was also a fair smattering of farmers and local shopkeepers with a few acres…… but that was at a time when almost everyone wanted to be a developer!
Like it or not, without the long knowledge of some of those who manage the larger development companies, such as Sean Mulryan, NAMA would lose even more money than they are already set to do. If you believe the Independent approximately 8% of NAMA’s debtors are paid a salary of €100,000 to manage sizable portfolios. It seems that another 15% are paid between €70,000 to €100,000. Hardly a majority. I am aware that many of the more professional developers have worked for the past four years to repay their loans without any salary whatsoever from NAMA. It is not in a true developer’s DNA to work for a salary – and virtually none of them want to be little civil servants.
The alternative for NAMA is to appoint receivers and sell the loans to the vulture capitalists for somewhere between 18 cents (as per BoI and AIB) and 30 cents in the Euro on the face value of the loans, thereby adding further losses.
However, as NWL states, the perception of salaries as outlined above is not the basis on which NAMA pays for the management of the various portfolios under its control. They do it by calculating the minimum staff and overheads required to manage any single portfolio and settle that sum as an overall payment to the company. It is ridiculous to talk of any development or property investment company in Ireland and under NAMA’s auspices having a staff of 50. I know of none that has anything remotely approaching this staffing level.
Without the incentive at the back end to the developers, there is no motivation for them to stay for the next eight years working on their portfolio to see it being sold off piecemeal. From the developer’s viewpoint, the banks have abandoned the industry and NAMA has pulled the plug by fair means and foul on as many loan agreements as it possibly can. There is no credit availability and the only buyers are vulture funds.
Until NAMA drops the ridiculous requirement that no sales can be made to their current parolees, it is destined for further and increasing losses, because in the end, the best buyers are some of the more professional local developers. BOSI in particular has grasped this fact and is the only really commercially intelligent bank running off its book at this point.. It is taking a bit longer for the penny to drop with the rest of them, but eventually it will – as there is no other option other than the circling vulture capitalists.
@ NWL
Lets not forget that NAMA is (by conscious design of its creators) the greatest soft-landing corporate welfare scheme in the history of the capitalist system. Had capitalism been left to work as it should, the developers (many of whom are on record as having conrtibuted generously to all the main political parties) would be driving taxis today. Instead they are living high on the hog courtesy of Sean Taxpayer. Its like the Twiilight Zone meets North Korea.
Without the help of these developers, NAMA would lose even more money.
The bankrupt developers should have been bankrupted, not bailed out.
And NAMA should never have seen the light of day.
What we have now is the worst possible scenario. Developers being kept alive who should otherwise have been allowed to (commercially) die. And a State Behemoth that is losing vast amounts of taxpayer money.
This Irish solution to an Irish problem lark just doesn’t cut it.