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A decade ago, veteran developer Paddy Kelly gave a talk at the McGill Summer School. Held in the Donegal town of Glenties, the event allowed Kelly to become one of the first Irish developers to admit how bad things had got. “We as a group of people owe about €5 billion, we as a family owe about €800 million,” Kelly admitted. He spoke about the psychological toll of the crisis, and how some of his friends had killed themselves. “When people are handing out harsh judgements, you have to remember that you are dealing with people,” Kelly said. He added that the credit bubble had made it too easy to borrow money and that he had used a partnership model, forming syndicates of investors, to do deal after deal.
“How did we get the money? It started to become easier about ten years ago. Little by little, it got easier and easier,” he said. At one stage, Kelly said he was involved in various hotels that in total had 7,000 rooms and he was part of a group that borrowed €250 million to assemble a site and build a new quarter in Bray. Anglo had been his main lender, but soon AIB, Bank of Ireland and British banks were all competing aggressively with it. Kelly said everything changed with the crash for people like him who were involved in property development. “When things go wrong, it is like a tiger at the door it is difficult to deal with,” he said ruefully.
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Ten years on, Paddy Kelly is out of Nama. Nama and various banks first made him sell his overseas assets from a €1 billion project in Florida, to a ski resort in Italy. Nama had waited for the market to recover in Ireland, prior to selling his assets here in 2016 to Colony Capital. Called Project Tolka, loans with a total face value of €1.5 billion were sold, secured on assets like the Burlington Plaza office block in Dublin 4 and the Clarion Hotel in Liffey Valley, Dublin 22. Kelly has spoken only a handful of times since the crash, but he gave a speech recently to Tangible, a business development consultancy founded by Raymond Sexton, which among other things organises online events.
Kelly makes the case for trying to tap into the Irish diaspora to help pull Ireland out of its current Covid-19 triggered crisis. “It’s my opinion that when the times of crisis come we should have access to the strength of our global diaspora – in particular in banking and national policy,” he said.
“The Irish Global Economic Forum (in the last crisis) was an attempt to create a ‘Council of Diaspora Elders’,” he said. “We need to now renew our efforts in this regard. However, I believe it’s true to say we are evolving well as a country with a reasonably high level of social and political stability. Europe, Canada, and New Zealand are good examples of economic, political, and social cohesion – the same is not evident in the UK and the US.”
Kelly said Ireland remained “a gateway for North America into Europe”. “Technology enhances our access to each other. We are a bridge and a gateway between the populations of the European Union, UK and USA – almost 1 billion people!”
“As Britain pulls away from Europe our status as an international hub becomes stronger,” he said. “Many of the major US companies located in Ireland over the decades have a diaspora connection. Foreign direct investment is the backbone of Ireland’s economy.”
Kelly said there were about three million sq ft of new office space recently developed or on its way in Dublin which compared to London with 2.4 million sq ft and New York with three million sq ft too. “The pulse of Silicon Valley can be felt in Dublin. Part of the next phase is the Irish guys in Silicon Valley co-locating to Dublin. The young Collison brothers from Limerick, with their fintech company Stripe in Dublin. The team from Intercom led by Eoghan McCabe who has recently moved to Dublin.”
“The culture of our banks is such that writing down debt is considered to be ‘moral hazard’ resulting in business loans, and of course home loans, being sold on to investors on a wholesale basis. This is government policy.”
Paddy kelly
Kelly said he was still involved in property development now that he was out of Nama. “In my world of property development and investment, we have experienced a seismic shift. The past decade has brought us many challenges – including questionable government policy – dealing with government agencies and various banks.”
“The re-structure under the supervision of the Troika resulted in major write-downs and ultimately the transfer of €100 billion-plus of value to international investors.”
“Within our group, we have now dealt with re-structuring debt in excess of €2 billion,” he added. “In Ireland, the culture of our banks is such that writing down debt is considered to be ‘moral hazard’ resulting in business loans, and of course home loans, being sold on to investors on a wholesale basis. This is government policy,” Kelly said.
“Legal processes are in place and have been updated to protect citizens under pressure – bankruptcy law has been amended – from 12 years to one year. These processes are expensive and where possible should be dealt as part of a collective.”
“I support people like Ed Honohan and activist Brian Reilly in Home Options who are endeavouring to change certain policies,” Kelly added. “However, engagement with vulture funds is now required to restructure successfully in Ireland. Bear in mind these funds were invited here and operate under government legislation. Engagement is the first step – and where possible collectively. My own experience down through the years is that one needs to engage to forge a solution.”
Kelly then spoke about some of the new projects he is currently working on. “The standard American funding model is based upon an investment of 80 per cent and banking of 20 per cent – resulting in more dynamism in the economy. The reverse is broadly the case in Europe.”
“Our own company is becoming quite active in this space and our aim is to educate and advise in this sector. We are part of creating funds with regulated structures whereby Irish people can safely own their assets and invest in Irish business,” he added.
“It should be noted that the Central Bank has now grown it is staffing numbers from 500 to 2,000 in order to fulfil its regulatory role to protect our citizens.”
Kelly said that he had long studied “urbanism,” and endeavoured to build buildings to a high standard that added to their vicinities. “Europe, Canada, and the UK offer some of the best examples of good urbanism. Ireland underscores in this regard – however, we now have the opportunity to address this with our talent of international architects and urban planners.”
Kelly quoted Jane Jacobs, the late journalist, who wrote a book called The Death and Life of Great American Cities, which argued that urban renewal if done badly did not respect the needs of people who lived in cities. Kelly quoted Jacobs as saying: “Cities have the capability of providing something for everybody, only because, and only when, they are created by everybody.”
“A good society is one we all wish to live in,” Kelly continued. “People are returning from overseas in increasing numbers for quality of life issues. It is important people feel connected and part of society and that non-nationals integrate with ease.”
“We realise that Ireland is not perfect … But the true ethos of a Republic is still alive in many of our citizens. Activism is part of the equation! Success is achieved mostly in small steps.”
Kelly said his own great-grandfather was in the Land League and imprisoned for his activism. Kelly praised people who fought repossessions. “When protestors stopped the auctioning of repossessed homes where owners were in dispute with the banks – that was success!”
Kelly finished his speech by returning to his original theme of the Irish overseas. “How do we best unify our diaspora energy? By creating sustainable finance, buildings and jobs – a sustainable society! Lobbying the government to create policies that lead to an equitable and productive society,” he said. “Ireland can become a place that is safe and inclusive for our diaspora and it’s possible to return if desired.”
Creating a luxury castle retreat in Roscommon
Intriguingly, Paddy Kelly also revealed in his talk he was working on the restoration of a castle in Roscommon. “I am involved in the restoration of a castle with Brian Reilly on Lough Key because we succeeded in assisting the owner to deal with a hedge fund and re-structure,” Kelly said. Reilly is a founding director of both Home Options and Right2Homes as well as being a non-executive director of Magnet Networks.
I rang Kelly to find out more detail, figuring it had to be, from his description, McDermott’s Castle and nearby Cloontykilla Castle, in Co Roscommon. There were articles last year about how the owner of the two castles Sean Simons, a former actor who grew nearby, had managed to block their sale by a vulture fund. Kelly confirmed it was and said he was introduced to Simons by Reilly, who campaigns to help borrowers fight off aggressive funds. “About 18 months ago, I met Sean and I resolved I would do anything to help him,” Kelly said. Kelly fell in love with the castles and the surrounding 500 acres of forested land. Simons had worked hard to try and restore Cloontykilla Castle already, and his struggles to restore it had been viewed by millions of people on an episode of Channel 4’s Grand Designs. Cloontykilla Castle was built in 1839 and designed by the architect John Nash, who also designed Buckingham Palace.
Simons, who is from Boyle, Co Roscommon, had poured all the money he made from starring in the West End in musicals like Little Shop of Horrors into restoring this castle. “I’m currently turning Cloontykilla Castle into a magnificent five-star luxury retreat that will be a completely authentic experience. If you’ve ever wanted to have your own castle for a week, then it will be the place for you!” he told The Dublin Gazette last year.
Simons’ problem was that work on the castle was not entirely complete after his then banker, Ulster Bank, pulled out of lending him more money, and then sold his loan off to a vulture fund. Late last year, this fund tried to sell off this loan on the market, in a move which would have seriously damaged Simons.
Ken Peterson the Irish-American entrepreneur was approached to see if he would step in to secure Simon’s loans, saving the two castles. Peterson, who owns Magnet Networks and a range of other interests, agreed.
Kelly said a new entity called Drawbridge had been set up to revive Simons’ castle dream. He estimated that Cloontykilla Castle might need another €2 million invested in it to allow it host boutique weddings and unique high-end holidays. McDermott’s Castle sits on an island in the south-east corner of Lough Key.
This beautiful castle is currently in ruins, and Kelly said the initial plan would be to build some infrastructure on the island to allow day-trips to visit it. In the longer-term, he said he would love to see it restored also. He said a partnership model might be needed to raise the finance to fully restore both castles. “This is a very unique and beautiful place,” Kelly said. “I was cycling around it just the other day. There are so many opportunities to go for walks, cycles and enjoy nature. There is nowhere like it.”
