# How long before we see a Major Developer go down?



## ccbkd (16 Sep 2008)

Surely with the chaotic state of the global Banking markets and our own internal property crash, we should start to see a Major developer tumble as banks finally accept they can't keep propping these guys up, The autumn season has been a damp squib, If it does happen I assume the bank then take the unsold stock scramble to sell it to help re-coup cash, If this likely event happens surely it will open the floodgates?


----------



## z103 (16 Sep 2008)

> Major developer tumble as banks finally accept they can't keep propping these guys up


Maybe the banks have no choice but to keep propping the developers up. If (when) a major developer goes bust, it could collapse the whole house of cards.


----------



## Howitzer (16 Sep 2008)

As long as the banks are able to keep rolling up the interest payments they will. Invariably smaller developers whose assets are thinner will  the first to be called in. The consequences of one of the major developers going under would be disatrous for the Irish banking sector.

A number of smaller, less high profile, developers have already gone to the wall and Liam Carrolls activities last May(ish) looked like an enforced scramble for cash.


----------



## webtax (16 Sep 2008)

When the auditors have to sign off on the current value of unsold properties/proposed developments for year-end financial statements?


----------



## mercman (16 Sep 2008)

There is so much talk about the state of certain developers at the moment some of it has to be true. The state of the entire market is at a critical stage. I would say that by mid October a number of the boys will be on the ropes -- and will cause a major stir with some of the Banks. The Banks were literally throwing money at them up to last year. Some are fine but in the main most are up the creek.


----------



## MichaelDes (16 Sep 2008)

webtax said:


> When the auditors have to sign off on the current value of unsold properties/proposed developments for year-end financial statements?


 
Correct there must be lengthy discussions between the auditors and the banks on the valuations of assets to liabilities. With the Enron scandal, three of the major investments houses delinquent and WA Mutual in the States on the ropes shouldn't the Central bank ensure that assets held against loans by the Irish banks are correctly marked to market with correct and current valuations.

If €150+k is lost by me because of non disclosure or full disclosure within one of the institutions, is this fair? Especially as the depositor losses nearly all, but the borrower still owes every cent.

These loans may not be technically delinquent but just non payment loans with roll over interest accruing for months and months. Fully declared revaluations whenever it happens will be unchartered financial territory and unthinkable the consequences.

When are banks next to report audited accounts for compliance?


----------



## oceanclub (17 Sep 2008)

ccbkd said:


> Surely with the chaotic state of the global Banking markets and our own internal property crash, we should start to see a Major developer tumble as banks finally accept they can't keep propping these guys up


 
I imagine this is why the government will introduce in the  budget some desperate measures in an attempt to get First Time Buyers (aka Suckers) to buy some of these developers' overpriced stock. I imagine there's quite a few developers out there with some juicy stories related to their dealings with politicians, and some of them will be tempted to use the nuclear option...

P.


----------



## DavyJones (17 Sep 2008)

leghorn said:


> Maybe the banks have no choice but to keep propping the developers up. If (when) a major developer goes bust, it could collapse the whole house of cards.




Watched a show on an American millionaire and he said something like " If you owe the bank 1 million, they own you. If you owe the bank 100 million, you own them"


----------



## PaddyW (17 Sep 2008)

Think I heard that somewhere too. Wonder how AIB are fixed with a 100 million loan this Friday


----------



## p45 (17 Sep 2008)

On the way out of the port tunnel today I was struck by the number of enormous half finished apartment blocks at the North Wall.  With Dublin already stuffed with completed and very empty apt blocks I guess it's just a matter of months before a developer goes.


----------



## sparkeee (18 Sep 2008)

let em crash they robbed ue all for years.


----------



## MrMan (18 Sep 2008)

sparkeee said:


> let em crash they robbed ue all for years.



hope you reported them to the guards.


----------



## shnaek (18 Sep 2008)

I reckon we are going to see a few firesales before we see one of the major developers go. I expect to see some firesales in the next few months. The banks just can't afford to bail developers out indefinitely.


----------



## z103 (18 Sep 2008)

It's a bit of a catch22 situation.

Developers can't pay their loans back to banks because houses aren't selling

And

People aren't buying because they can't get loans from banks.


----------



## markwfitz (29 Sep 2008)

Interesting fact from AIB annual report.
Top 50 Loan exposures are €18.5bn up from €13.9bn in 2006, thats 370m on average.
Do you think you could start guessing 50 people who owe AIB that amount of money? wow.. large numbers & in 2007 practically all the AIB loan growth was to developers in Construction & property, it is in black & white in their annual report. They funnelled over €11bn extra into that sector in 2007!
Do you think we may see another ICI insurance situation when some of these loans are not repaid or the loan covenants are broken. It certainly will be interesting.


----------



## room305 (29 Sep 2008)

leghorn said:


> People aren't buying because they can't get loans from banks.



I think that statement is being grossly over exaggerated or misreported in the press. I have spoken to a few a people who bought in recent months and none of them had any difficulty obtaining finance.


----------



## MrMan (29 Sep 2008)

room305 said:


> I think that statement is being grossly over exaggerated or misreported in the press. I have spoken to a few a people who bought in recent months and none of them had any difficulty obtaining finance.



I would definitely say that difficulty in borrowing is a major factor in house sales slowing especially with ftbs.


----------



## z106 (29 Sep 2008)

MrMan said:


> I would definitely say that difficulty in borrowing is a major factor in house sales slowing especially with ftbs.


 
Ya. It's definitely having some impact.
The quesion is how significant is that impact.


----------



## shnaek (29 Sep 2008)

room305 said:


> I think that statement is being grossly over exaggerated or misreported in the press. I have spoken to a few a people who bought in recent months and none of them had any difficulty obtaining finance.



Were they Gardai, lawyers, accountants or civil servants? They can get loans handy enough at present as their income is guaranteed.


----------



## mercman (29 Sep 2008)

Sentiment is gone -- simple as that. Coupled with Banks more or less out of the lending business does not make the shorterm outlook too favourable.


----------



## room305 (29 Sep 2008)

shnaek said:


> Were they Gardai, lawyers, accountants or civil servants? They can get loans handy enough at present as their income is guaranteed.



In all cases they were public sector workers or had very secure jobs.

It seems to me that banks are still willing to provide mortgages once they can be assured those applying have a reasonable deposit, the valuation on the house is realistic, the amount applied for is not more than 4.5x annual salary and the income stream is secure.

Sounds like the kind of prudent lending the banks should have been doing all along rather than a case for government intervention.


----------



## ccbkd (2 Oct 2008)

Why on the week that Irish Banks nearly folded are they still so reluctant to tell us who are the Bad Debts they are carrying, We know they are property developers but why are they being protected by the very institutions who almost crumbled...if the property crash is going to come to a head we should see at least one or two major developer fall from grace big style, they saw the huge benefits of capitalism now they should feel the pain also...
I beleive most of the big developers were planning launches just after the budget in a forthnight, I guess the events of this week put pay to those plans!


----------



## WILLY NILLY (8 Oct 2008)

This is a bit of a technical question that I was thinking about but here goes.......

Bank has lent 100m  to a property developer in 2006.

The banks security is the developors landbank worth 150m in 2006.

Developer cant build as there are no buyers now in 2008.

Bank gets landbank valued at 70m and in a firesale the bank sells it for 70m.

The bank puts the 30m loss on the transaction in the profit and loss account for 2008 and its profit is reduced by 30m.  Its Balance sheet now shows Assets of 70m (cash) from the transaction. 

Question

Hoe does this impact on capital account or share holders fund account? 

In other words, the value of the bank has decreased by 30m by the write off....... but how is the loss reflected in the value of the bank to the share holders.

Maybe its a silly question!


----------



## tedcrilly (8 Oct 2008)

can't answer that question but have another one

Do banks have recourse to the Developer's (or anyone else's) other assets over and above the assets used to secure the debt facility?

TC


----------



## Towger (8 Oct 2008)

tedcrilly said:


> Do banks have recourse to the Developer's (or anyone else's) other assets over and above the assets used to secure the debt facility?


 
On the rumour mill...

I have heard through a friend of a friend that a Developer was offered a reduced price on a house, the developer turned it down. This person then contacted the Developer's bank and made the same offer for the house and the bank sold the house from under the Developer.

I have also heard from a much better sourcesthat one well known Developer has left a few bills unpaid and is now employing two bodyguards...


----------



## darag (8 Oct 2008)

The 100m loan would have appeared as an asset on their balance sheet.  By writing off the debt and replacing it by the land worth 70m, the value of their assets goes down by 30m.  Thus the bank's equity (net asset value) goes down by 30m.  

Selling it is balance sheet neutral as it involves replacing one asset with another (cash).

I don't know much about accounting to be honest so I don't know how loan collateral is represented in a bank's accounts but its value obviously can't be directly represented on the balance sheet as it's more like the payout value of a paid up insurance policy.


----------



## mainasia (13 Oct 2008)

oceanclub said:


> I imagine this is why the government will introduce in the budget some desperate measures in an attempt to get First Time Buyers (aka Suckers) to buy some of these developers' overpriced stock. I imagine there's quite a few developers out there with some juicy stories related to their dealings with politicians, and some of them will be tempted to use the nuclear option...
> 
> P.


 
Too true....


----------



## mainasia (13 Oct 2008)

MrMan said:


> I would definitely say that difficulty in borrowing is a major factor in house sales slowing especially with ftbs.


 
This is ignoring the fundamentals of the purchase. If the banks don't give out loans to FTB's that don't earn enough to cover over-valued and rapidly depreciating property that is the prudent and correct thing to do.
Why do the banks need to give out loans to again TEMPORARILY keep something over-valued. 
And once more, it's very obvious if the developers were forced to sell their stock at a market price the benefit to FTBs would be much bigger. They could get the loan for the reduced principal price and that loan would be less risky.


----------



## ccbkd (22 Oct 2008)

Taggart Holding Belly up !


----------



## MrMan (22 Oct 2008)

mainasia said:


> This is ignoring the fundamentals of the purchase. If the banks don't give out loans to FTB's that don't earn enough to cover over-valued and rapidly depreciating property that is the prudent and correct thing to do.
> Why do the banks need to give out loans to again TEMPORARILY keep something over-valued.
> And once more, it's very obvious if the developers were forced to sell their stock at a market price the benefit to FTBs would be much bigger. They could get the loan for the reduced principal price and that loan would be less risky.



The difficulty borrowing appears in most cases to be from the inability to save a reasonable deposit. Knocking a house from €250,000 to €200,000 is no use to a ftb who still hasn't got €20-25k in savings.


----------



## Bronte (22 Oct 2008)

MrMan said:


> The difficulty borrowing appears in most cases to be from the inability to save a reasonable deposit. Knocking a house from €250,000 to €200,000 is no use to a ftb who still hasn't got €20-25k in savings.


 If they can't save how can they afford to pay a mortgage?


----------



## mercman (22 Oct 2008)

This is the first of the flood. Pretty amazing when the Banks not so long ago were literally throwing money at the developers with no foresight. There will be many more to follow and there is absolutely nothing can be done to save them. AFAIK there was just one developer that offloaded a large chunk of ther assets in early 2007 and shut up shop. People including their Bankers thought they were mad - it goes to show not everybody was greedy.


----------



## MrMan (22 Oct 2008)

Bronte said:


> If they can't save how can they afford to pay a mortgage?



People pay bills and spend their disposable income. So paying the rent may be close to the same amount as paying a mortgage and unfortunately alot of people have not put away money so producing say €30,000 before paying a mortgage is not feasible even though the actual mortgage repayment is well within their budget.


----------



## joker538 (22 Oct 2008)

MrMan said:


> People pay bills and spend their disposable income. So paying the rent may be close to the same amount as paying a mortgage and unfortunately alot of people have not put away money so producing say €30,000 before paying a mortgage is not feasible even though the actual mortgage repayment is well within their budget.


 
Are you advocating the reintroduction of 100% mortgages?


----------



## MrMan (22 Oct 2008)

joker538 said:


> Are you advocating the reintroduction of 100% mortgages?




I'm explaining why there is difficulty in borrowing for property especially with ftbs. I'm meeting ftbs on a regular basis that want to buy property but don't have the sufficient savings to pay 10% plus the further expense required to fit out a house.


----------



## MichaelDes (22 Oct 2008)

MrMan said:


> People pay bills and spend their disposable income. So paying the rent may be close to the same amount as paying a mortgage


A mortgage is no way cheaper than renting, not in my area anyway.




mercman said:


> This is the first of the flood. Pretty amazing when the Banks not so long ago were literally throwing money at the developers with no foresight.


Re Taggarts - it's got €200m of rotten assets and UBL/BOI are considering moving these assets off from the balance sheet to a "_Special Investment Vehicles" _and in the meantime playing with tax payers monies.

Now was it not these sort of mad decisions previously, that caused all the problems within the banking sector. When are they going to realise and wake up to reality because all that's happening is delayment of the inevitable...

[broken link removed]


----------



## queenlex (23 Oct 2008)

SPC100 said:


> Not long - [broken link removed] (link is to Irish times article) Do they count as Major?


 
I would have said so from what I have heard on the news about them.  Repeating some of the eariler posters I have been in parts of Dublin recently with whole blocks of apartments empty even in what would be called 'nicer' areas like stepaside.

Also where is this Belmayne place on the news on the northside?  SOUnds like there is a developer gone down there too but dont know who they are?


----------



## MrMan (23 Oct 2008)

> A mortgage is no way cheaper than renting, not in my area anyway.



Everywhere is different but even if there was a big difference the spending culture of the last decade has seen 20 somethings save little (generalisation I know).


----------



## Brendan Burgess (24 Oct 2008)

Sorry folks

We have had to delete multiple defamatory posts so I am closing this thread. 

If it is reported in the paper that a receiver has been appointed to a company, you can report that and provide a link. 

Saying "it won't be long before Developer X goes bust" puts my home on the line, so don't do it.

Brendan


----------

