“I’m a complete fusspot,” says Michael O’Flynn, standing in the hallway of one of the well-appointed detached houses in his latest housing scheme, Rokeby Park near Lucan village in west Dublin.
“Attention to detail is something we’re known for. Building is an imperfect science and if someone has an issue we’ll deal with it.”
Rokeby Park is a high-end scheme, comprising 71 detached four- and five-bedroom houses at just four to the acre.
The spacious showhouse is tastefully kitted out and the sizeable gardens already have an impressive sward of grass.
“The farming background helps, you know,” O’Flynn jokes.
This is one of a small number of schemes O'Flynn has on the go in Dublin and Cork as he begins a new chapter in his property career, following time served with the National Asset Management Agency and a period of bitter litigation with US investment giant Blackstone that ended with a peace accord.
Raised in Ovens, Co Cork, O’Flynn was one of the State’s biggest property developers in boom-time Ireland.
“I’ve built thousands of houses,” he says. “I’m not sure of the exact number, but thousands.”
Much to his chagrin, his company’s loans of €1.8 billion were transferred to Nama for work out from 2010 onwards, making him one of the agency’s 10 biggest debtors.
His personal loans of about €25 million were also moved to Nama even though he had never given any personal guarantees, unlike many of his rivals.
O’Flynn drafted a business plan that would have involved the full par value debt being paid back – taking between five and 10 years – but it was rejected by Nama.
“Once they rejected my plan I just wanted out of there because it was a waste of time.
“They were asking me to work out something on their basis that I didn’t believe in.”
His borrowings were sold by Nama to Blackstone for a reputed €1.1 billion in 2014 (O’Flynn says he doesn’t know how much Nama paid the banks for his loans, nor what it received by selling them on) after which the US company sought to call in his borrowings at short notice.
Not one to back away from a fight, O’Flynn lawyered up and took Blackstone to court, eventually winning the battle.
In October, O’Flynn put together a funding package of €400 million to secure control of the business in Ireland from Blackstone with a view to building 10,000 homes, mostly in Dublin and Cork, over the next seven or eight years.
This involved a joint-venture agreement with New York-based Avenue Capital Group, and a fund of more than €300 million.
Some €50 million from this was used to pay Blackstone for assets, along with about €40 million in senior debt drawn down from AIB and an unspecified amount of equity provided by O'Flynn, who has retained full ownership of his companies.
The group is also managing investments for Blackstone, including the 17- storey Elysian residential tower in Cork, which it will finish out with €5 million from the US company.
Separately, in the UK, O’Flynn agreed a joint venture with global investment giant Blackrock to develop assets with a combined gross development value of €500 million.
O'Flynn is currently one of the few Irish developers approved for senior debt with both AIB and Bank of Ireland (where he has a €12 million credit facility).
It puts him in a strong position to deliver on the 3,500 housing units he currently has in the pipeline in Dublin and Cork.
Complaint to European Commission
It's not all a bed or roses for O'Flynn, however. He is fuming that the Government has mandated Nama to build 20,000 residential units over the next five years and is one of five parties who have come together and lodged a complaint with the European Commission alleging illegal state aid.
And then there's the Central Bank rules on deposits and income ratios, which have slowed mortgage lending.
O’Flynn has sold 17 houses in his Lucan scheme – which range upwards in price from €675,000 – but claims three purchasers asked for their deposits back because the Central Bank’s rule that they needed to have a 20 per cent cash deposit in place before being approved for a loan proved too onerous for them.
“We’ve lost sales because of it,” he says. “The blunt reality is that the concept of the Central Bank instrument was good but the application and the timing of it was wrong.
“It’s actually having an unbelievable impact away from the intended impact, which was to mind the banks.
“It’s affecting the whole housing supply industry. That can’t be good for the consumer and it can’t be good for the country.”
The commitment from Central Bank governor Philip Lane to review the rules later this year doesn't wash with O'Flynn.
“He should say we’re not reviewing the rules, or just review them. Telling people in this country that you’re going to do something either causes a rush to buy or causes a pause.
“When the rules were coming in it probably caused a bit of a rush and now because he’s said it will be reviewed later in the year people are holding back, thinking they’ll be able to buy a different type of house. So it’s serving no purpose.”
The current rule means first-time buyers need a 10 per cent deposit for the first €220,000 of a house price and 20 per cent for the balance.
“For everyone else it’s 20 per cent.
O’Flynn argues that the cap “make no sense” in Dublin, where house prices are higher than the national average.
“It needs to be €300,000 in Dublin,” he argues.
He’s not a fan of the income cap, either. “In the UK the multiplier is 4½ times– why should it be 3½ in Ireland? In the UK they don’t have VAT, while we have 13.5 per cent. We have to look at the cost side and the time it takes to get planning.”
What about the profits achieved by developers, which are never revealed?
“Listen, we need a profit of 15 per cent. There’s no mystery in that. We made too much profits at one stage but that was a function of the market. We have to achieve replacement costs. We have to make a margin because of the risk, and to get funded.”
This brings him back to Nama and its plan to become a provider of residential housing.
“When I see [Nama chief executive] Brendan McDonagh talking that builders should be working to a 7 to 8 per cent margin, that’s complete nonsense, because you can’t fund anything.
“On a speculative housing model it’s unhelpful when somebody who is funding the marketplace with special, guaranteed State funds suggests that a margin of that amount is sufficient.
“It’s not commercial and it’s just playing to the gallery. We must make 15 per cent. In coming up with a house price, you have to put in the replacement costs of land, otherwise you’re building yourself out of business. That’s fairly fundamental.
“I’ve no problem with Nama building houses but they must be on a level playing pitch, otherwise we have a distortion in the market.”
O’Flynn estimates – and this is in the state-aid complaint to Brussels – that Nama’s average cost of funding is 4 per cent.
He also argues that Nama does not have the skill sets to build housing.
“I’m quite certain about that because I was in Nama and I know precisely what they can and can’t do.”
Bank guarantee
O’Flynn is clear as to what the Fianna Fáil-led government should have done to deal with the unfolding banking crisis in 2008.
“The real scandal in Ireland is that we allowed the deposits disappear for six months before the night of the guarantee [September 29th, 2008],” he says.
“We needed the deposits kept in this country.
“I knew in July and August that the banks were f***ed. The dogs in the street knew and I’m not just saying that now.
“Why didn’t we guarantee the deposits in May, June, July, August of that year and stop the outflow? We didn’t guarantee the deposits until the banks were empty.
“We then set up Nama, which completely destroyed what was left of the banks. We paid off every bondholder in the world. Had we done the deposit guarantee we mightn’t have done as badly.”
Before the crash, O’Flynn preferred to fly below the media radar but he was forced into the open afterwards, when Nama was set up to acquire developer’s loans from the banks and the industry became a fall guy for the crash.
He used also preferred to fly by helicopter to attend meetings in various cities in Ireland and Britain but sold the chopper after it starred in an RTÉ’s Prime Time programme in 2010 on the lifestyles of Nama’s developers.
O’Flynn was filmed being brought by helicopter from his 90-acre dairy farm in Ovens to Down Royal racecourse in Lisburn, Co Down, where one of his horses was running.
“The helicopter was a very useful business tool at the time when I had businesses all over the UK and living out of Cork made it difficult. But it became too much of a hassle for me and I didn’t want that kind of attention.
“It was no longer acceptable and I accepted that point of view.
“Once it came up I sold it. I never used it for personal use without paying for it and it was a business tool that I had no intention of replacing.”
Back to the day job and O’Flynn says the “reality is that we have a housing crisis at the moment”.
“We have fundamental flaws in the supply of affordable homes and mortgages,” he says. “We’re not dealing with the fundamental issues and until we do we’re making the situation worse.
He believes there should be a “national approach” to zoning and to infrastructure development, rather than having multiple local authorities doing their own things and building houses and supporting infrastructure in the wrong places.
“The problem we have is that there’s an ad hoc approach to zoning, there’s an ad hoc approach to infrastructure and there’s an ad hoc approach to funding.”
With Avenue as his backer, O’Flynn is well placed to develop sites here but insists he won’t be “throwing money around” in Ireland.
“I don’t need to build in Ireland,” he says. “I could just as easily go building in Oxford or Edinburgh.”
Enormous impact
O’Flynn is outwardly upbeat but the events of the past seven years have taken a toll.
“It has had an enormous impact on my life. I wouldn’t recommend the journey to anybody, through Nama and through Blackstone. But the support of people has been incredible.
“It was extremely stressful but I’ve managed to come through it all without any impact on my health. I’d be health-conscious and probably more so through the crisis.
“I know fellas who hit the bottle but I didn’t do any of that stuff or I didn’t get into medication.
“That’s when you’d really be in trouble. I was lucky that I’d a very good structure, family and people in my corner. You can’t put a price on that.”
He accepts he “made mistakes” but tried to “behave in the absolute best way. To stand up and be counted”.
At 58, O’Flynn has no thoughts of retirement. “Ah, sure I’m only a young fella,” he jokes.
“I can see myself at it at some level for the next 10 years and very much so for the next five to seven years.”
He has a son and daughter (both chartered surveyors) working in the business but says they both “have a bit to travel” before they could take over the group and he doesn’t rule out some of his “key staff” taking the reins either.
What keeps him motivated? “I’m passionate about the business and I’m passionate about the contribution that the property development community can make to the recovery.
“It’s depressing how badly our sector was thought of and wrongly blamed for. I’ve fought for the industry because I believe in it.
“We have an enormous contribution to make but there’s almost a view that we shouldn’t be in the room to discuss the recovery strategies. There will no be recovery without developers.”
