PROFILE: JOHN MULCAHY:Most taxpayers won't have heard of John Mulcahy, but his new job will determine how much the developers' bad loans will cost us
YOU MIGHT THINK our economic fate rests in the hands of the two Brians, but another, less well-known, figure will have almost as much influence on the ultimate bill to the taxpayers arising from the collapse in the property market.
John Mulcahy, a chartered surveyor and a leading intermediary in land deals around Dublin over the past four decades, is the man charged by the National Asset Management Agency (Nama) to devise a template for valuing the billions of development loans the agency is to take over.
The methodology he determines will have a huge influence on how much developers, the banks or taxpayers end up shelling out for the mess in which we find ourselves. Price these loans too high – well in excess of the current market value of the properties backing them – and ordinary citizens who were not to blame for the crisis could end up paying the cost for decades; price them too low and the banks could wobble.
TO FELLOWprofessionals and supporters of Nama, Mulcahy is a safe pair of hands, a vastly experienced operator who commands considerable respect from bankers, developers, economists and pension funds.
To the doubters, however, his appointment represents more of the same from the Minister for Finance, Brian Lenihan, through the appointment of the very types of people who were most involved in the property bubble to clean up the ensuing mess.
As the long-time managing director and then chairman of Jones Lang LaSalle, one of the leading commercial property firms in the capital, he rode the Celtic Tiger most profitably through one stratospheric deal after another. Friends call him “mother Mulcahy” in honour of all the deals he has nursed.
There was, for example, the development of the International Financial Services Centre in the early 1990s, in which Jones Lang Wootton, as it was then known, handled more than 90 per cent of lettings and sales. In the late 1990s, Mulcahy and other directors of that firm made a killing when it merged with the US firm, LaSalle Partners.
The merged firm was heavily involved in well-known commercial developments such as Citywest, George’s Quay, East Point business park and the headquarters of both AIB and Bank of Ireland; in fact, just about every major commercial development during the period. Mulcahy displayed an impeccable sense of timing when he led the team that advised South Wharf plc in selling the Irish Glass Bottle site in Ringsend, Dublin 4, for a record €412 million in 2006; the site is now worth a fraction of this sum.
The 60-year-old Dubliner has seen a few slumps in his time and is inclined towards the long view. "We are not just in a slump. We are right at the bottom of the slump. We are actually sitting in the water with our binoculars trained on the horizon," he told The Irish Timesin 1991.
This week, making his introductions before the Joint Oireachtas Committee on Finance and the Public Service, he was again talking about being at the bottom of the cycle, but admitted the present decline in property values was the most severe he had seen.
Mulcahy told the committee he had been a “bear for the past four years”: “We sold down our pension fund property assets, which was not a popular course of action at the time. One’s speaking engagement requests become very limited when one is a bear in the market”.
The remarks raised a few eyebrows. After all, he told The Irish Timesat Christmas 2006 the commercial property sector would have another good year in 2007 and continued with an upbeat forecast during that year, before pessimism eventually set in.
Other past comments of Mulcahy’s have been parsed this week. How times have changed since he made the following comment in 2006, at a meeting in UCD: “When government intervenes in the property market, or in any other market for that matter, the issue is not what good it will do but, rather, how much harm it will do before the intervention is reversed”?
Mulcahy believes in the cyclical nature of economic cycles and property markets. Since 1971, he says, the markets have moved in seven-year cycles, and both commercial and residential property have recovered by almost 90 per cent from the bottoms of their respective cycles.
Following this logic would entail valuing the loans at a higher level in expectation of a recovery in values in the future. Mulcahy did, however, tell TDs that he thought the amount of development land available in many rural areas far outstripped potential demand for the foreseeable future and this was likely to revert to agricultural value.
Mulcahy won’t be doing the actual valuations of individual properties or land – this work will be carried out by a panel of external valuers – but his influence in setting the parameters is considerable. Indeed, his clout within the profession is already enormous as he was centrally involved in drawing up the Irish version of the “red book” of valuations, regarded as the valuers’ bible.
Fellow surveyors say he is at the top of his game, unusually well versed in economics and law as well as valuing. “He’s easily the best player in the market, head and shoulders over the rest,” says one figure in the property world. “At the same time, he’s a straight-up guy and doesn’t lose the run of himself.”
“John has always been well respected since a young age when he first made his name in Dublin property,” says Mark FitzGerald, chairman of the Sherry FitzGerald estate agency. “He’s very bright, straight, he’s good company and he’s a trusted advisor to many clients.” Developers are equally enthused. One leading player describes him as amusing, intelligent and savvy. “You mightn’t always agree with his opinions, but they are based on reasons that are objectively and statistically sound. He’s one of the few who would sacrifice a fee to put a client off a purchase if he thought that was best for the client. I’d let him look after my money.”
FROM GOATSTOWNin south Dublin, Mulcahy studied chartered surveying in Bolton Street (now the Dublin Institute of Technology) and joined Jones Lang Wootton in the early 1970s. He developed a long and fruitful relationship with British Land plc, which built the St Stephen's Green and Ilac shopping centres. His clients included some of the country's biggest financial institutions and pension funds.
As well as a long track record, Mulcahy brings to the job a respect for history. Way back in 1983, he was defending the industry against attacks in the midst of what he called “the worst recession since the 1930s”.
The following year, he warned there could be riots in Dublin unless steps were taken to improve the most run-down areas. If his comments hinted at a social conscience, his elaboration could not be credited with prescience given what happened in the years that followed.
“The knee-jerk reaction up to now has been to zone an area for development and then to sit back and wait for things to happen,” he said. “The obsession with trying to develop large areas in one go leads to a succession of grandiose projects for trade centres and the like. But the lure of large projects that will put an area ‘on the map’ is an illusory lure; it leads in the direction of planning and financial disasters.” He returned to the theme of urban renewal in 1990 when expressing opposition to plans by the then minister for the environment, Pádraig Flynn, to extend the designated areas for urban renewal in Dublin – a decision that would later be scrutinised by the planning tribunal.
Over-designation would have the opposite effect to what was intended, he warned, by killing the golden egg of urban renewal.
Mulcahy showed his prescience in 1995 when he predicted a long bull market in property. Even more accurately, he predicted in an article in The Irish Timesthat year that the housing boom would end in tears and warned "major dis-equilibriums in the residential market will ultimately run the risk of producing negative equity. "This phenomenon, which acts a bit like deflation, will produce profound social and economic consequences, not just in the residential market. As a phenomenon, it is not easily reversed."
He lives in Dublin 4 with his wife Margaret Clandillon, an aircraft leasing specialist, and their children. He also has grown-up children from an earlier marriage. Colleagues talk of him being a social animal with a range of sporting interests, including golf and tennis.
“He likes to drive a nice car but he’s not particularly ostentatious,” says one contact. “He’s very witty and he doesn’t take himself too seriously,” says another. Nonetheless, he was said to be upset at some of the media coverage he got this week. Mulcahy will have to get used to being in the limelight as the battle for and against Nama is played out over the coming months, with enormous potential consequences for all of us.
CV JOHN MULCAHY
Who is he?Until recently, chairman of Jones Lang LaSalle, a leading Dublin commercial property firm
Why is he in the news?He has been seconded to the National Asset Management Agency to devise its methodology for property valuation.
Most likely to say: "Just don't call me an estate agent."
Least likely to say:"We're all f***ed!"
