June 24, 2024 • 47 mins
Chris Wilson, the chief executive of Fairfield Real Estate Finance, takes us on a remarkable journey through his influential career in our latest episode. From his pivotal role at RBS during the financial crisis to navigating the complexities of the NAMA Project Eagle debacle at Jefferies, Chris brings a wealth of experience that is both insightful and eye-opening. You'll gain a deeper understanding of real estate debt finance and learn how alternative lenders like Fairfield are stepping up where traditional banks have retreated, particularly in the European property finance landscape.
Join us as we unravel some of the more controversial aspects of property finance. Chris shares firsthand accounts of notable transactions, such as the acquisition of Malmaison Hotels from RBS and his intricate work with Jefferies Loan Corps Europe post-Project Eagle. The conversation turns riveting as he details his collaboration with Pat Kearney on a significant resolution in Northern Ireland, shedding light on the intricate and often contentious world of finance, including the political fee funneling allegations that surfaced later.
We also confront the pressing challenges within Ireland's property development scene. From stringent planning regulations to the debilitating delays caused by Irish Water, these systemic issues are contributing to the housing shortage, impacting developers and young professionals alike.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello again, dear listener.
Today I'm speaking with ChrisWilson.
Chris is a financier, so helends money to real estate
developers to build things likehousing.
We discuss his careertrajectory from working with RBS
during the financial crisis tohis move to Jefferies and the
NAMA Project Eagle debacle tothe founding of his current
company, fairfield Real EstateFinance.
(00:31):
I've known Chris for many yearsnow and I really enjoyed
talking to him.
As an American, he has somevery positive things to say
about investing in Ireland, buthe also does share his
frustrations.
I'm Rick Larkin and you arelistening to the Build.
Chris, thanks very much forcoming in to visit us.
(00:54):
Would you mind starting byintroducing yourself, just
telling us your name and whatyou do?
Speaker 2 (01:00):
So I'm Chris Wilson.
I'm the chief exec of a realestate lender, an alternative
lender called Fairfield RealEstate Finance.
It is Edinburgh based andoperates in UK Ireland, spain
and Portugal.
Speaker 1 (01:15):
Can you explain?
Just because a lot of ourlisteners are in the property
industry, a lot of them aren'tand a lot of the time I get
asked questions, I get asked toexplain things to people and I
find it quite difficult becausewe're also very used to talking
to property people who just know.
Could you explain briefly whatreal estate debt finance is?
Speaker 2 (01:40):
So the simplest explanation of what we do is we
lend money secured by commercialproperties, so, like your bank
would provide you a mortgage foryour house, we do essentially
the same thing, but focused oncommercial real estate.
Our customers are propertyinvestors and developers for the
(02:01):
most part.
Developers for the most part,and we refer to them as sponsors
, because the actual entity thatborrows tends to be a company
that's just set up for thetransaction and just set up to
buy the particular property andthat and that you'll hear people
talk on.
Speaker 1 (02:16):
This is like spvs, right.
So typically say, when we dosomething, we set up a project
entity and that could be calledanything xyz limited that
actually borrows the money fromyou, but I'm the person who
phoned you to ask you for themoney and I'm the person who
you'll phone if I don't pay itback yes, and, and so we'll put
in, uh, some amount of money 60,70 percent, uh and uh the
(02:39):
sponsor, rick larkin or others,um, we'll put the rest of the
money in.
Speaker 2 (02:44):
Sometimes it's their own money, sometimes they're
providing money on behalf ofinvestors, and sometimes it's a
combination more likely acombination.
Speaker 1 (02:52):
And nowadays that is the dominant way of financing
property development.
Would you say that's fair inEurope?
Speaker 2 (02:59):
Yeah, I mean there's very, very few people who build
new properties without some formof financing.
Sometimes they borrow a littlebit, sometimes they borrow a lot
.
Sometimes, if you're a majorREIT or institutional investor,
you might have corporatefacilities you can use.
But generally property levelfinancing is the way people
(03:20):
develop properties.
Speaker 1 (03:21):
And that's provided by people like yourself, more so
than banks, the way it used tobe.
Speaker 2 (03:28):
Yeah, so you know, in Ireland, pre-financial crisis,
the vast majority something like98, 99% of money for real
estate transactions, whether itwas development or investment,
came from banks.
There were a few major banks.
Not all of them are stilloperational.
The ones that are operating arefairly conservative, and so
(03:51):
that creates an opportunity foralternative lenders, backed by
institutional investors, to comeinto the market and provide
that gap and keep the marketgoing forward.
Speaker 1 (04:02):
Speaking of major banks, you worked for OrbeBS
back in the day for a long time,more than 10 years.
Is that right?
Six years, six years.
And that was in the US in.
Speaker 2 (04:15):
No.
So I got hired in London Okay,there are really two different
versions of RBS.
Okay, so there's RBS before thefinancial crisis, rbs at its
height.
So there's RBS before thefinancial crisis, rbs at its
height.
And I got hired in London towork in the real estate finance
group in global banking andmarkets.
So in a tiered bank where youhave started retail branches and
(04:35):
you go up to corporate lendingand then, sorry, commercial
lending and corporate lendingand then up at the top is the
global banking and markets.
It was at the time, I think, themost ambitious bank in Europe
and perhaps in the world.
The attitude of management wasvery much encompassed in its
(04:57):
motto make it happen.
And there were some.
The bank was looking to grow.
There was certainly someoverzealous lending, but I think
generally we kept ourdiscipline around structuring
and due diligence anddocumentation.
(05:19):
Where things got out of control, it was a matter of quantity
rather than quality.
There were literally dozens ofplaces in which you could borrow
money against a real estateasset in the bank and they were
happy for those different groupsto compete, and so it was a
(05:41):
massive and fairly uncontrolledreal estate book across many,
many different levels of thebank, and that's ultimately, I
think, what led to its downfall.
Speaker 1 (05:53):
Just because of the sheer scale of the lending that
was going on.
Speaker 2 (05:55):
Yeah, I got a call this was third quarter of 2007
from a friend and he mentioned,casually he was at Citibank.
He mentioned casually that RBShad a casually, he was at
Citibank.
He mentioned casually that RBShad a bigger balance sheet than
Citibank and I thought that'sabsolute nonsense.
He doesn't know what he'stalking about.
Citibank's a massive globalbank with a huge market cap.
(06:16):
I looked it up and, sure enough, he was correct.
We did have a larger balancesheet than Citibank, which which
was no place for us to be, andthat that was in the hundreds of
billions, right, yes, yes,absurdly large balance sheet and
part of that ambition that thebank had to be a major global
player.
Speaker 1 (06:36):
So where were the real bad sections of it then?
I mean, because you know RBShad a unit here, ulster Bank and
Ulster Bank bought First Active, which was formerly a building
society, and was merged into it.
I actually worked there whenthat was happening but I was,
you know, basically an intern orjust slightly a hair above an
(06:59):
intern.
And I remember going to becauseI worked in property finance.
And I remember going to becauseI worked in property finance.
I remember going to an internalthinking meeting or I don't
(07:21):
know conference where all of thedeal guys from real estate
finance two and 300 millioneuros in Dublin for development
assets just seemed incredible tome.
And then when you lookafterwards and say like the
whole in Ulster Bank's balancesheet in Ireland versus its
assets was enormous, right, likeits loan losses were absolutely
enormous.
Speaker 2 (07:52):
I assume that that wasn't repeated at that
percentage loss rate across allof the operations.
No, I again, I think thequality was reasonable.
I think the the losses you knowthere were losses and I think
just that the size of thebalance sheet meant that those
losses were not sustainable.
Yeah, yeah, interesting times,no doubt when the crash was
(08:17):
starting to happen?
Were you still there when itwas all and the plan was just to
?
I had been running ContinentalEurope and I had lots of
employees.
The plan was just to have asimple life as a lender again.
Yeah, and then some of thesenior guys left RBS in the US
and I ended up co-heading thebusiness from March 2008 until I
(08:38):
left at the end of 09, whichwas the very dark days at the
bank.
Yeah, so not the simple lifethat you'd hoped for.
No, it was very complicated.
Once the government took over,which was September 2008, it
really became bothnon-functional as an
organization, but also veryclear writing on the wall that
(09:00):
the ambition of the bank was tobecome a domestic UK bank with
maybe some operations to serviceUK clients, but no aspirations
to be a global bank anymore.
Speaker 1 (09:13):
And at the time it was, I think, was it the fifth
biggest bank in the world at thetime it may have been so.
Speaker 2 (09:19):
They also had the ill-fated acquisition of ABN
Amro in the midst of it, whichwithout ABN Amro, one never
knows, it which, you know,without ABN Amro one never knows
.
But that certainly put us overthe edge.
Yeah, straw, that broke thecamel's back.
Speaker 1 (09:31):
There's probably a lot of straws, yeah, the several
hundred billion tons that brokethe camel's back.
So after you left RBS, thenwhat did you do?
Did you take some time to justlook at?
Speaker 2 (09:43):
the world.
No, I did have a couple ofmonths, but I jumped into an
opportunity at Brookfield AssetManagement, which is fairly well
known these days Canadian assetmanager Enormous group.
Enormous group focused on realestate, infrastructure and
renewable power and theCanadians had a three-month
(10:06):
global financial crisis so theywere very positive about the
world.
So I joined them to start andbuild up an advisory group in
the US.
They had a very strong Canadianadvisory group and they wanted
to take it global.
Speaker 1 (10:20):
And then you from there went to start up Fairfield
.
Speaker 2 (10:25):
So there was an interim step.
So at Brookfield one of thethings we did, lots of things we
did some debt placement, somedebt advisory, restructuring
type work.
We also did some property salesand M&A.
I got involved in a transactionwith KSL, a group out of Denver
, colorado, to buy MalmaisonHotels.
(10:47):
They were actually buying itfrom a part of RBS who had
control at that point, and weneeded to arrange debt on that
transaction.
So Malmaison Hotels had 31 or32 hotels in the UK, most of
them not in London, and we wentaround the world looking for
debt, okay, on a very goodtransaction, very easy to
(11:09):
finance, uh, in theory, uh, andnobody was interested because
the assets weren't in london.
Uh, after sorting that out, thelight bulb went off in my head
and I said I do have to get backto the uk and try and lend
again because there's a massiveopportunity and how did that go
down at home?
So not brilliantly.
My wife we've been married forover 30 years.
(11:32):
She doesn't like to fly, so theidea of me going back to Europe
was not great, but she'smanaged through it.
So initially I joined up withsome of the guys who had left
RBS and, at this time, hadcreated a finance company called
Jeffrey's Loan Corps.
So they agreed to let me grabsome of the balance sheet and
create Jeffrey's Loan CorpsEurope.
That was March 2014.
(11:54):
So we ran around mostly doingdiscounted payoff finance.
So for the podcast listenersyeah, I was going to say you
might want to explain that oneDiscounted payoff finance is
where, say in the case ofIreland, a borrower's at NAMA.
Their loan gets sold to a fund,often derisively referred to as
(12:15):
vulture funds, and that fundbuys the loan at a big discount.
They are looking to resolve theposition quickly.
They offer the borrower asmaller discount in order to
clear his position and we comein as the lender to help
facilitate that transaction.
So we're working with borrowersto enable them to get their
(12:37):
loans back and to restart theirbusiness.
Speaker 1 (12:43):
Yeah, which is a kind of integral thing of every loan
crisis I mean savings and loancrisis in the US.
It would have happened thereright a lot, and I think that,
specifically as this relates toIreland, that was seen as like
almost a corrupt thing.
Right Like NAMA weren't allowedto sell the loan to the
(13:04):
original borrower.
They were prevented from doingthat by law, which always struck
me as sort of a crazy like.
If the original borrower wasprobably the person who's going
to be willing to pay the most,why would you immediately delete
your number one customer?
But you and Jefferies didtransactions in Ireland around
about that time.
Speaker 2 (13:24):
Yes, you and Jefferies did transactions in
Ireland around about that time.
Yes, so we did a lot ofdiscounted pay off finance in
that 2014 to 2016 time period.
We initially arrived inNorthern Ireland just after
Project Eagle had been completed, right, and this was a very
opportune moment.
Lots of borrowers who now,after sitting in NAMA for seven,
(13:47):
eight years, six, seven years,had the opportunity to resolve
their situation in a way theyweren't able to, as you
mentioned, with NAMA.
Speaker 1 (13:57):
Yeah, Just for people again who may not remember or
know, project Eagle was a loanbook that NAMA sold to a company
called Cerberus and this loanbook was all of NAMA's exposure
to Northern Ireland.
Yes, in one single transaction.
Do you remember what size theloan book was?
I don't remember.
Speaker 2 (14:16):
I was not paying much attention when Project Eagle
was first done, but I had afriend in Northern Ireland who
said this would be a good timefor you to come meet some people
.
Yeah for sure.
Speaker 1 (14:26):
Um, it worked out very well, yeah, um, so any any
particular stories from fromthat time that you?
Speaker 2 (14:33):
yeah, so it was.
Um, you know, we were involvedprobably in seven or eight
resolutions out of thatportfolio, probably by volume
the most with any lender forCerberus.
The first one we did was acompany called Kilmona, a
borrower named Pat Kearney, andthis was January 2015,.
(14:56):
So relatively shortly after thetransaction was completed.
Pat was one of the top two orthree exposures in that book.
Like all the borrowers, he hadpersonal guarantees which
prevented him from continuing todo any new business.
He was really stuck until heresolved his loans, and so we
(15:19):
worked with Pat and his team.
It was over 100 million poundtransaction, over 145 separate
assets involved underlyingtitles, and we had to do new due
diligence and get ready.
We completed that.
It was quite a momentousoccasion in Northern Ireland
because it was the firstresolution in that portfolio, so
(15:43):
we had a celebration dinner.
Speaker 1 (15:46):
So that was the very first one that, let's say,
Cerberus got.
Speaker 2 (15:50):
Yes, very first, and really marked a new era, a
chance for the global financialcrisis to start to be put behind
in Northern Ireland.
And so, at the celebrationdinner after the transaction,
the First minister attended,which was really a recognition
that this was an important eventfor Northern Ireland.
(16:10):
The borrower used his law firmthat he'd used during NAMA,
which was called Tuins you mightwant to Google that.
And everything seemed great andactually the transaction
progressed very, very well.
And everything seemed great andactually the transaction
progressed very, very well.
It was a huge success for us.
About five months later, agentleman who I'd never heard of
named Mick Wallace stood up inthe dial and made a statement
(16:35):
regarding some portion of a feethat had been paid again that I
wasn't aware of by Cerberus tolaw firms.
Some portion of that fee wasdestined for politicians or
political parties and this setoff, rightly, a firestorm in
Ireland and Northern Ireland.
People started to questionwhether there was some sort of
(16:58):
underlying involvement ofpolitical actors in this
transaction and created a bit ofa vortex.
So the combination of Cerberus,Tuins and the first minister
all being, you know,tangentially involved in our
transaction or actually, youknow, in the case of Cerberus
and Tuins, quite activelyinvolved, the first minister was
(17:20):
tangentially involved.
The first minister wastangentially involved.
That led to us being sort ofdrawn into this vortex where
every single article in theIrish Times about this
accusation for the next week anda half included it at the
(17:42):
bottom that we had done thefirst resolution.
It involved Tuins acting forthe borrower, cerberus, the
vendor, and that there had beenthis dinner.
So finally, after a week and ahalf of these stories, I rang up
the reporter and said you haveto stop mentioning us in these
articles.
We had nothing to do with it.
I was completely unaware, Iwasn't even focused on.
Speaker 1 (18:00):
Northern Ireland.
Just remind me.
I'm sorry for interrupting you.
The allegation was thatCerberus had paid a fee.
Speaker 2 (18:10):
So, going back and again, this is information I
learned after the fact.
So PIMCA was the originalpreferred bidder and they made a
public statement that they wereexpected to make a 15 million
euro payment.
That's round numbers, um to uh,brown rudnick and two ins, two
(18:31):
law firms, as a sort of finderfee, which is very strange for a
widely marketed transaction,which, particularly to be paid
to a law firm, would be, yes,unusual um.
And then shortly thereafter,after making that announcement,
they dropped out and Cerberusappeared as the preferred bidder
and there was no mention of anypayment until later on.
(18:53):
But a payment had been made,initially to Brown Rudnick.
Half of that payment had beenpassed on.
Cerberus paid the finder's fee.
Yes, and again, as we learnedlater on, two wins at about the
same time we were using them tocomplete the transaction, or our
borrowers using them tocomplete the transaction, I
(19:14):
should say.
They got the payment in and themanaging partner passed the
payment.
Sorry, this was well.
Before the payment came in, themanaging partner attempted to
pass the payment on to a Isle ofman account not associated with
the firm.
The payment was called back and, about the same time as we were
(19:37):
doing the transaction, themanaging partner left the firm
as fallout for this paymentcoming in and out, and this was
a massive story.
But I pled my case with theIrish Times that we were really
not one to be mentioned.
Well, it was nothing really todo with you, right?
No, but she said she waswilling to exclude us provided I
(20:00):
answered a few questions.
And the big question she hadwas did it make a difference
whether it was PIMCO or Cerberusas the ultimate buyer of the
portfolio?
And the point I made to her,which is important in the
context of this podcast, is thatI don't know whether they would
have acted significantlydifferently was getting done and
(20:22):
that borrowers were able toresolve their positions, because
the developers, who hadpersonal guarantees, were unable
to do further developmentwithout resolving their
positions.
And, as a country, northernIreland faced an issue that you
cannot attract investors into acountry if you don't have high
quality offices and high qualitywarehouses to put them in, and
(20:46):
in order to have those things,you need developers.
And you can't attract peopleand you retain your best
workforce if you don't havehouses and apartments for them
to live in.
The built environment, which iswhat developers produce and
enhance, is critical to theeconomy and so that a resolution
(21:06):
involving anybody Cerberus,pimco or another is really
important, and that that was thestory that wasn't being told in
all this, and she accepted thatopinion.
I don't think she'd everthought about it that way and we
did get excluded from furtherarticles, which was nice Until
now.
Speaker 1 (21:25):
I mean, it's an excellent point that you make
and it's something that I thinkis probably still problematic.
Right, because we are 10 yearson from when all of that
happened and we're still stuckin this sort of reductive debate
about developers.
Right, the words change.
(21:46):
Right, it was vulture funds,then it was cuckoo funds.
The whole idea is that or thereseems to be this whole idea
being pushed by certain fringepolitical elements and, to be
fair, I think, a lot of peoplein the media that are perhaps
just not aware of the contextaround what is being said.
There's this idea being pushedthat the private market has
(22:09):
failed and so the private marketneeds to be replaced with the
public one, when the reality is,in fact, the public policy
failed, the private market isdoing everything it can in every
direction, as all privatemarkets always do, because
that's the whole point of them,but that the policy failures are
not being corrected.
What do you think the maindifficulty is for you?
(22:31):
So you come in as a lender.
You're obviously not going togive money to anybody.
You're going to give money todevelopers who you believe in
and projects that you believe in, but you're also only going to
lend into a given market if youbelieve that that market on a
macro basis is sound, right,it's got good fundamentals.
So I mean you look at irelandnow, you, because you lend
across europe, right, we do,yeah, um, in fact, let's come
(22:55):
back to that.
Let's just go back to fairfieldfor a second, because I know we
got sidetracked there talkingabout jeffries.
So you came into fairfield.
Were you there at the beginningof fairfield, or?
Speaker 2 (23:03):
yeah, so, so, uh, after a couple of years of very
actively lending as part ofJeffrey's Loan Court, doing some
very good transactions, webasically blew through the
allocation of balance sheet wewere given.
It was pretty clear we weren'tgoing to get a whole lot more.
There were literally three ofus running around in Europe and
about 60 people on the US sideof us running around in Europe
(23:30):
and about 60 people on the USside and we were using much more
than our fair share of thebalance sheet, and so we had the
opportunity to look for anothersponsor, and so, in May 2016,
we found Oaktree, who's been ourmain backer since then, and we
set up Fairfield with theirsupport.
(23:52):
The business has lent about 2.2billion euros since then.
About 60% of that's been inIreland, and Ireland's been a
fabulous market for us and, at amacro level, I think Ireland's
done a lot of things right, andone of the important points to
keep in mind is that the issueswith housing and the issues with
(24:15):
infrastructure are problems ofsuccess and of economic growth.
That doesn't absolve thegovernment of their
responsibility in not enablinghousing to be built in the right
way, but the economic successof Ireland has led to it being a
place where Irish stay homerather than going abroad, and
(24:37):
where people from othercountries seek to come here to
live and work because it's avery good environment and and
you, you mean you're lendingacross Europe, not just in
Ireland, so you get to seeIreland in the light of perhaps,
other countries.
Speaker 1 (24:53):
Do we have it any worse than anywhere else?
Speaker 2 (24:57):
Um, I think the you know the aspects of the planning
system.
Um, aspects of governmentpolicy around housing do make it
worse in Ireland than in othercountries.
Uk has a similarly complex andsometimes vexing planning system
.
I still think Ireland's worseyeah.
Speaker 1 (25:21):
We're world champions when it comes to the planning
system, I think.
Speaker 2 (25:24):
Yes, and ultimately there's some amount of delusion
in government thinking that ifyou require builders to build
really high quality apartmentswith dual aspect and you know
large footprints and lots ofother requirements, that that
(25:44):
will improve the housing stockfor the average resident.
And the reality is more of theabove is what improves the
housing stock, and particularlyat the margins, people who are
less able to afford housing arethe losers of setting such a
high bar for housing in Ireland.
Speaker 1 (26:04):
Yeah, because they never get anywhere near us right
.
Speaker 2 (26:06):
Yes, and you know, the conversation with a typical
cab driver as I come from theairport into the center of
Dublin is about how their25-year-old, who has a good job,
can't move out of the house,and that is a severe political
issue.
Speaker 1 (26:20):
It's also a moral failing, because it's not like
in the 1970s, when we didn'thave any money, we didn't have
the wherewithal to fix theseproblems, and the thing that
annoys me about it is that we'rechoosing not to fix them in the
service of certain sections ofsociety or the certain, I think.
Actually, a lot of the timeit's it's the idea that doing
(26:45):
what we want as a developmentcommunity somehow benefits us,
and I try to point out to peoplethat actually the status quo
benefits us.
Right, because the barriers toentry are really high.
It's a really difficultindustry to get in, so there are
no startups, right, there's nodevelopment startups.
Um, and artificial constraintson supply are good for people
that own things.
Right, and a lot of the timepeople don't seem to understand
(27:08):
that, like the policymakers maythink they're making our job
harder.
So they are making it harder,but they're also making it in
another sense, more profitable.
If you can hang in there, yes,when you are looking at a
project, take us through.
What are the things that areimportant to you.
So I come into you and I say,hey, chris, I have this great
site.
You know it's half an acre,it's zoned Resi.
(27:32):
I want to put this apartmentbuilding on it.
What's your starting point tothat?
Speaker 2 (27:39):
So we don't tend to get involved in most situations
prior to a planning consent.
Okay, involved in mostsituations prior to a planning
consent.
So if you bring me your siteI'll say that looks good, and
please come back to me when youhave your planning consent in
place and I'm very interested inhelping you.
Then we do have some exposureto the planning system.
(28:02):
So sometimes a borrower willacquire a property and he'll
have a consent to build, say,100 units of residential but he
will have a plan to try and goin and get an additional 10 or
20 units approved and we'll workwith them and say if you get
that approval, we'll provideadditional debt to enable that
(28:24):
to be built.
But that's limited exposure.
But we're certainly well awareof the issues.
And where we do have exposure wesee the ponderous nature of the
system.
So we have a shopping centerthat we were involved in
financing in Bray.
The sponsor went in for consentfor 25 residential units in the
(28:49):
upper floors and they had to goto Ambor Panola, the Planning
Appeals Board, for that consentbecause they'd purchased the
asset from the council on adevelopment agreement
complicated developmentagreement and that application,
that appeal, essentially went in12 and a half months ago for a
(29:13):
long time.
It had a date in july of lastyear on the website.
Then it moved to date in august.
Speaker 1 (29:19):
There's no date attached to it, but we still
wait and that that's a tale nowthat is told every day.
As to how long it can, it cantake borplanova severely
under-resourced, and then it hadits own problems, which we're
going to explore in a laterepisode, but the resources
(29:41):
appear to be there.
Now, aside from planning,what's the thing that restricts
you the most?
You obviously have criteria asto how much money you're going
to lend, whether the person islike a reputable, experienced
person, but aside from that, ona project level, what's the
thing that tends to create themost difficulty for a lender in
Ireland?
Speaker 2 (29:57):
So you know, the general issue that we face is a
viability question.
So you know, the planningprocess rightly puts constraints
on the nature of projects andthey want certain aspects.
But those, you know, thoseenhancements to the build, over
and above what you know adeveloper would do, uh in in
(30:22):
their uh based on their ownideas of of what's best, um have
costs.
And when you add uh,construction cost, inflation,
relatively high interest ratesto a project, Values have not
moved very much and in somecases yields have pushed out.
(30:43):
So values have gone the otherway.
Viability is the major issue ondevelopment.
We cannot fund a project evenat a relatively low level of
loan to value.
We can't fund a project that isnot profitable based on the
underwriting.
So we need to see that there issome level of profit in the
(31:04):
project so that we know that thedeveloper who we're backing
will see the project througheven if conditions deteriorate
over the course.
Something goes wrong, right?
Yes, so that is the biggestobstacle we have and we look at
a lot of projects that simplyaren't viable at today's
construction costs and today'sinterest rates.
Speaker 1 (31:25):
Yeah, and has that disimproved in the last 12
months?
Do you think?
Speaker 2 (31:31):
It's sort of leveled out Over the last six months.
It's sort of leveled out Overthe last six months.
It's sort of leveled out andour hope is that interest rates
start to come down.
Values sort of take intoaccount construction costs and
there haven't been a lot ofprojects started, which means
supply is constrained goingforward and that's across
commercial as well asresidential.
(31:53):
So hopefully it will level outand we'll we'll see viability
improve that provides a littlebit of support also to pricing
right, that uh supply is notincreased dramatically yes, yes,
and, and you know, ultimatelythe, the solution to the housing
crisis in ireland and anywhereelse is all of the above Build
(32:16):
more of every type of unit.
And so you know, the governmentbodies having a view on the
types of units they want to see,the mix of units they want to
see, doesn't necessarily improvethe housing stock in Dublin.
Sometimes it actually goesagainst it.
(32:36):
You know, at the most extreme,if we had all six bedroom houses
being built in Dublin, thenyou'd have, you know, a return
to the tenements, essentiallybecause people would have to
divide them up to make sense ofthe stock that's available.
And so having lots ofwell-meaning but potentially
(33:00):
misguided criteria affectsviability, affects supply and
moves the opposite way of whereyou need to be moving it
certainly does.
Speaker 1 (33:09):
I mean, there's one perfect example of that is the
focus that Dun Laoghaire andRatown have.
For those who don't know,dublin's divided into four
different council areas and DunLaoghaire and Ratown kind of is
the one where all the richpeople live.
They have a development planthat calls for like a very large
proportion of three-bedroomapartments because they think,
(33:30):
you know, they're family unitsand you need to have family.
But of course, the reality isthe families inland don't
typically want to live in anapartment and so, okay, unless
you force them to, they're notgoing to right.
If they have alternatives andif they are earning a decent
income, they do havealternatives, right, and they
are.
That alternative is to livesomewhere else.
So the reality of what happensthen is you have an apartment
(33:53):
built that was designed for afamily, so it's big, so then the
cost of that apartment ishigher.
So what happens is that threepeople move into that apartment
from three separate families andat the same time that this is
going on, people are banningco-living, saying that co-living
is a bad thing and that weshould be providing better
options for people.
(34:14):
But they won't let you build aone bedroom apartments because
they're, you know, consideredfor transient communities and
are no good for developingcommunities and are no good for
families.
Yet you have a lot of singlepeople.
You have a lot of people whoare divorced nowadays.
You have a lot of people whoseneeds are for a one bedroom
apartment.
Speaker 2 (34:31):
You have a lot of people who are coming to Dublin
to work from other countries,who have no idea what sort of
timeframe they're working on,and so they don't want to get
involved in acquiring a property.
They want a rental and theywant something simple.
Speaker 1 (34:45):
Yeah, you know, they may not be bringing all their
furniture and, and you know,clothing et cetera from from
where they were based, based,yeah, I mean we get inquiries
for people who want to know ifthey can have a fully like nice
forks, plates, cups in thecupboard right, because they
don't know, maybe it's a year,maybe it's five years, who knows
?
But the the policies that wehave that are pushing the
(35:09):
typology of units that we wouldlike for the community that we
would like the community thatexisted 30 years ago.
All that's doing is driving upthe cost for individuals, um, so
that policymakers I don't knowcan sit back and feel like that
they have some sort of moralhigh ground.
Um, so there's a lot of there'sa lot of contradictions and
(35:31):
I've said a lot on this.
That it's, I mean, it's a formof schizophrenia.
What is the next move for youwith Fairfield?
Do you, are you guys, inexpansion mode?
Would you like to?
I mean, you said 60% of yourlending that has been done in
Ireland, which is great.
Are you looking outward to saywe'd like to do more in Europe?
(35:55):
Would you like to do more inIreland?
Like, what's your plan?
Speaker 2 (35:58):
Yeah, we're just really getting started in Spain
and Portugal, so we have oneloan, uh, in each country.
Um, and you know we've done thethe hard work of getting
comfortable with the countriesfrom a a legal and economic
perspective.
Um, we like the risk return ofboth markets, so we need to do
more there.
(36:18):
We're also looking to enhancethe capital available to us, so
we're in an exercise which willhopefully provide more capital
and allow us to grow thebusiness.
Speaker 1 (36:32):
Has the market for that capital changed in the last
sort of year, or is there still, like a huge desire from
capital providers to put moneyinto debt finance for real
estate?
Speaker 2 (36:45):
There's a very interesting thing going on among
institutional investors.
You know typically a lot ofpensions insurance companies,
sovereign wealth funds, likedcore funds, core property funds,
core property funds just forthe ownership.
So core property funds.
They buy high quality assets.
(37:07):
These are offices, shoppingcenters, apartments, et cetera.
They buy them with anexpectation of a modest return
but also a very consistent, safereturn.
So they're looking for qualitylocations.
They're looking for qualityassets.
They're not looking to take ona lot of issues, so assets that
(37:29):
need leasing or asset management, investment of any kind, they
just want safe, stable assets.
So this would be your buyer foryour newly developed office
building, your stabilizedshopping center, your stabilized
PRS rental scheme.
So they've had a fairly bad runover the last 10 years and you
(37:51):
think about, in the shoppingcenter world, it went from being
a very attractive asset tobeing quite an out-of-favor
asset and the values declined.
And now, more recently, officeswent from being a very safe,
stable asset that the no-brainerin real estate investing was
buying a grade-A office in thecenter of a city like Dublin and
(38:16):
yields on those have pushed out, meaning values have gone down.
And so those core investorshave not really seen the safe,
stable returns they thought theywere going to see, and a lot of
them are now interested in realestate credit as an alternative
for those safe, stable returns.
So you know a little bit lessrisk because instead of being
(38:40):
the equity in the first year ofloss, you're the debt and so
you're protected by the equity,and so we're seeing a lot of
interest and that's good, andhopefully we can parlay that
interest into an expandedbalance sheet for Fairfield Of
course, the heightened interestin debt comes at the cost of
(39:01):
reduced interest in equity, andyou need both right.
We need both and transactionshave to make sense.
But we're typically financingassets that are transitional in
some stage in some nature.
So it may be as simple as youknow it's a property that needs
some additional leasing, or itmay be that there's a small
(39:23):
project to be done, like a lobbyrefurb or energy efficiency
measures, or it could be at theother end of the scale, could be
a ground up development, and soyou know that's a different
investor set, not necessarilyone that is facing as much of
the same issues.
Speaker 1 (39:41):
Yeah, Okay, I ask everybody who comes on about the
magic wand, right?
So if you could fix one thingbut it has to be one thing,
because when I ask some people,they start with one thing and
then five minutes later they'vereally fixed 100 things.
So what's your one?
Speaker 2 (39:56):
thing.
So, as you know, I'm a bit of asuper fan of this podcast and
I've listened to everybody'smagic wand and I've thought a
lot about this.
And it is a very tough questionBecause you do have a.
You know, you get an idea andthen you think, well, maybe it's
actually a bigger idea and it'sa bigger idea and it's a bigger
idea Plus.
Speaker 1 (40:17):
the thing about ideas , isn't it?
Speaker 2 (40:19):
And all of a sudden you're doing something that
doesn't fit into the magic wandcategory.
So I'm going to say my simplestlevel fix is Irish water.
Every new development,particularly residential
developments, particularlyhousing estates that get built,
need to be connected to Irishwater.
(40:41):
And Irish water are notoriousin the development community for
being very hard to pin down onwhen they will connect you to
the water.
You cannot sell a house or anapartment that is not connected
to the water system.
This is entirely in thegovernment's control.
Irish Water is a governmentowned entity.
(41:01):
They need to invest in doublingor troubling the staff to
create connections.
We've had numerous developmentfacilities, development loans to
single family housing estateswhere we're held up at the end.
Buyers ready to buy Developmentcompleted, irish water
(41:27):
connection not done for threemonths.
That is a lose-lose scenario.
There's no value created in it.
There's value lost because thedeveloper holds on to the
properties for a few more months.
Our interest accrues.
Yeah, right, when you're atpeak debt too, right, when
you're at peak debt.
(41:48):
It is an easily solvableproblem.
It is one that could do a lotof good.
The developer, when he's ableto sell immediately, gets on to
the next development.
That's more houses.
The buyers get to live in theirnew home.
That's good for them.
They're happy.
They're selling their old home.
That's more houses, all goodfor the system.
(42:10):
No sense in why Irish waterconnections are such an issue.
Yeah, there is no sense.
I worked very hard to make itthat one point.
Speaker 1 (42:19):
There's the last part of what you're saying Well, we
could spend a whole hour talkingabout Irish water and you know
again, well-meaning Guys thatwork there are well-meaning, but
the system has been designedlike in a just cockamamie way.
I mean, we used to be able todo this, right, we.
In 2006, we were building 90000 houses a year.
There was no delays forconnecting to water.
(42:40):
Now we're building a third ofthat and we can't seem to.
Speaker 2 (42:43):
I have no doubt that there's some skill involved.
I don't think I would be ableto connect a new development to,
but they don't actually theydon't actually do the connection
.
Speaker 1 (42:51):
I mean, this is the crazy thing about it.
So a lot of the time thesedelays are driven by the need
for them to inspect the workthat's been done and the water
is connected right.
It's literally opening a valveand the developer is not allowed
to do that.
So it's not as though Irishwater have to come out and do
enormous amount of work and it'sdifficult to schedule it.
A lot of the time that doeshappen in cases, but a lot of
(43:12):
the time it is literally aninspection and turning a valve
on and they don't have the staffand they don't have the
resources and they don't havethe resources for the
infrastructure that's needed toprovide the water.
They don't have the resourcesto do the drainage
infrastructure, to do sewagetreatment.
Speaker 2 (43:29):
So hopefully one of the relevant ministers is
listening and this can beresolved.
But that would have a hugeimpact for relatively minimal
investment, yeah, and for us asa lender, you have to underwrite
the project, so you have tomake an assumption about how
sales will go.
Yeah, and we have to pad thoseassumptions for the
(43:53):
unpredictability of Irish waterconnecting the new units to the
system, and there's a cost tothat.
And again, if you're worriedabout projects being viable, if
viability is an issue forcreating new houses, having us
assume three or six months ofadditional time for no
particularly good reason, itaffects that.
Speaker 1 (44:16):
Yeah, there's absolutely no reason for it to
be like that.
Well, thank you for sticking toone thing.
I know that was probably hardfor you.
It was very difficult.
This year we're going to bevery strict, because last year
you were starting out and Iwasn't really paying much
attention.
I was giving people too muchrope.
So it's a new regime now, alittle bit more of an iron fist.
(44:38):
Is there any other points thatyou had in your head or things
that you feel like you need tosay?
You basically have an open mic.
Speaker 2 (44:47):
You know, as I said, ireland has had tremendous
success.
What's happened here over thelast 30 or 40 years is truly
phenomenal and there are lots oflessons for other countries to
learn from Ireland's success.
But housing and infrastructureare today's problems and they
(45:09):
will impact economic growth.
They have probably already tosome extent impacted economic
growth.
They have probably already tosome extent impacted economic
growth.
The taxi driver whose son isliving at home will one day
decide to move to anothercountry and because he can live
on his own and the job he haswill provide sufficient money to
(45:31):
afford an apartment or a housein another country.
He can probably do that job fromanywhere, and he might be able
to do that job from anywhere,and so that's not good for the
Irish economy, and thegovernment has done very, very
well in attracting companieshere.
But at some point these issueswill come to the forefront.
(45:52):
Those companies will makedifferent decisions.
Yeah, I'm going to takeadvantage of this and I'm going
to add one more.
At some point in last year'sseason last season there was a
reference to an Atlantic articlecalled Housing Broker Brains.
Speaker 1 (46:08):
Yeah, that was the last episode.
Actually Sean Keyes, the guyfrom the currency.
Speaker 2 (46:13):
That is a really, really important article and I
see it all the time in speakingwith friends about housing, the
concept being that, you know, inevery other aspect of the
economy, more units is thoughtto be good because it reduces
prices, makes something moreaffordable.
(46:33):
We've seen that with phones andcomputers and everything else
all types of technology butsomehow in housing, lots of
people think that more unitssomehow is bad and governments
feed into that sense.
All of the above build lots.
That is the solution to thehousing crisis.
Mark.
Speaker 1 (46:52):
BLYTHINGTON JR.
Yeah, OK, well, you heard ithere first.
Well, not first, I mean for theumpteenth time.
You need to start getting thosehouses built and Chris is there
to finance them for you withvery generous debt packages,
margins in the low 2%, 3%.
Now, Chris, is it that?
Speaker 2 (47:08):
is incorrect.
Speaker 1 (47:11):
I'll let you get in touch with Chris and get the
real margin and listen.
Thanks very much.
It's been great to have you onand I know that we've been
batting back and forth aboutthis for a while, but it's great
to get it done in the end and Iguess we'll leave it there.
Speaker 2 (47:25):
Thank you for having me and thank you for doing this
podcast.
It's very important.
Thanks a lot, Chris.
Hello again, dear listener.
Today I'm speaking with ChrisWilson.
Chris is a financier, so helends money to real estate
developers to build things likehousing.
We discuss his careertrajectory from working with RBS
during the financial crisis tohis move to Jefferies and the
NAMA Project Eagle debacle tothe founding of his current
company, fairfield Real EstateFinance.
(00:31):
I've known Chris for many yearsnow and I really enjoyed
talking to him.
As an American, he has somevery positive things to say
about investing in Ireland, buthe also does share his
frustrations.
I'm Rick Larkin and you arelistening to the Build.
Chris, thanks very much forcoming in to visit us.
(00:54):
Would you mind starting byintroducing yourself, just
telling us your name and whatyou do?
Speaker 2 (01:00):
So I'm Chris Wilson.
I'm the chief exec of a realestate lender, an alternative
lender called Fairfield RealEstate Finance.
It is Edinburgh based andoperates in UK Ireland, spain
and Portugal.
Speaker 1 (01:15):
Can you explain?
Just because a lot of ourlisteners are in the property
industry, a lot of them aren'tand a lot of the time I get
asked questions, I get asked toexplain things to people and I
find it quite difficult becausewe're also very used to talking
to property people who just know.
Could you explain briefly whatreal estate debt finance is?
Speaker 2 (01:40):
So the simplest explanation of what we do is we
lend money secured by commercialproperties, so, like your bank
would provide you a mortgage foryour house, we do essentially
the same thing, but focused oncommercial real estate.
Our customers are propertyinvestors and developers for the
(02:01):
most part.
Developers for the most part,and we refer to them as sponsors
, because the actual entity thatborrows tends to be a company
that's just set up for thetransaction and just set up to
buy the particular property andthat and that you'll hear people
talk on.
Speaker 1 (02:16):
This is like spvs, right.
So typically say, when we dosomething, we set up a project
entity and that could be calledanything xyz limited that
actually borrows the money fromyou, but I'm the person who
phoned you to ask you for themoney and I'm the person who
you'll phone if I don't pay itback yes, and, and so we'll put
in, uh, some amount of money 60,70 percent, uh and uh the
(02:39):
sponsor, rick larkin or others,um, we'll put the rest of the
money in.
Speaker 2 (02:44):
Sometimes it's their own money, sometimes they're
providing money on behalf ofinvestors, and sometimes it's a
combination more likely acombination.
Speaker 1 (02:52):
And nowadays that is the dominant way of financing
property development.
Would you say that's fair inEurope?
Speaker 2 (02:59):
Yeah, I mean there's very, very few people who build
new properties without some formof financing.
Sometimes they borrow a littlebit, sometimes they borrow a lot
.
Sometimes, if you're a majorREIT or institutional investor,
you might have corporatefacilities you can use.
But generally property levelfinancing is the way people
(03:20):
develop properties.
Speaker 1 (03:21):
And that's provided by people like yourself, more so
than banks, the way it used tobe.
Speaker 2 (03:28):
Yeah, so you know, in Ireland, pre-financial crisis,
the vast majority something like98, 99% of money for real
estate transactions, whether itwas development or investment,
came from banks.
There were a few major banks.
Not all of them are stilloperational.
The ones that are operating arefairly conservative, and so
(03:51):
that creates an opportunity foralternative lenders, backed by
institutional investors, to comeinto the market and provide
that gap and keep the marketgoing forward.
Speaker 1 (04:02):
Speaking of major banks, you worked for OrbeBS
back in the day for a long time,more than 10 years.
Is that right?
Six years, six years.
And that was in the US in.
Speaker 2 (04:15):
No.
So I got hired in London Okay,there are really two different
versions of RBS.
Okay, so there's RBS before thefinancial crisis, rbs at its
height.
So there's RBS before thefinancial crisis, rbs at its
height.
And I got hired in London towork in the real estate finance
group in global banking andmarkets.
So in a tiered bank where youhave started retail branches and
(04:35):
you go up to corporate lendingand then, sorry, commercial
lending and corporate lendingand then up at the top is the
global banking and markets.
It was at the time, I think, themost ambitious bank in Europe
and perhaps in the world.
The attitude of management wasvery much encompassed in its
(04:57):
motto make it happen.
And there were some.
The bank was looking to grow.
There was certainly someoverzealous lending, but I think
generally we kept ourdiscipline around structuring
and due diligence anddocumentation.
(05:19):
Where things got out of control, it was a matter of quantity
rather than quality.
There were literally dozens ofplaces in which you could borrow
money against a real estateasset in the bank and they were
happy for those different groupsto compete, and so it was a
(05:41):
massive and fairly uncontrolledreal estate book across many,
many different levels of thebank, and that's ultimately, I
think, what led to its downfall.
Speaker 1 (05:53):
Just because of the sheer scale of the lending that
was going on.
Speaker 2 (05:55):
Yeah, I got a call this was third quarter of 2007
from a friend and he mentioned,casually he was at Citibank.
He mentioned casually that RBShad a casually, he was at
Citibank.
He mentioned casually that RBShad a bigger balance sheet than
Citibank and I thought that'sabsolute nonsense.
He doesn't know what he'stalking about.
Citibank's a massive globalbank with a huge market cap.
(06:16):
I looked it up and, sure enough, he was correct.
We did have a larger balancesheet than Citibank, which which
was no place for us to be, andthat that was in the hundreds of
billions, right, yes, yes,absurdly large balance sheet and
part of that ambition that thebank had to be a major global
player.
Speaker 1 (06:36):
So where were the real bad sections of it then?
I mean, because you know RBShad a unit here, ulster Bank and
Ulster Bank bought First Active, which was formerly a building
society, and was merged into it.
I actually worked there whenthat was happening but I was,
you know, basically an intern orjust slightly a hair above an
(06:59):
intern.
And I remember going to becauseI worked in property finance.
And I remember going to becauseI worked in property finance.
I remember going to an internalthinking meeting or I don't
(07:21):
know conference where all of thedeal guys from real estate
finance two and 300 millioneuros in Dublin for development
assets just seemed incredible tome.
And then when you lookafterwards and say like the
whole in Ulster Bank's balancesheet in Ireland versus its
assets was enormous, right, likeits loan losses were absolutely
enormous.
Speaker 2 (07:52):
I assume that that wasn't repeated at that
percentage loss rate across allof the operations.
No, I again, I think thequality was reasonable.
I think the the losses you knowthere were losses and I think
just that the size of thebalance sheet meant that those
losses were not sustainable.
Yeah, yeah, interesting times,no doubt when the crash was
(08:17):
starting to happen?
Were you still there when itwas all and the plan was just to
?
I had been running ContinentalEurope and I had lots of
employees.
The plan was just to have asimple life as a lender again.
Yeah, and then some of thesenior guys left RBS in the US
and I ended up co-heading thebusiness from March 2008 until I
(08:38):
left at the end of 09, whichwas the very dark days at the
bank.
Yeah, so not the simple lifethat you'd hoped for.
No, it was very complicated.
Once the government took over,which was September 2008, it
really became bothnon-functional as an
organization, but also veryclear writing on the wall that
(09:00):
the ambition of the bank was tobecome a domestic UK bank with
maybe some operations to serviceUK clients, but no aspirations
to be a global bank anymore.
Speaker 1 (09:13):
And at the time it was, I think, was it the fifth
biggest bank in the world at thetime it may have been so.
Speaker 2 (09:19):
They also had the ill-fated acquisition of ABN
Amro in the midst of it, whichwithout ABN Amro, one never
knows, it which, you know,without ABN Amro one never knows
.
But that certainly put us overthe edge.
Yeah, straw, that broke thecamel's back.
Speaker 1 (09:31):
There's probably a lot of straws, yeah, the several
hundred billion tons that brokethe camel's back.
So after you left RBS, thenwhat did you do?
Did you take some time to justlook at?
Speaker 2 (09:43):
the world.
No, I did have a couple ofmonths, but I jumped into an
opportunity at Brookfield AssetManagement, which is fairly well
known these days Canadian assetmanager Enormous group.
Enormous group focused on realestate, infrastructure and
renewable power and theCanadians had a three-month
(10:06):
global financial crisis so theywere very positive about the
world.
So I joined them to start andbuild up an advisory group in
the US.
They had a very strong Canadianadvisory group and they wanted
to take it global.
Speaker 1 (10:20):
And then you from there went to start up Fairfield
.
Speaker 2 (10:25):
So there was an interim step.
So at Brookfield one of thethings we did, lots of things we
did some debt placement, somedebt advisory, restructuring
type work.
We also did some property salesand M&A.
I got involved in a transactionwith KSL, a group out of Denver
, colorado, to buy MalmaisonHotels.
(10:47):
They were actually buying itfrom a part of RBS who had
control at that point, and weneeded to arrange debt on that
transaction.
So Malmaison Hotels had 31 or32 hotels in the UK, most of
them not in London, and we wentaround the world looking for
debt, okay, on a very goodtransaction, very easy to
(11:09):
finance, uh, in theory, uh, andnobody was interested because
the assets weren't in london.
Uh, after sorting that out, thelight bulb went off in my head
and I said I do have to get backto the uk and try and lend
again because there's a massiveopportunity and how did that go
down at home?
So not brilliantly.
My wife we've been married forover 30 years.
(11:32):
She doesn't like to fly, so theidea of me going back to Europe
was not great, but she'smanaged through it.
So initially I joined up withsome of the guys who had left
RBS and, at this time, hadcreated a finance company called
Jeffrey's Loan Corps.
So they agreed to let me grabsome of the balance sheet and
create Jeffrey's Loan CorpsEurope.
That was March 2014.
(11:54):
So we ran around mostly doingdiscounted payoff finance.
So for the podcast listenersyeah, I was going to say you
might want to explain that oneDiscounted payoff finance is
where, say in the case ofIreland, a borrower's at NAMA.
Their loan gets sold to a fund,often derisively referred to as
(12:15):
vulture funds, and that fundbuys the loan at a big discount.
They are looking to resolve theposition quickly.
They offer the borrower asmaller discount in order to
clear his position and we comein as the lender to help
facilitate that transaction.
So we're working with borrowersto enable them to get their
(12:37):
loans back and to restart theirbusiness.
Speaker 1 (12:43):
Yeah, which is a kind of integral thing of every loan
crisis I mean savings and loancrisis in the US.
It would have happened thereright a lot, and I think that,
specifically as this relates toIreland, that was seen as like
almost a corrupt thing.
Right Like NAMA weren't allowedto sell the loan to the
(13:04):
original borrower.
They were prevented from doingthat by law, which always struck
me as sort of a crazy like.
If the original borrower wasprobably the person who's going
to be willing to pay the most,why would you immediately delete
your number one customer?
But you and Jefferies didtransactions in Ireland around
about that time.
Speaker 2 (13:24):
Yes, you and Jefferies did transactions in
Ireland around about that time.
Yes, so we did a lot ofdiscounted pay off finance in
that 2014 to 2016 time period.
We initially arrived inNorthern Ireland just after
Project Eagle had been completed, right, and this was a very
opportune moment.
Lots of borrowers who now,after sitting in NAMA for seven,
(13:47):
eight years, six, seven years,had the opportunity to resolve
their situation in a way theyweren't able to, as you
mentioned, with NAMA.
Speaker 1 (13:57):
Yeah, Just for people again who may not remember or
know, project Eagle was a loanbook that NAMA sold to a company
called Cerberus and this loanbook was all of NAMA's exposure
to Northern Ireland.
Yes, in one single transaction.
Do you remember what size theloan book was?
I don't remember.
Speaker 2 (14:16):
I was not paying much attention when Project Eagle
was first done, but I had afriend in Northern Ireland who
said this would be a good timefor you to come meet some people
.
Yeah for sure.
Speaker 1 (14:26):
Um, it worked out very well, yeah, um, so any any
particular stories from fromthat time that you?
Speaker 2 (14:33):
yeah, so it was.
Um, you know, we were involvedprobably in seven or eight
resolutions out of thatportfolio, probably by volume
the most with any lender forCerberus.
The first one we did was acompany called Kilmona, a
borrower named Pat Kearney, andthis was January 2015,.
(14:56):
So relatively shortly after thetransaction was completed.
Pat was one of the top two orthree exposures in that book.
Like all the borrowers, he hadpersonal guarantees which
prevented him from continuing todo any new business.
He was really stuck until heresolved his loans, and so we
(15:19):
worked with Pat and his team.
It was over 100 million poundtransaction, over 145 separate
assets involved underlyingtitles, and we had to do new due
diligence and get ready.
We completed that.
It was quite a momentousoccasion in Northern Ireland
because it was the firstresolution in that portfolio, so
(15:43):
we had a celebration dinner.
Speaker 1 (15:46):
So that was the very first one that, let's say,
Cerberus got.
Speaker 2 (15:50):
Yes, very first, and really marked a new era, a
chance for the global financialcrisis to start to be put behind
in Northern Ireland.
And so, at the celebrationdinner after the transaction,
the First minister attended,which was really a recognition
that this was an important eventfor Northern Ireland.
(16:10):
The borrower used his law firmthat he'd used during NAMA,
which was called Tuins you mightwant to Google that.
And everything seemed great andactually the transaction
progressed very, very well.
And everything seemed great andactually the transaction
progressed very, very well.
It was a huge success for us.
About five months later, agentleman who I'd never heard of
named Mick Wallace stood up inthe dial and made a statement
(16:35):
regarding some portion of a feethat had been paid again that I
wasn't aware of by Cerberus tolaw firms.
Some portion of that fee wasdestined for politicians or
political parties and this setoff, rightly, a firestorm in
Ireland and Northern Ireland.
People started to questionwhether there was some sort of
(16:58):
underlying involvement ofpolitical actors in this
transaction and created a bit ofa vortex.
So the combination of Cerberus,Tuins and the first minister
all being, you know,tangentially involved in our
transaction or actually, youknow, in the case of Cerberus
and Tuins, quite activelyinvolved, the first minister was
(17:20):
tangentially involved.
The first minister wastangentially involved.
That led to us being sort ofdrawn into this vortex where
every single article in theIrish Times about this
accusation for the next week anda half included it at the
(17:42):
bottom that we had done thefirst resolution.
It involved Tuins acting forthe borrower, cerberus, the
vendor, and that there had beenthis dinner.
So finally, after a week and ahalf of these stories, I rang up
the reporter and said you haveto stop mentioning us in these
articles.
We had nothing to do with it.
I was completely unaware, Iwasn't even focused on.
Speaker 1 (18:00):
Northern Ireland.
Just remind me.
I'm sorry for interrupting you.
The allegation was thatCerberus had paid a fee.
Speaker 2 (18:10):
So, going back and again, this is information I
learned after the fact.
So PIMCA was the originalpreferred bidder and they made a
public statement that they wereexpected to make a 15 million
euro payment.
That's round numbers, um to uh,brown rudnick and two ins, two
(18:31):
law firms, as a sort of finderfee, which is very strange for a
widely marketed transaction,which, particularly to be paid
to a law firm, would be, yes,unusual um.
And then shortly thereafter,after making that announcement,
they dropped out and Cerberusappeared as the preferred bidder
and there was no mention of anypayment until later on.
(18:53):
But a payment had been made,initially to Brown Rudnick.
Half of that payment had beenpassed on.
Cerberus paid the finder's fee.
Yes, and again, as we learnedlater on, two wins at about the
same time we were using them tocomplete the transaction, or our
borrowers using them tocomplete the transaction, I
(19:14):
should say.
They got the payment in and themanaging partner passed the
payment.
Sorry, this was well.
Before the payment came in, themanaging partner attempted to
pass the payment on to a Isle ofman account not associated with
the firm.
The payment was called back and, about the same time as we were
(19:37):
doing the transaction, themanaging partner left the firm
as fallout for this paymentcoming in and out, and this was
a massive story.
But I pled my case with theIrish Times that we were really
not one to be mentioned.
Well, it was nothing really todo with you, right?
No, but she said she waswilling to exclude us provided I
(20:00):
answered a few questions.
And the big question she hadwas did it make a difference
whether it was PIMCO or Cerberusas the ultimate buyer of the
portfolio?
And the point I made to her,which is important in the
context of this podcast, is thatI don't know whether they would
have acted significantlydifferently was getting done and
(20:22):
that borrowers were able toresolve their positions, because
the developers, who hadpersonal guarantees, were unable
to do further developmentwithout resolving their
positions.
And, as a country, northernIreland faced an issue that you
cannot attract investors into acountry if you don't have high
quality offices and high qualitywarehouses to put them in, and
(20:46):
in order to have those things,you need developers.
And you can't attract peopleand you retain your best
workforce if you don't havehouses and apartments for them
to live in.
The built environment, which iswhat developers produce and
enhance, is critical to theeconomy and so that a resolution
(21:06):
involving anybody Cerberus,pimco or another is really
important, and that that was thestory that wasn't being told in
all this, and she accepted thatopinion.
I don't think she'd everthought about it that way and we
did get excluded from furtherarticles, which was nice Until
now.
Speaker 1 (21:25):
I mean, it's an excellent point that you make
and it's something that I thinkis probably still problematic.
Right, because we are 10 yearson from when all of that
happened and we're still stuckin this sort of reductive debate
about developers.
Right, the words change.
(21:46):
Right, it was vulture funds,then it was cuckoo funds.
The whole idea is that or thereseems to be this whole idea
being pushed by certain fringepolitical elements and, to be
fair, I think, a lot of peoplein the media that are perhaps
just not aware of the contextaround what is being said.
There's this idea being pushedthat the private market has
(22:09):
failed and so the private marketneeds to be replaced with the
public one, when the reality is,in fact, the public policy
failed, the private market isdoing everything it can in every
direction, as all privatemarkets always do, because
that's the whole point of them,but that the policy failures are
not being corrected.
What do you think the maindifficulty is for you?
(22:31):
So you come in as a lender.
You're obviously not going togive money to anybody.
You're going to give money todevelopers who you believe in
and projects that you believe in, but you're also only going to
lend into a given market if youbelieve that that market on a
macro basis is sound, right,it's got good fundamentals.
So I mean you look at irelandnow, you, because you lend
across europe, right, we do,yeah, um, in fact, let's come
(22:55):
back to that.
Let's just go back to fairfieldfor a second, because I know we
got sidetracked there talkingabout jeffries.
So you came into fairfield.
Were you there at the beginningof fairfield, or?
Speaker 2 (23:03):
yeah, so, so, uh, after a couple of years of very
actively lending as part ofJeffrey's Loan Court, doing some
very good transactions, webasically blew through the
allocation of balance sheet wewere given.
It was pretty clear we weren'tgoing to get a whole lot more.
There were literally three ofus running around in Europe and
about 60 people on the US sideof us running around in Europe
(23:30):
and about 60 people on the USside and we were using much more
than our fair share of thebalance sheet, and so we had the
opportunity to look for anothersponsor, and so, in May 2016,
we found Oaktree, who's been ourmain backer since then, and we
set up Fairfield with theirsupport.
(23:52):
The business has lent about 2.2billion euros since then.
About 60% of that's been inIreland, and Ireland's been a
fabulous market for us and, at amacro level, I think Ireland's
done a lot of things right, andone of the important points to
keep in mind is that the issueswith housing and the issues with
(24:15):
infrastructure are problems ofsuccess and of economic growth.
That doesn't absolve thegovernment of their
responsibility in not enablinghousing to be built in the right
way, but the economic successof Ireland has led to it being a
place where Irish stay homerather than going abroad, and
(24:37):
where people from othercountries seek to come here to
live and work because it's avery good environment and and
you, you mean you're lendingacross Europe, not just in
Ireland, so you get to seeIreland in the light of perhaps,
other countries.
Speaker 1 (24:53):
Do we have it any worse than anywhere else?
Speaker 2 (24:57):
Um, I think the you know the aspects of the planning
system.
Um, aspects of governmentpolicy around housing do make it
worse in Ireland than in othercountries.
Uk has a similarly complex andsometimes vexing planning system
.
I still think Ireland's worseyeah.
Speaker 1 (25:21):
We're world champions when it comes to the planning
system, I think.
Speaker 2 (25:24):
Yes, and ultimately there's some amount of delusion
in government thinking that ifyou require builders to build
really high quality apartmentswith dual aspect and you know
large footprints and lots ofother requirements, that that
(25:44):
will improve the housing stockfor the average resident.
And the reality is more of theabove is what improves the
housing stock, and particularlyat the margins, people who are
less able to afford housing arethe losers of setting such a
high bar for housing in Ireland.
Speaker 1 (26:04):
Yeah, because they never get anywhere near us right
.
Speaker 2 (26:06):
Yes, and you know, the conversation with a typical
cab driver as I come from theairport into the center of
Dublin is about how their25-year-old, who has a good job,
can't move out of the house,and that is a severe political
issue.
Speaker 1 (26:20):
It's also a moral failing, because it's not like
in the 1970s, when we didn'thave any money, we didn't have
the wherewithal to fix theseproblems, and the thing that
annoys me about it is that we'rechoosing not to fix them in the
service of certain sections ofsociety or the certain, I think.
Actually, a lot of the timeit's it's the idea that doing
(26:45):
what we want as a developmentcommunity somehow benefits us,
and I try to point out to peoplethat actually the status quo
benefits us.
Right, because the barriers toentry are really high.
It's a really difficultindustry to get in, so there are
no startups, right, there's nodevelopment startups.
Um, and artificial constraintson supply are good for people
that own things.
Right, and a lot of the timepeople don't seem to understand
(27:08):
that, like the policymakers maythink they're making our job
harder.
So they are making it harder,but they're also making it in
another sense, more profitable.
If you can hang in there, yes,when you are looking at a
project, take us through.
What are the things that areimportant to you.
So I come into you and I say,hey, chris, I have this great
site.
You know it's half an acre,it's zoned Resi.
(27:32):
I want to put this apartmentbuilding on it.
What's your starting point tothat?
Speaker 2 (27:39):
So we don't tend to get involved in most situations
prior to a planning consent.
Okay, involved in mostsituations prior to a planning
consent.
So if you bring me your siteI'll say that looks good, and
please come back to me when youhave your planning consent in
place and I'm very interested inhelping you.
Then we do have some exposureto the planning system.
(28:02):
So sometimes a borrower willacquire a property and he'll
have a consent to build, say,100 units of residential but he
will have a plan to try and goin and get an additional 10 or
20 units approved and we'll workwith them and say if you get
that approval, we'll provideadditional debt to enable that
(28:24):
to be built.
But that's limited exposure.
But we're certainly well awareof the issues.
And where we do have exposure wesee the ponderous nature of the
system.
So we have a shopping centerthat we were involved in
financing in Bray.
The sponsor went in for consentfor 25 residential units in the
(28:49):
upper floors and they had to goto Ambor Panola, the Planning
Appeals Board, for that consentbecause they'd purchased the
asset from the council on adevelopment agreement
complicated developmentagreement and that application,
that appeal, essentially went in12 and a half months ago for a
(29:13):
long time.
It had a date in july of lastyear on the website.
Then it moved to date in august.
Speaker 1 (29:19):
There's no date attached to it, but we still
wait and that that's a tale nowthat is told every day.
As to how long it can, it cantake borplanova severely
under-resourced, and then it hadits own problems, which we're
going to explore in a laterepisode, but the resources
(29:41):
appear to be there.
Now, aside from planning,what's the thing that restricts
you the most?
You obviously have criteria asto how much money you're going
to lend, whether the person islike a reputable, experienced
person, but aside from that, ona project level, what's the
thing that tends to create themost difficulty for a lender in
Ireland?
Speaker 2 (29:57):
So you know, the general issue that we face is a
viability question.
So you know, the planningprocess rightly puts constraints
on the nature of projects andthey want certain aspects.
But those, you know, thoseenhancements to the build, over
and above what you know adeveloper would do, uh in in
(30:22):
their uh based on their ownideas of of what's best, um have
costs.
And when you add uh,construction cost, inflation,
relatively high interest ratesto a project, Values have not
moved very much and in somecases yields have pushed out.
(30:43):
So values have gone the otherway.
Viability is the major issue ondevelopment.
We cannot fund a project evenat a relatively low level of
loan to value.
We can't fund a project that isnot profitable based on the
underwriting.
So we need to see that there issome level of profit in the
(31:04):
project so that we know that thedeveloper who we're backing
will see the project througheven if conditions deteriorate
over the course.
Something goes wrong, right?
Yes, so that is the biggestobstacle we have and we look at
a lot of projects that simplyaren't viable at today's
construction costs and today'sinterest rates.
Speaker 1 (31:25):
Yeah, and has that disimproved in the last 12
months?
Do you think?
Speaker 2 (31:31):
It's sort of leveled out Over the last six months.
It's sort of leveled out Overthe last six months.
It's sort of leveled out andour hope is that interest rates
start to come down.
Values sort of take intoaccount construction costs and
there haven't been a lot ofprojects started, which means
supply is constrained goingforward and that's across
commercial as well asresidential.
(31:53):
So hopefully it will level outand we'll we'll see viability
improve that provides a littlebit of support also to pricing
right, that uh supply is notincreased dramatically yes, yes,
and, and you know, ultimatelythe, the solution to the housing
crisis in ireland and anywhereelse is all of the above Build
(32:16):
more of every type of unit.
And so you know, the governmentbodies having a view on the
types of units they want to see,the mix of units they want to
see, doesn't necessarily improvethe housing stock in Dublin.
Sometimes it actually goesagainst it.
(32:36):
You know, at the most extreme,if we had all six bedroom houses
being built in Dublin, thenyou'd have, you know, a return
to the tenements, essentiallybecause people would have to
divide them up to make sense ofthe stock that's available.
And so having lots ofwell-meaning but potentially
(33:00):
misguided criteria affectsviability, affects supply and
moves the opposite way of whereyou need to be moving it
certainly does.
Speaker 1 (33:09):
I mean, there's one perfect example of that is the
focus that Dun Laoghaire andRatown have.
For those who don't know,dublin's divided into four
different council areas and DunLaoghaire and Ratown kind of is
the one where all the richpeople live.
They have a development planthat calls for like a very large
proportion of three-bedroomapartments because they think,
(33:30):
you know, they're family unitsand you need to have family.
But of course, the reality isthe families inland don't
typically want to live in anapartment and so, okay, unless
you force them to, they're notgoing to right.
If they have alternatives andif they are earning a decent
income, they do havealternatives, right, and they
are.
That alternative is to livesomewhere else.
So the reality of what happensthen is you have an apartment
(33:53):
built that was designed for afamily, so it's big, so then the
cost of that apartment ishigher.
So what happens is that threepeople move into that apartment
from three separate families andat the same time that this is
going on, people are banningco-living, saying that co-living
is a bad thing and that weshould be providing better
options for people.
(34:14):
But they won't let you build aone bedroom apartments because
they're, you know, consideredfor transient communities and
are no good for developingcommunities and are no good for
families.
Yet you have a lot of singlepeople.
You have a lot of people whoare divorced nowadays.
You have a lot of people whoseneeds are for a one bedroom
apartment.
Speaker 2 (34:31):
You have a lot of people who are coming to Dublin
to work from other countries,who have no idea what sort of
timeframe they're working on,and so they don't want to get
involved in acquiring a property.
They want a rental and theywant something simple.
Speaker 1 (34:45):
Yeah, you know, they may not be bringing all their
furniture and, and you know,clothing et cetera from from
where they were based, based,yeah, I mean we get inquiries
for people who want to know ifthey can have a fully like nice
forks, plates, cups in thecupboard right, because they
don't know, maybe it's a year,maybe it's five years, who knows
?
But the the policies that wehave that are pushing the
(35:09):
typology of units that we wouldlike for the community that we
would like the community thatexisted 30 years ago.
All that's doing is driving upthe cost for individuals, um, so
that policymakers I don't knowcan sit back and feel like that
they have some sort of moralhigh ground.
Um, so there's a lot of there'sa lot of contradictions and
(35:31):
I've said a lot on this.
That it's, I mean, it's a formof schizophrenia.
What is the next move for youwith Fairfield?
Do you, are you guys, inexpansion mode?
Would you like to?
I mean, you said 60% of yourlending that has been done in
Ireland, which is great.
Are you looking outward to saywe'd like to do more in Europe?
(35:55):
Would you like to do more inIreland?
Like, what's your plan?
Speaker 2 (35:58):
Yeah, we're just really getting started in Spain
and Portugal, so we have oneloan, uh, in each country.
Um, and you know we've done thethe hard work of getting
comfortable with the countriesfrom a a legal and economic
perspective.
Um, we like the risk return ofboth markets, so we need to do
more there.
(36:18):
We're also looking to enhancethe capital available to us, so
we're in an exercise which willhopefully provide more capital
and allow us to grow thebusiness.
Speaker 1 (36:32):
Has the market for that capital changed in the last
sort of year, or is there still, like a huge desire from
capital providers to put moneyinto debt finance for real
estate?
Speaker 2 (36:45):
There's a very interesting thing going on among
institutional investors.
You know typically a lot ofpensions insurance companies,
sovereign wealth funds, likedcore funds, core property funds,
core property funds just forthe ownership.
So core property funds.
They buy high quality assets.
(37:07):
These are offices, shoppingcenters, apartments, et cetera.
They buy them with anexpectation of a modest return
but also a very consistent, safereturn.
So they're looking for qualitylocations.
They're looking for qualityassets.
They're not looking to take ona lot of issues, so assets that
(37:29):
need leasing or asset management, investment of any kind, they
just want safe, stable assets.
So this would be your buyer foryour newly developed office
building, your stabilizedshopping center, your stabilized
PRS rental scheme.
So they've had a fairly bad runover the last 10 years and you
(37:51):
think about, in the shoppingcenter world, it went from being
a very attractive asset tobeing quite an out-of-favor
asset and the values declined.
And now, more recently, officeswent from being a very safe,
stable asset that the no-brainerin real estate investing was
buying a grade-A office in thecenter of a city like Dublin and
(38:16):
yields on those have pushed out, meaning values have gone down.
And so those core investorshave not really seen the safe,
stable returns they thought theywere going to see, and a lot of
them are now interested in realestate credit as an alternative
for those safe, stable returns.
So you know a little bit lessrisk because instead of being
(38:40):
the equity in the first year ofloss, you're the debt and so
you're protected by the equity,and so we're seeing a lot of
interest and that's good, andhopefully we can parlay that
interest into an expandedbalance sheet for Fairfield Of
course, the heightened interestin debt comes at the cost of
(39:01):
reduced interest in equity, andyou need both right.
We need both and transactionshave to make sense.
But we're typically financingassets that are transitional in
some stage in some nature.
So it may be as simple as youknow it's a property that needs
some additional leasing, or itmay be that there's a small
(39:23):
project to be done, like a lobbyrefurb or energy efficiency
measures, or it could be at theother end of the scale, could be
a ground up development, and soyou know that's a different
investor set, not necessarilyone that is facing as much of
the same issues.
Speaker 1 (39:41):
Yeah, Okay, I ask everybody who comes on about the
magic wand, right?
So if you could fix one thingbut it has to be one thing,
because when I ask some people,they start with one thing and
then five minutes later they'vereally fixed 100 things.
So what's your one?
Speaker 2 (39:56):
thing.
So, as you know, I'm a bit of asuper fan of this podcast and
I've listened to everybody'smagic wand and I've thought a
lot about this.
And it is a very tough questionBecause you do have a.
You know, you get an idea andthen you think, well, maybe it's
actually a bigger idea and it'sa bigger idea and it's a bigger
idea Plus.
Speaker 1 (40:17):
the thing about ideas , isn't it?
Speaker 2 (40:19):
And all of a sudden you're doing something that
doesn't fit into the magic wandcategory.
So I'm going to say my simplestlevel fix is Irish water.
Every new development,particularly residential
developments, particularlyhousing estates that get built,
need to be connected to Irishwater.
(40:41):
And Irish water are notoriousin the development community for
being very hard to pin down onwhen they will connect you to
the water.
You cannot sell a house or anapartment that is not connected
to the water system.
This is entirely in thegovernment's control.
Irish Water is a governmentowned entity.
(41:01):
They need to invest in doublingor troubling the staff to
create connections.
We've had numerous developmentfacilities, development loans to
single family housing estateswhere we're held up at the end.
Buyers ready to buy Developmentcompleted, irish water
(41:27):
connection not done for threemonths.
That is a lose-lose scenario.
There's no value created in it.
There's value lost because thedeveloper holds on to the
properties for a few more months.
Our interest accrues.
Yeah, right, when you're atpeak debt too, right, when
you're at peak debt.
(41:48):
It is an easily solvableproblem.
It is one that could do a lotof good.
The developer, when he's ableto sell immediately, gets on to
the next development.
That's more houses.
The buyers get to live in theirnew home.
That's good for them.
They're happy.
They're selling their old home.
That's more houses, all goodfor the system.
(42:10):
No sense in why Irish waterconnections are such an issue.
Yeah, there is no sense.
I worked very hard to make itthat one point.
Speaker 1 (42:19):
There's the last part of what you're saying Well, we
could spend a whole hour talkingabout Irish water and you know
again, well-meaning Guys thatwork there are well-meaning, but
the system has been designedlike in a just cockamamie way.
I mean, we used to be able todo this, right, we.
In 2006, we were building 90000 houses a year.
There was no delays forconnecting to water.
(42:40):
Now we're building a third ofthat and we can't seem to.
Speaker 2 (42:43):
I have no doubt that there's some skill involved.
I don't think I would be ableto connect a new development to,
but they don't actually theydon't actually do the connection
.
Speaker 1 (42:51):
I mean, this is the crazy thing about it.
So a lot of the time thesedelays are driven by the need
for them to inspect the workthat's been done and the water
is connected right.
It's literally opening a valveand the developer is not allowed
to do that.
So it's not as though Irishwater have to come out and do
enormous amount of work and it'sdifficult to schedule it.
A lot of the time that doeshappen in cases, but a lot of
(43:12):
the time it is literally aninspection and turning a valve
on and they don't have the staffand they don't have the
resources and they don't havethe resources for the
infrastructure that's needed toprovide the water.
They don't have the resourcesto do the drainage
infrastructure, to do sewagetreatment.
Speaker 2 (43:29):
So hopefully one of the relevant ministers is
listening and this can beresolved.
But that would have a hugeimpact for relatively minimal
investment, yeah, and for us asa lender, you have to underwrite
the project, so you have tomake an assumption about how
sales will go.
Yeah, and we have to pad thoseassumptions for the
(43:53):
unpredictability of Irish waterconnecting the new units to the
system, and there's a cost tothat.
And again, if you're worriedabout projects being viable, if
viability is an issue forcreating new houses, having us
assume three or six months ofadditional time for no
particularly good reason, itaffects that.
Speaker 1 (44:16):
Yeah, there's absolutely no reason for it to
be like that.
Well, thank you for sticking toone thing.
I know that was probably hardfor you.
It was very difficult.
This year we're going to bevery strict, because last year
you were starting out and Iwasn't really paying much
attention.
I was giving people too muchrope.
So it's a new regime now, alittle bit more of an iron fist.
(44:38):
Is there any other points thatyou had in your head or things
that you feel like you need tosay?
You basically have an open mic.
Speaker 2 (44:47):
You know, as I said, ireland has had tremendous
success.
What's happened here over thelast 30 or 40 years is truly
phenomenal and there are lots oflessons for other countries to
learn from Ireland's success.
But housing and infrastructureare today's problems and they
(45:09):
will impact economic growth.
They have probably already tosome extent impacted economic
growth.
They have probably already tosome extent impacted economic
growth.
The taxi driver whose son isliving at home will one day
decide to move to anothercountry and because he can live
on his own and the job he haswill provide sufficient money to
(45:31):
afford an apartment or a housein another country.
He can probably do that job fromanywhere, and he might be able
to do that job from anywhere,and so that's not good for the
Irish economy, and thegovernment has done very, very
well in attracting companieshere.
But at some point these issueswill come to the forefront.
(45:52):
Those companies will makedifferent decisions.
Yeah, I'm going to takeadvantage of this and I'm going
to add one more.
At some point in last year'sseason last season there was a
reference to an Atlantic articlecalled Housing Broker Brains.
Speaker 1 (46:08):
Yeah, that was the last episode.
Actually Sean Keyes, the guyfrom the currency.
Speaker 2 (46:13):
That is a really, really important article and I
see it all the time in speakingwith friends about housing, the
concept being that, you know, inevery other aspect of the
economy, more units is thoughtto be good because it reduces
prices, makes something moreaffordable.
(46:33):
We've seen that with phones andcomputers and everything else
all types of technology butsomehow in housing, lots of
people think that more unitssomehow is bad and governments
feed into that sense.
All of the above build lots.
That is the solution to thehousing crisis.
Mark.
Speaker 1 (46:52):
BLYTHINGTON JR.
Yeah, OK, well, you heard ithere first.
Well, not first, I mean for theumpteenth time.
You need to start getting thosehouses built and Chris is there
to finance them for you withvery generous debt packages,
margins in the low 2%, 3%.
Now, Chris, is it that?
Speaker 2 (47:08):
is incorrect.
Speaker 1 (47:11):
I'll let you get in touch with Chris and get the
real margin and listen.
Thanks very much.
It's been great to have you onand I know that we've been
batting back and forth aboutthis for a while, but it's great
to get it done in the end and Iguess we'll leave it there.
Speaker 2 (47:25):
Thank you for having me and thank you for doing this
podcast.
It's very important.
Thanks a lot, Chris.
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