I now propose we return back to public session. Is that agreed? And in returning to public session, this is our fourth session of today, the Committee of Inquiry into the Banking Crisis is now resuming in public session. Can I ask members and those in the public Gallery to ensure that their mobile devices are switched off.

At our next session we will hear from Mr. Michael O'Flynn, founder, O'Flynn Construction Group. This is one of several sessions in which the inquiry will focus on relationships between property development companies and their principal financial institutions. Mr. Michael O'Flynn founded O'Flynn Construction in 1978. The O'Flynn Group operates a number of businesses in Ireland, the UK and mainland Europe. The group's activities cover property investment, development, construction and the provision of student accommodation. The group, as well as its personal borrowings, have now exited from NAMA. Mr. Flynn, you're very welcome before the committee this evening.

Before hearing from the witness, I wish to advise the witness that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect to their evidence to this committee. If you are directed by the Chairman to cease giving evidence in relation to a particular matter and you continue to do so, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that the only evidence connected with the subject matter of these proceedings is to be given. I would remind members and those present that there are currently criminal proceedings ongoing and further criminal proceedings are scheduled during the lifetime of this inquiry which overlap with the subject matter of the inquiry. Therefore, the utmost caution should be taken not to prejudice those proceedings. Members of the public are reminded that photography is prohibited in the committee room. To assist the smooth running of the inquiry, we will display certain documents on the screens here in the committee room. For those sitting in the Gallery, these documents will be displayed on the screens to your left and right. Members of the public and journalists are reminded that these documents are confidential and they should not publish any of the documents so displayed.

The witness has been directed to attend this meeting of the Joint Committee of Inquiry into the Banking Crisis. You have submitted a witness statement. This is before the committee, will be relied upon in questioning and form part of the evidence of the inquiry.

I now ask that the clerk will administer the oath to Mr. O'Flynn, please.

Thank you very much, Mr. O'Flynn, and, once again, thank you for your co-operation with the committee this evening and if I can invite you to make your opening remarks, please.

Thank you, Chairman. Good evening all and thank you for the opportunity to address the committee. As you know from my submission, I have been in the property development and construction business for over 37 years. During this time, I worked through the recession of the 1980s and the currency crisis of 1992-1993. At all times, the O'Flynn companies paid every creditor and repaid all borrowings in full plus interest. Our business model was always soundly based. From 1978, the business grew, as did the mix of skills within the organisation, including development, planning, project management, asset management and construction, investment and finance. Development was the origin of the group and was always at the centre of our activities. The key focus for development was to take a total management approach from inception to completion, only building product where real demand existed.

As a group, our plan was to create a strong and valuable organisation which would be broadly based and diversified in so far as is practical in terms of locations, business and economic risk. At the peak in the mid-2000s, the O'Flynn Group employed over 1,000 people directly and indirectly. In the statement to the inquiry, NAMA CEO, Mr. Brendan McDonagh, and not Mr. Frank Daly, as mentioned in my submission to you, indicated a view that diversification reflected an absence of strategy amongst developers. I disagree. Rather, diversification is a recognised and appropriate risk management strategy operated by businesses of scale.

By the end of 2008, the group had fully evolved to a diversified model in terms of its asset type and geographic base. In addition to our development business in Ireland, our varied businesses extended across nine jurisdictions, encompassing commercial, retail, industrial and residential and included a very successful student accommodation business, senior living accommodation and investment properties.

My relationship with banks - I can only speak from my own experience with the banks, that experience runs contrary to some of the generalisations I have heard reported at this inquiry about easy lending which was relationship based and where the loan was up to 100% or more of the value of the asset in some cases. This was certainly not the case in relation to the O'Flynn Group. The cash balances of the O'Flynn Group were always strong and were applied in property acquisitions. Even the years 2006-2008, the average amount of our cash balance was €76 million. In our property acquisitions, a mix of our own cash and bank borrowings was generally applied, with the exception of joint venture arrangements where a lender sought a much higher return based on profit share. In such cases, funding was provided by the lender and time, skills and expertise were provided by us and profits were shared in an agreed proportion.

To be very clear, our borrowings were not speculative. They underpinned specific developments with a strong balance sheet and a credible and strong cash flows to support them. I never issued personal guarantees to any lender in relation to the business and the reason for this was our track record, but also the strength of our balance sheet and by extension, the level of equity which we were bringing to each project. In approving any loan application, the bank had to satisfy itself of the ability of the borrowing company to repay the loan and the security available. I have never provided any form of personal guarantee to a bank to secure an O'Flynn Group loan.

The O'Flynn Group way of operating was to identify a projects that made financial sense and then go about the financing, not the other way around. From time to time, O'Flynn Group companies are required to provide guarantees for the liabilities of other group companies and where we believed it was the right thing to do, those inter-company guarantees were provided.

The global financial crisis - access to finance is the lifeblood of developers in the way raw materials are to a manufacturer. When the global financial crisis hit, that supply was denied to us. Regardless of how strong a company's balance sheet is, if you and your principal customers are dependent on banks for access to cash, you will not be in a position to continue business in such circumstances. I am hugely appreciative and grateful to the State for providing liquidity to our business when the banks were in the extraordinary and unforeseen position of being unable to provide finance. It was the only time in my 37 years in business that I have ever seen a business environment like this and I hope I will not see it again in my time.

The role of NAMA - while the concept of NAMA was well-intentioned, I believe it was destined to realise a less than optimal return to the State.

NAMA was intended to save the Irish banking sector but in fact hastened its demise and along the way added to the burden on the Irish taxpayer. There were alternative and better options, and Lombard Street Research, a macroeconomic consultancy company based in London, outlined those options in a report which was submitted by the Construction Industry Federation to the Department of Finance, a copy of which I have provided to the inquiry.

I believe there are four reasons why NAMA has and continues to fail to maximise the return to the State. Firstly, the time that it took to create this new organisation, staff it, resource it, and deal with the European Commission on competition matters, decide on a valuation mechanism, value the loans on a loan-by-loan basis and ultimately transfer the loans, which was costly. The concept of NAMA was first mooted in April 2009 but it was April 2010 before NAMA was able to even commence the review of business plans of the first tranche of borrowers. It led to continued financial uncertainty over an extended period. Secondly, I firmly believe that from the outset NAMA lacked experience in many important areas but most notably in the area of asset management and development. This had very significant consequences in terms of early action to enhance the value of the assets under management. Thirdly, NAMA failed to distinguish between developers who knew what they were doing and had a track record in business but who were thrown into turmoil by the global financial crisis, and part-time developers or people who had gone into the development business without having any understanding of the fundamentals involved. While in NAMA, I presented a comprehensive, professionally assisted business plan designed to ensure that the O'Flynn Group could continue in its current form and that all debt could be repaid over time at par. We applied very significant resources to the preparation of our business plan, which extended to some 2,000 pages, and believed that it offered a realistic timeframe to allow the group to operate a successful recovery strategy, which in turn would result in full debt repayment over time. This plan was examined in detail on behalf of NAMA by FTI Consulting, a global business advisory group experienced in complex businesses, who conducted a comprehensive exercise with which we co-operated fully. Although our engagement with FTI was positive, our business plan was rejected by NAMA without explanation or any meaningful engagement whatsoever. Instead we were required to implement a business plan designed by NAMA personnel unfamiliar with our extensive and varied businesses across nine jurisdictions.

The NAMA plan did not accommodate full debt repayment. Although we had no part in designing it, we were required to implement it and yet remain responsible for the full amount of the loans. Despite attempts on my part, NAMA refused to engage with me to see how this plan could be achieved. To this day, I am bewildered as to why this was the case but the net effect is the taxpayer suffered a loss that could have been avoided in respect of the O'Flynn Group loans. To be clear, we did not get a loan write-down. NAMA took over the O'Flynn Group €1.8 billion loan book and sold to the Blackstone at a discount. However, we continue to owe Blackstone the full par value of the loans. The discount taken by NAMA on the sale of the loan has cost the taxpayer but could have been avoided, had NAMA been prepared to work with us and to take our business plan on board. We are fortunate that following the resolution of our dispute with Blackstone we still have a business, albeit a smaller one, on which we are building up again and contributing to the economic growth of the country. However, both the tax man and the O'Flynn Group would have benefited, had NAMA taken a more strategic approach to our business and assets. While I can only speak for my own business, I know there were other developers where NAMA has lost out, also because of their failure to identify and work with these people though an agreed business plan to maximise the return to the State.

Finally, there was an in ... there was an inability of NAMA to recognise the cyclical nature of the economic downturn, and take a longer-term view of asset realisation and maximisation of proceeds. We are all ... we are already seeing assets purchased from NAMA being sold on at significant profits. A combination of a failure to identify developers who knew their business and a lack of recognition of where Ireland and Europe were on the economic cycle has resulted in a significant loss for the State. Had NAMA picked developers who knew the business and had a track record, the State would have realised more proceeds and, in addition, some of the office and housing shortages we are now ... which are now emerging due to the lack of activity in recent years could have been avoided.

Much of the debate around NAMA has come to be dominated by its profitability as a measure of its success. This should not be the case. By paying low prices for assets and by taking good loans as well as bad, it was always likely that the entity would generate a profit. However, this profit has been achieved at the cost of an earlier recovery in the banking system and serious damage to some developers, who had loans acquired and who lost an opportunity to work out those loans.

It also ignores the huge hidden cost of fees which are not included on NAMA's balance sheets but, instead, added to the account of the borrower.

There are other failings that I think should be identified: the lack of any real oversight of NAMA in relation to the ... to the exercise of the extraordinary powers vested in it; the special Oireachtas committee to examine matters in relation to NAMA, as provided for in the NAMA Act, was never established; the refusal by NAMA to allow partial refinancing joint ventures or any other means of attracting outside equity; the so-called section 172 policy - section 172 precludes the sale of loans by NAMA to borrowers who are in default in respect of those loans; NAMA, however, operated a policy which, in fact, went far beyond what the legislation provided. Although our loans were not in default at the time they were sold, NAMA's process precluded any proper commercial discussions between us and, thus, prospective purchasers of our loans. It was irrational and, in my view, potentially unlawful that we were precluded from having such discussions with potential purchasers. I believe that the State should be allowed to get the best return from the sale of assets, irrespective of who the highest bidder is.

Most NAMA borrowers are prevented from speaking frankly of their personal experiences within NAMA, either because their loans are still controlled by NAMA or because they are subject to confidentiality arrangements. I've outlined in much greater detail in my submission my experiences of NAMA and a ... and the serious shortcomings of same. I should stress, however, that I have encountered some very decent, professional and fair-minded people who worked in NAMA. However, I have also had some very poor experiences. The only remedy a borrower can seek in NAMA is to seek judicial review of decisions made by NAMA. Not only does the expense of such application put it beyond the reach of most borrowers but any such application is certain to be regarded by NAMA as unco-operative and, therefore, in real terms, would be the end of that borrower in NAMA. To be very clear, I had no role or involvement or was not consulted on the transfer of my loans, or the loans of the O'Flynn Group, when the various financial institutions entered NAMA. I equally had no involvement in the price at which these loans were transferred, the haircut suffered by the banks and the cost to the Irish taxpayer as a result. In fact, at the time my loans were acquired, NAMA ... NAMA insisted that the borrowers did not even have the right to make representations in relation to the acquisition of their loans. The Supreme Court subsequently determined that NAMA was wrong in that regard.

Neither the acquisition of our loans from the banks nor the sale of them by NAMA had any impact on the amount we owed. At all times we remained liable for the full par debt. I've already repaid my personal loans in full, which I believe is a vindication of the fact that they never constituted a systemic risk and should not have been acquired by NAMA. The O'Flynn Group submitted a business plan which would have allowed full debt repayment but this was rejected and, instead, despite remaining liable for par debt, we were required to implement NAMA's alternative plan under which full repayment could never have been achieved. I was not permitted to be a party to the selection of the winning bid for my loans nor the price paid for those loans. It's important to know that we co-operate fully with all prospective bidders to maximise the return to the State and this has been acknowledged by NAMA. People talk about NAMA being a developer bailout but that is not my experience.

To be very clear, as I have said already, I am hugely appreciative to the State for stepping in to provide liquidity when the banks became unable to operate and I wanted to repay that. The taxpayer lost money, of that there is no doubt. However, I have a business that is now much smaller than it was before, resulting in a direct loss to the economy. The main winners in all of this have been the private equity companies who have the funding and are able to buy loans and assets at a time in the economic cycle where the value realised by the State was far from optimal. As the positive economic cycle has progressed, these assets and loans are now being realised at a significant profit.

The future: looking to the future, development always requires skill and judgment to be done well at a significant scale. It's always capital intensive and it is always a risky undertaking. It is essential that a professional developer sector is re-established to ensure that Ireland's future property needs are satisfied to meet the requirements of a modern, growing economy. Part of the re-establishment of a professional development model would have to entail less reliance on bank finance and a greater dependence on a different funding model, where the equity comes from professional investors. But as well as the development sector learning lessons from the crisis, there are also lessons to be learned in the area of zoning, planning and building regulations. We should not lose the opportunity to correct all the systemic issues which ... that contributed to the demise of the property sector in Ireland. The property ... the property market is cyclical. The O'Flynn Group and its various companies have been through a number of peaks and troughs but we have adapted to meet circumstances and to continue in business. It is easy in the current climate to forget the positive contribution made by the ... by the construction-property sector to the economy. A functioning property and construction sector, with properly-managed, experienced companies, is essential in every economy. Ireland is no exception. Thank you, Chairman.

Thank you very much, Mr. O'Flynn. And if we can commence questioning, please, and in doing so if I can invite Deputy Kieran O'Donnell. Deputy, you've 25 minutes.

Welcome Mr. O'Flynn, at the late hour.

Thank you, Deputy.

Mr. O'Flynn, based on your dealings with the Irish banks in the pre-crisis period, did you get the general impression that the ... maintaining and growing market share was the dominant driver in lending practices? And did you observe increasing competition between them for businesses with you and your company?

Well, I would have to say that we had an approach to lending in that we had our own process to go through before we approached a bank. There is no doubt that there was competition by the banks for such lending. We had our own internal approach where we went through a process of appraisal and did all the advance work before we would even discuss a project with a bank or with banks. I think the competition was strong, of that there is no doubt.

And looking at appendix 2 in your ... in your ... page 7, you dealt with eight banks in the first pie chart and over 50% of loans for the O'Flynn Group were held with Anglo alone, from what I can see. And, can you explain why that level of debt was held with Anglo above the other banks? The ... AIB, you dealt with Bank of Ireland, AIB, Bank of Scotland, First Active, Lombard and a couple of other banks. But in the main, well over ... well, I can see from the pie ... over 50% was with Anglo.

Yes, there's a simple explanation for that in that the bulk of the borrowing with Anglo was out of London. We had a long-established relationship with the London branch of Anglo, and the two businesses that we had in the UK and Europe were Victoria Hall, which is a student accommodation business, and Tiger Developments, which is mainly an investment property and business, would have traditionally banked with Anglo from the outset and we continued to be loyal to them in that regard.

And-----

They didn't bank as much in Ireland and that situation was more ... was handled by the other banks in the main.

So the Anglo loans were basically for UK investments?

UK and Europe.

UK and Europe, not Irish?

There were some Irish, there were some Irish but ... you asked me, the majority ... the scale of the Anglo was ... the scale was the largest because of the UK and European dimension, which was exclusively Anglo out of London.

And did you find that the banks, did the banks come to you looking for loans? Did they hustle you for loans, in essence?

No, we always approached the banks. It was the other way around. We ... if we had a project we approached one or more banks to discuss that project with them. We never had a line of credit. We were driven by a project, not by some, some desire by a bank to entice it.

And the level of gearings that the banks were willing to accept, did you see a slippage in that up to 2008 over those years?

Well, we always had equity in our developments. We ... I wouldn't say there was a slippage, perhaps there was more competition. There might have been slightly less equity but-----

Well, I suppose I'm referring to ... to page 19 of your appendices, and you give two graphs. You give the O'Flynn Group, the value-to-debt ratio at 30 September '08 and on the face of it, Mr. O'Flynn, it would seem that the debt gearing levels were very high.

Well, sorry, that was at the end of '08.

Yes.

I mean, at the end of '08 we were well into the crisis at that stage, which started in '07. And even ... if you look at that, you're still talking about a difference of a few hundred million, I think, in equity, despite the downturn of '07 and '08. But if you go back to the earlier years, we would have been dealing with an equity ratio, excluding joint ventures now, of maybe 70%, 30%. Well, we had substantial equity on our balance sheet, in our company and, as I said in my opening statement, we had cash balances and we always applied equity to our ... to our projects.

You didn't find any one of the banks more aggressive than the other?

No, actually. There was a sameness about the three or four ... the three main banks we dealt with on equity, you know, lending.

And what do you-----

I would say that the different times, in different years, one was ahead of the other in terms of what they might charge.

And what would you regard as a sustainable debt-to-value ratio now?

Well, now or then?

Now. No, wait, both.

Sorry. I always worked on the rule of ... the old rule was two thirds, one third and I think we all got into the 70:30, and sometimes, perhaps, pushed it over the 70%, but we were always talking about a third, 30%, you know, maybe it went down a bit. Now, I would say that's not enough. I mean, we ... the old rule was that 70:30 was a good position to be. It served us well for 37 years in terms ... or thirty-something years at that stage in terms of how we operated because I don't think anybody, anywhere saw the scale of the shock that we were asked to take. So, we worked on the basis of a model that had served us well for decades but,-----

Okay.

-----all of a sudden, it was ... it wasn't enough, unfortunately, but, even in 2008, we still had substantial equity in our business.

And what would think should be the ... going forward, what would you feel is a sustainable level?

Well-----

Based on your expertise in that area.

Well, I would say that, you know, the banks today are very much down in the 50 ... 50%, 55%, and I think that's where it needs to be.

Okay. In the pre-crisis period, same period, did you or your management colleagues believe at any point that there was a property bubble was in the making, or did you generally rely on the soft landing theory?

I think, to be frank, we were always concerned about prices. We were ... in a way, we were pricing ourselves out of business because of the scale of price increases. That did worry us.

When you say "price increases", are you saying in land?

Well, I've heard previous reports of this inquiry. Land drives the price of houses more than anything else and the first rule of business was always to stay in business, but there was probably a time in the 2000s when we should all have packed our bags, really, because of the price escalation of land.

Now when-----

And we were making larger profits, but those profits were necessary to replace land because the land cost was going up so much.

And when ... what would you think was the period that you should have all ... what date should you have all packed up your bags, in hindsight?

Well, I think, in the mid-2000s, land was overheating and we began to ... it's important to remember that I've been through the '80s and the '90s in the UK and I've seen different difficulties, shall I say, in the property area. So, we were diversified in terms of geographic locations, but also in terms of development and investment and, like, we would have had €75 million rental income per annum; whilst we were in NAMA, for example, I think, somewhere totalling €260 million, €270 million was paid to NAMA. So we were ... we thought we had a good hedge because of the-----

Rental roll.

-----the rent roll, but, you know, against that, no one ever anticipated the scale of the collapse and, I suppose, prices ... when the average couple can't buy a house, you know, you know something is going wrong with your business model. But very little anyone could do about ... you know, do-----

Did you pull back, did the O'Flynn Group pull back at any stage coming up to-----

Well, we found ourselves losing out to a lot of sites, you know, which was a concern to us at the time, but I'm ... I must say, the whole planning situation is a huge concern of mine and has been for a long number of years. And it's not just today and I'm not looking back with hindsight when I talk about this, but I've a huge difficulty in that the price of land went absolutely out of all order but the lack of market marking ... matching up what was required to satisfy the market and what was being zoned-----

We'd-----

-----there was a complete mismatch, Deputy.

We'd Mr. Mulryan in earlier, you may have seen his testimony.

I saw some of it, yes.

And he said that, from '05 on, he reckoned that there was 30,000 more houses being built than the market required. So, was there a case of whereby that supply was well in excess of demand-----

I think-----

-----from '05 on?

I think there are two points to that. One is that the overall numbers were out of line with what should have been built. But we built a lot of houses in a lot of places where houses weren't needed. We zoned a lot of land, you know, in a lot of places land was ... shouldn't have been zoned. We put a lot of infrastructure into land, into local authorities where ... to build houses in places where they shouldn't have built houses in the first place. I mean, I've always concentrated on the metropolitans, but I was really, really taken aback by some of the developments that got zoned, and got infrastructure and got planning. You know, you have to have zoning, you have to-----

Yes.

-----have infrastructure, you have to have planning, before you get to funding an actual product. And ... so to answer your question, I don't have the breakdown of where the numbers of houses were built that should have been built.

Well, then on a final point in this question, what could have been done, we'll say, in that '04-'05 period, that would have cooled the market?

Well, first of all, I would have zoned more land. I would have matched up the zoning and the infrastructure to where houses were needed. Anybody like us, building houses since 1978, it was not in our interest to have house prices escalating to the extent they were, making super profits that we were putting back into the raw material, we were buying for new land. That is not a business model that can survive, okay? We thought we had a good hedge against it because of all the other activities and this ... We formed a group in 2006. We thought by forming the group we were doing exactly what should be done in case you had a downturn. We never ... maybe we all bought into the soft landing, somewhat, but no one could have anticipated a global crisis - the euro crisis. Because the-----

Did you-----

-----the mismatch between the banks' borrowing and the banks' lending. That was not understood by people like me, to the extent that it should have been. And I accept that as a mistake by me.

So did you buy into the soft landing?

I bought into the soft landing, by and large, because I never thought that the banking position could be as bad as it was. I always had equity. I knew that equity could be lost. Like, in a development, first of all, you have a balance sheet. But then in a development itself, you have a profit margin; that's the first thing that should go. And then you have equity in the company with ... but no one ever anticipated that the scale of the drop, which was no doubt connected, not to the oversupply, because there was very little oversupply, and I've been a long advocate of this. It was all down to the, you know, to the banking collapse and the establishment of NAMA. Because NAMA's establishment was meant to save the banking crisis. But sure, it expedited it.

Well, okay, that leads into NAMA. Did the NAMA disposal of assets and loans from your company's portfolio happen at the most opportune time to achieve the best return for your business and, more particularly, for the taxpayer? And can you please distinguish between disposal regimes for Ireland and abroad in terms of the way NAMA dealt with it? You might just go through it and a couple of points I want to take up with you.

Sorry, could you mind giving me the questions on their own again, please?

In simple terms right, do you believe - you've said it already, but just to articulate it - do you believe that the way the policy that ... the way NAMA went about disposing of your loans was in the best ... put O'Flynn Group in the best position and get the best return, the most opportune return to the Irish taxpayer?

Well, it certainly didn't put us in the best position. I think anybody who's been reading the press for the last 12 months would know that.

But Mr. Flynn-----

Going back-----

Yes.

-----going back to that, Deputy, the first point is NAMA ... we've been into NAMA ... now I embraced the NAMA structure with reservations, and that's no secret to anyone, because I made a lot of comment at the time because it was my business and my livelihood and everything else. But I went into NAMA on the basis that this was going to be a work-out vehicle. That we were actually ... they were actually going to identify people they could work with and figure out a plan to get us out of this extraordinary position that ... perhaps, we contributed somewhat to it but I think it was a ... banking was the origin of the scale of it. And when I went into NAMA, I thought NAMA was going to be work-out vehicle and we were going to figure out plans on working that out. I spent enormous time, as did my senior staff, working on a business plan of some couple of thousand pages, because of the nature and scale of our business but NAMA had no interest in that business plan.

What did NAMA want you to do?

NAMA just ... NAMA was a quasi-receivership disposal structure. That's what NAMA was. Like, I'm here to tell the inquiry, answer your questions - that's what it actually was. Because NAMA wanted me to dispose of my assets.

That's it.

But you did-----

I knew their plan. I could not repay the debt ever with the plan they had. I had a plan that by ... with a number of ... of inputs and a structure ... you know, a strategic plan, which was reviewed by FTI Consulting on behalf of NAMA, but I had a plan to repay my debt. They never engaged in that plan.

And would that ... would that have required NAMA to put an investment into your proposal?

Well, that's a very good question, Deputy, because it would have, but that's the nature of business.

But that's taxpayer's money.

Sorry, the nature of business is: we owed money. Some of those businesses didn't actually need ... needed very little money. Remember, we ... we had a big ... you know, rental income. But the reality of the situation was, if you put companies on hold for one, two, three or four years you're not going to get a return from the businesses that are actually involved in that period and that's actually what happened. I mean, they definitely gave us ... allowed us do certain developments, as they saw it or certain pieces of development, as they saw it. But the overall plan that we produced to repay our debts was rejected. And that's ... that was a watershed moment for me-----

Yes.

-----because I had come up with a plan. I wanted to repay everything. I'm very grateful for what the taxpayer ... for the State and the taxpayer, what was done, but my plan was to repay the money, not be told "Here's a plan, which won't repay the money and, by the way, you're responsible for it."

If NAMA wasn't set up, what would have happened to the O'Flynn Group? Like, you were very exposed, particularly in Anglo and other banks. What would have happened to the O'Flynn Group?

Well, I actually wasn't that exposed in Anglo because of the amount of rental income I had with Anglo.

Well, before your loans went into NAMA, were they functioning loans?

Yes, they were.

Were you repaying?

Yes, they were ... yes, I was.

Was there much interest roll-up on loans?

Well, sorry, I ... it's important to understand, interest roll-up is part and parcel of development. Where I had interest roll-up it was being rolled up. To this day ... and I've borrowed recently for development, from one of the pillar banks, and I've offers from both of them for development, there's interest roll-up as well, because that's how those loans are done.

So your loans went into NAMA-----

So there was interest roll-up on one hand. There was substantial interest being paid on the other loans on the other hand because of the rental income I had. Now, you must realise, for a year before NAMA became active, the banks were pretty inactive. So that was a period when a lot of loans went out of kilter and I can't, Chairman, give the exact details of every-----

I appreciate that.

-----but, by and large, I can tell you ... and I can come back if you wish, Chairman, I can tell you that we were doing what we were supposed to be doing. Now, we made decisions with banks not to continue developments that we had development finance for, because that was the prudent thing to do. We brought a lot of our developments to a convenient stop. There is no ghost estate attached to my portfolio anywhere. We put huge effort into finishing off roads, finishing off houses. People who had bought off us were actually not living in building sites. That was the effort we put in and we felt-----

And can I just-----

-----we felt we had to put in.

Can I just ... point of clarification, your personal loans were taken into NAMA, right? In terms of security for those personal loans, would it have any way involved the O'Flynn Group in terms of shareholding in the O'Flynn Group or-----

No, my personal loans, to this day is a bone of contention of mine. They should never have been in NAMA, because, because-----

Were they in any way, security-wise or anything, tied into the O'Flynn Group?

No. We had no ... I had no personal guarantees. There was no connection.

At all.

Yes. Like, as I said to you, I embraced NAMA. My only option at the time was take a judicial review. Yes, I took the best legal advice in this country and considered taking it. Not just looking with the benefit of hindsight and what NAMA turned out to be, I should have taken a judicial review against everything except the Irish land and development company, because I genuinely thought I was buying into a structure that actually was a work-out, was an asset management agency, as the name describes, but it was anything but that, Deputy, I can assure you.

And can I take it further? Do you have any idea of the level of discounts that were ... that was ... given on your loans when they went into NAMA? Have you any idea?

Deputy, I have no idea. I can't answer that question.

Well then, assuming when those loans were ... were initially mooted to be sold on to Blackstone ... I just ... you were reputed back in May 2014 as saying that ... that your ... that your ambition was to ... that the loans would come out of NAMA. Am I correct in that?

You're absolutely correct. Once NAMA rejected my business plan ... and at that stage ... at that stage and during that process I had made a lot of important concessions to NAMA, serious financial concessions to NAMA.

Once they had rejected my business and presented a plan that was unworkable, I would not repay my loans. At that stage, Deputy, I wanted out. And I make no secret of that fact because, as far as I was concerned, I couldn't do what I set out to do and I wasn't interested in implementing a plan that I had no faith in and I didn't believe in.

And at the time, just, I suppose, for clarification, Mr. O'Flynn, would you have been on a salary from NAMA as ... were you one of the developers that would have been on a salary from NAMA during that period?

Well, first of all, I wasn't on a salary from NAMA, I was on a salary from my company. All our expenses and all our costs were being paid by the company.

Okay. So your basic-----

If that's an answer to your question-----

Your basic contention was you were a functioning company, repaying your loans and whatever. Can I just ask you on one particular point, you state in your ... page 1 of your document you say-----

Which document now, sorry?

This ... sorry, on your statement itself.

Yes.

And you say, "neither the recession nor the banking crisis could fairly be said to have been 'caused' by developers." Can you expand on that? And in your view who ... it's the second last paragraph on page 1 and it says, "For present purposes, it suffices to record my personal view that neither the recession nor the banking crisis could fairly be said to have been 'caused' by developers." If not, who caused the crisis?

I have always said that there's no question there was too much borrowing. There was a lot of borrowing for projects that could not work and I had lots of experience of looking at projects that couldn't work. I don't believe that the banking crisis ... that this was caused by developers. I think we certainly, the borrowings in the property sector were an issue but the developers that I would speak of are not ... are the full-time, professional developers, who have been at it, in my case 37 years now and lots of others like me. But, unfortunately, every single person became a developer of some sort or other. Not every single ... lots of people became developers. And all of us got lumped in together. This is what happened also in NAMA. Everybody was ... they didn't separate the professional from the amateur, or from the people who got into the business, people who had no skills in the area, people who had no history of doing ... or, actually not able to work the assets, so to speak. So I don't think it's a ... we've taken a fair amount of criticism as a grouping and I'm speaking for the full-time professional developers. A lot of that has actually been caused by the way NAMA decided to demonise us at the outset, which is an extraordinary thing to do when you're taking over all the loans of all these people, to be overcritical of them. But I think the banking crisis ... it was a global crisis. It was a euro problem. And I think had the banks been able to withstand the shock that other countries could, I don't think we would be having this discussion that ... we certainly had some contribution, but we didn't cause it.

Do you believe it would have been a soft landing?

I'm sorry, I believe we have other issues on the property area. I'm not saying we didn't make some ... I'm absolutely, you know, appreciative to the ... of the support and I'm absolutely acknowledging that were lots of issues in the property area. But to put us there front and centre as the cause, the developer community that I speak for, I don't think that's a fair reflection.

Can I just bring it to the present, and you've been quite outspoken in terms of how future planning for building of houses and commercial ... the provision of commercial property and very much, a lot of that has been directed at NAMA. What would you ... what's the blueprint that you would like to see in terms of the next five years, as to what you believe should happen in terms of provision of housing throughout Ireland and provision of commercial property?

Well-----

And obviously, when you're giving that reply, integrate NAMA into your response.

Well, the first thing one should try and figure out, what does the market need? We should only ever be supplying market needs. There was a lot of market needs that never existed that people were trying to supply. At this moment in time I'm extremely worried about the supply of houses and the supply of buildings for industry. I am worried because, whilst I've read the Government's 2020 programme, and it's quite good, it says a lot of things, I don't see much implementation attached to it.

I see a mismatch in terms of the funding for the industry. There's a serious funding problem out there for the industry. Everyone talks about we need all these houses, we need buildings, we need everything. But, to actually address the issues, someone needs to do something about it and I, I can see prices again being driven ... I think the ... I think the, the cost associated with building, the development charges, you know, we need proper regulations, and I'm all for that but some of the standards being applied by local authorities are just not necessary and are, are not what's needed in a recovering scenario. Having said that, I'm not against, the regulations are essential. I'm just talking about the extra cost being put. Development levies need to be looked at ... the whole planning area is taking for ever. We have to get real about planning in this country if we're talking about playing catch-up on what's needed in terms of housing and FDI. We're lucky that one of the pluses of the ... of that period is that we'd a lot of buildings where a lot of housing of jobs took place, but they're running out. We, we have the ... trying to fund speculative development, Deputy, is next to impossible, even in, even in this greater area in ... the greater Dublin area.

Why is that, finally?

Final question, Deputy.

Because the banks-----

Just expand-----

Final question.

Why is that, what funding model should be put in place and what can you do to ensure-----

I'm only allowing one supplementary, Deputy. I'll bring you in in the wrap-up again then, okay? You're lead questioner, so you get back in.

Because the banks have had such a difficult time with property, I can understand their reluctance to go near anything with, where there's ... more speculative nature than they need to. The reality of the situation is that you have to create buildings before you get tenants. Buildings aren't going ... people aren't going to come from, you know, faraway places in the world and wait two years. You have to have, I've known in places that we've developed in Cork, we've done a lot of work with the IDA over the years and they've done phenomenal work, but they needed buildings. They need buildings. I go back to the time when they used to ... advance factory rentals because otherwise we couldn't fund it. We're back to those days again but, to answer your question, we need to identify how many houses do we need and where do we need them. We need to put infrastructure where those houses, and you know I ... I've been involved with lots of meetings on behalf of Property Industry Ireland, even recently with various Departments ... in Dublin and recently with the Cork development forum. I'm really worried about the fact that there's scarce money to go around, we're not putting it where development is urgently needed to supply the housing numbers and the offices and factories that are needed. So you have to identify first: what's the market need, where is the need, you can't give some, a bit to everyone everywhere in the country and you have to supply it at a cost that works. Unfortunately, some of the costs associated with development today, the cost of funding is one of those costs. I think the development ... the banks are going as far as they can go. I think there's only a certain amount of equity around, a lot of the equity was easy to get for investment properties. It's more difficult for, for development ... I know that more than anybody else as, as well as anybody else knows that. So, I think we've challenges there in the cost of funding, we've challenges on the costs associated with planning, development levies and some of the regulations.

We'll return to that again in a moment, Mr. O'Flynn, but I do need to move on. Senator Marc MacSharry.

Thanks very much, and thanks, Mr, O'Flynn, for being here and sorry for delaying you so long this evening. From your statement that you've made political contributions to various parties, in your opinion was there any relationship between political contributions from the property sector and the regime of property-related tax incentives and reliefs, such as the urban renewal scheme in the pre-crisis period, and were such tax measures as common in other countries where you had business interests?

Well, I made contributions to parties and there's no question about that and I've always supported various approaches for contributions. There was ... I never made a contribution to connect with and look for anything from any politician, ever. So, I don't see any connection there but to go to the, the key part of your question, I think tax incentives are very important for certain types of developments. I accept some of the tax incentives in this country probably went on longer than they should but I was involved in urban renewal, I would say urban renewal is still necessary in parts of our cities. I think we've, we have to have more people living in cities and we have to find ways of buffering the, the brownfield or, or, you know, the brownfield cost of building and the issues around that.

I mean there are large parts of our cities that are not viable, some of them were not viable in the boom years and that's the blunt reality. I've been involved in student accommodation schemes in ... back in the early '90s. Ireland led the way, we created a very big student accommodation business in the UK, in Germany and Spain. Ireland led the way with accommodation, with student accommodation because of tax allowances and it helped universities enormously and I read in the paper, I think today or yesterday, that one of the universities - I think our own man from Cork - was calling on further tax incentives. We have to provide accommodation if we're going to feed our universities and I think universities are very important. So the point I'm coming to is, there are some tax incentives which would be very necessary and very desirable today.

Just so ... for absolute clarity, you wouldn't be aware of any demonstrable quid pro quo for contributions or donations?

Senator, I can assure you absolutely ... I've been part of many delegations and have met politicians in all spheres of Irish society and I do not ever connect the two.

Okay and just a last question on this kind of stream, if you like. When contributions were made in ... by the firm or you personally or whatever, were they always solicited by way of, you know, fundraising activities by politicians or political parties, or, for example, at election time would you unilaterally decide "It's election time, I think I'll make contributions"?

I think to answer your question, by and large, they were ... we were always approached to buy a table, buy this, buy a golf outing or something or other, and they were all public events which we openly supported and I don't ... I can't recall getting up in the morning deciding to contribute. But if I was approached for that, or for many other causes be they charity or otherwise, I was rarely found wanting.

To the best of your knowledge, you wouldn't have kind of taken your own initiative and said, "Well there's an election coming up I think I'll ...".

No.

Okay, that's fine. From your perspective, do you regard the valuation methodology applied in the pre-crisis period as having been sufficiently robust and representative? And if not, what is your view in relation to any deficiencies in the valuation process in the pre-crisis period?

You mean in the development sector pre-----

Indeed.

Look ... the valuation is not an exact science, it is never meant to be. I think the valuations turned out to be so wrong, one would have to question how valuable they were. But I would also have to say that you have to have a valuation process in an industry like ours. I think the valuers, like ourselves, have learnt a lot from the crisis, I think, going forward. Values tend to be above the market when the market's going up and below the market when the market's going down. I think you won't see too many strong valuations from the experiences they, and all of us, have had in recent times. But to answer your question overall, I think valuations were too strong.

And then in the crisis, well I say ... let's ... rather than the crisis, in the stronger growth period, say that's 2005-2006, into 2007, did standards drop in any way in terms of the approach by valuers, in terms of the robustness of loan to value? Or was there any sense that valuers were facilitating developers perhaps to get a better loan to value ratio from their perspective rather than the banks-----

I can only speak of my own experiences and we always dealt with the main companies when it came to valuations and valuations were nearly always a requirement, a precondition in the bank borrowings. I have never experienced anything other than proper, professional approach and I dealt a lot in the UK as well and, I must say, the Irish-UK model would have been very similar.

Yes, and would any valuer have ever, if you were putting together a project and maybe you had your own view, or your project team had their own view of a value, did the valuer ever say to you, "Sorry no, that won't work, that doesn't work, that doesn't stack up"?

No, absolutely ... even ... if the valuer wouldn't always agree and that's fine too. But we had our own process for evaluating, you know, a project. And we never brought in valuers except as a banking requirement, because we would have had our own skills in the various offices that we have, because we don't operate at a distance from any of our projects.

You said there that in nearly every instance a valuation was required. Can you outline a case or two, perhaps, where, in borrowing, a valuation was not required?

Chairman, I have to check, but, by and large, it was a box that we always ticked. And, you must remember, if I was to go forward with a development, I would have to be sure of my sales prices and we would generally ask ... consult with external agents, and we would always work on the basis that you might be asked to value this. So there was no point in giving us a value unless it was going to, you know, follow through.

I suppose ... it's not in any way to question your own good business model, it's rather to get a perspective because we've had other evidence that would suggest that, on occasion, financial institutions did not seek valuations. So, could I ask you, without being specific to any cases, are you aware of any loan for a development purpose that was extended, to you or anybody, without a valuation being insisted upon by the financial institution?

I can't say that I am, to answer your question, but I've no doubt loans were extended where banks took a view of other security but ... and that I would be aware of, because I was often puzzled by the prices paid, so ... and puzzled by the prices paid, there's usually some reason why a bank can lend more than what's-----

In your assessment, did NAMA save your business, or not? And are there features of NAMA's engagement with your company that you regard as particularly helpful and any as particularly unhelpful?

Well, that's a big question. I've already outlined a lot in my statement ... and mentioned in my opening statement. I think the concept of NAMA might have worked had they embraced the industry and those who were capable of working through. I didn't think it was the right concept. I put into my statement ... I made a submission, I felt there should have been a bad bank in each bank. I think if NAMA was a ... overall credit-controlling structure, it might have had some chance but the kind of skills that NAMA ended up with ... for the kind of undertaking they had to carry out, it was just an impossible ask. They didn't have the skills to deal with companies of our scale or of the type of product we were dealing with. It became ... it wasn't an asset management company, it became a quasi-receivership vehicle.

So just ... in the word, then, helpful or unhelpful?

Helpful in that it became a temporary home whilst the banking system was not operating but very unhelpful when I realised that we, as the company executives with the knowledge and know-how, our views and our proposals to repay debt didn't matter.

In your opening statement, sorry, in his opening statement, Mr. Daly's comments ... it's okay to make reference to previous evidence isn't it?

Yes, once you're not getting into the business of-----

Sorry, I am quoting from you, I'm just confusing myself slightly for a second. In your own opening statement, you said that "Mr. Daly's comments illustrate NAMA's lack of understanding of the development sector and I take exception to the generalised suggestion that diversification can only be explained as an unbridled and irresponsible "compulsion to purchase-----

It was actually Mr. McDonagh said that. I corrected it today.

Was it, okay, sorry, Mr. McDonagh ... "compulsion to purchase more", you said. Can I ask, did NAMA have an expertise or skillset deficit, to your mind?

Well, I think it had. I don't see how NAMA could ... like, the banks had an expertise in banking and financial ... albeit everybody had difficulties, but NAMA didn't have the asset management-type property experience that was necessary and it became very clear that the programme was to dispose of assets and there's been an extraordinary amount of assets that were sold at totally the wrong time. But on top of that, a lot of assets lie dormant. We weren't preparing planning permissions, we weren't working on preparing for the shortage that we now have today because nothing happened for a number of years.

So ... if the work was done in that period, which was all part of our plan and I'm sure the plans of others, well, then you would have a much more valuable portfolio today. But you've portfolios now being sold where pretty much nothing happened for a number of years. Like, the nature of our business wasn't a collection of assets, it was a business. You can't let a business ... you have to keep working a business and I am ... we have a sound business plan.

Did you have a sense that ... you were mentioning earlier about you had gone with your business plan and so on and this was rejected ... did you have a sense that because you were the developer, because you were the business owner, that, in some way, because you were the maker of the suggestion or business plan that it was going to be wrong anyway?

Well, we had it professionally assured by an outside company. So, we didn't just make it up ourselves in a room and say "NAMA must agree with us."

Yes.

So, we employed and engaged with one of the top accountancy firms in terms of assuring and sense checking our plan and proposal. So, it was something that was-----

So, it is your-----

-----properly thought out, now.

Yes. No, I appreciate that. So is it your assessment that it wasn't adequately assessed on the other side?

Senator, I don't think it was assessed at all, really.

Okay. Do you think-----

There was another plan in play to dismantle the people in the industry and that plan ... I was told at a very early meeting by the senior executives, "We want disposals. We don't want plans. We don't want development. "We don't need any more development", I was told at one meeting by a very senior executive and I said, "But this is a business that I've been in for an awful long time and we will need development again." And I'm on public record of saying that for a number of years now. We had too much development in many places but we have ... we had a short ... we never oversupplying. We'd wrong product at times and I'm guilty of that, partly driven by planning considerations and partly driven by bad timing on our part. I'm the first to accept to that but, by an large, we shouldn't have stopped the development industry like we did. We shouldn't have panicked either, like we did. I'm sure Europe ... we'd have found a way with Europe if we had proper approach to a lot of companies who were capable of working out their product and supplying the needs of an economy that was in difficulty but had a careful plan to return to ... which it has done and which we wanted to tie into as an industry.

In your opening statement, you said, and I'm quoting, "I firmly believe that, from the outset, the Board of NAMA lacked experience in many important areas but most notably [I just said there a second ago again] in the area of asset management and development ... NAMA had embarked upon a strategy of disposals which I believe ultimately cost the State dearly." Can you expand a little bit on this?

Well, maybe on reflection, Senator, I'm being quite, maybe somewhat unfair to the board. Maybe it's the senior executives I should have more carefully described that as but I do think the board lacked property experience also. I think the senior executives absolutely lacked it.

Okay. Well, put it another way. Let's just say NAMA, as opposed to board or executives, I mean do you feel that ... I mean, would it be correct to say that they embarked on a strategy for disposals which ultimately cost the State dearly - as an entity as opposed to individuals or board or executives or-----

There is no question, Senator. By anybody who understands the Irish property businesses and companies that there has been an incredible amount of money lost on the structure that was set up to save the banks but it did the opposite, to work out the industry which it never actually did and we now have shortages and rising prices, which is a concern to everyone, and very few structures capable of actually delivering product which is ... you know, to attract the new money that's needed for development, you need platforms, you need businesses because, you know, and I have recent experience of this. The first question that all of these equity providers who might look at development will ask is, "Who is the company? Do you have a structure? Is there someone to receive the money?" So, all of this happened under NAMA's watch. That's my answer.

Did your experience in disposals that ... did NAMA, do you think, or not, look to the assets with the stronger or the greater equity to dispose of first or to move first so as to raise capital for their own works rather than - and you had mentioned earlier - looking at the longer-term picture of what was viable development?

Well, some of the overseas assets that were sold quickly, and I resisted that, were extraordinary. We knew in the industry, those of us operating out of London ... there were very good examples in London. Some of the assets now that are maybe been brought to the market in Ireland are actually going to do well, but had they been sold back then like others were, you'd have had the same result. So it's extraordinary that we were in such a rush to sell good assets, a lot of them good income-producing assets, and, at the same time, hold the borrowers responsible for the outcome when the timing couldn't have been worse. I think in a banking situation ... and I have been through the banking issues in the past in terms of tough times be it in Ireland and in the UK and overseas. We worked through ... we paid all our money back. It didn't happen today or tomorrow but it was always the plan was you borrowed the money, you paid your money back and that's what companies like I wanted, like us wanted to do.

I don't want to panic the legals on the next question so I'm only going to be questioning in a very general sense, okay. I'm going to quote for you and then I'm going to ask a question but in a very general sense. And you said in your opening statement:

NAMA was required to have full regard of the legal rights of those who were to be affected by those powers. Regrettably, in my experience, it did not always happen.

So not speaking specifically, but in a general sense, which legal rights of developers do you believe, in general, were affected by NAMA's operations?

Well, it's a very general-----

I'll assist you in answering the Senator's question. Is ... without finding yourself in a space of making an allegation that would be ... well, it might consider an abuse of privilege or something like that I would maybe, if you could speak in general terms as to what the approaches were. Once you don't make a statement. Okay, please.

I just want to go to the section of the statement you're referring to, Senator.

Yes, I've, kind of, my own notes done out so I can't tell you what page it's on, I'm afraid.

Okay, that's fine.

It's on the screen, great.

Highlight the section. It's hard to read there sometimes if it's at an angle. Yes, it's the ... item 4, the role of NAMA.

My screen isn't operating so I can't help.

Okay, I have it now.

You've got it.

I have it on all counts now. So the paragraph you are referring to is the first paragraph, yes?

I couldn't tell you; it's not in front of me, unfortunately.

"... was required to have full regard to the legal rights".

Yes, it's the first paragraph I'm told, yes.

There is no doubt in how NAMA operated, the extraordinary powers vested in it were used to make ... to get commercial solutions from borrowers who didn't have any access to the courts and who were not able to defend their positions. Now, it's one thing to give extraordinary powers; it's another thing for those powers to be used, not just in a legal sense, but in a commercial sense, and I think the property rights of companies and individuals was taken away by the fact that people had no choice. It was a case of if we didn't accept what was being suggested, another solution would be found for your borrowings. I think the rights of the individuals and I don't want to go into the technical side and I don't want to go into any of my own. But the rights of the individuals and companies were ignored in the application of their commercial power, not to mention their legal options.

Okay. Chairman, you can guide me on this one. I'm going to quote again and then ask you a question, but if I'm veering offside, you can let me know because I am not sure. Again, in you opening statement you said:

The O’Flynn Group co-operated fully in all of its dealings with NAMA, but there was no consultation with the developer when the loans were acquired; a strong business plan was rejected without explanation; and there was a leakage of very sensitive information into the public domain.

What leakage of sensitive information was made into the public domain that you referenced in your opening statement? And do you believe the leaked was-----

Well I-----

-----deliberate or accidental?

It was deliberate.

Okay.

And it's now the subject of criminal investigations.

Okay.

Okay. We're all right.

Is that all right?

Yes.

Okay, that's all I wanted to know about that. Very finally, three minutes ahead of schedule: for the taxpayer, do you believe that in NAMA, the public have got value for money?

No, I don't.

Thank you.

Thank you very much. I'll just take a couple of questions myself there, Mr. O'Flynn, and it's been indicated to me that some members might want to have a very short break, a comfort break, at that time. Mr. O'Flynn, would you describe yourself as a developer or a builder or is there a difference?

It's a good question, Chairman. It's a question I'm hearing more recently. We are builders and developers, in that I think to describe ourselves only as developers isn't doing justice to the amount of other skills that we have in terms of project management, construction and development management. And I think the origin of the business was building and developing. In the '80s, there was one profit. That was a combination of construction, project management and developer. Unfortunately in the years leading up to the crisis, everybody became a developer and all the other skills were hired in. I think we're going back to the model where unless you have the in-house structure and ability, I don't think the banks will want to know any more, and I don't think if the banks will be interested, you won't be able to borrow money.

I want to focus on the building aspect in a moment. Were you a land speculator at any time?

No. We bought land as raw material to build houses.

Okay. And did you speculate at any-----

I don't think, Chairman, I have ever sold land as ... except maybe I ended up with a surplus site but I can't even remember one of those offhand, no.

Okay.

We always built on our own sites.

On the building side of it, I want to move to the present, and then maybe work a bit backwards and we'll go back into NAMA and all the rest of it. In testimony recently with the former Taoiseach, Bertie Ahern, last week, one of the issues that he repeated over and over was to increase supply, increase supply, during the crisis years. However, we know that even with the increase in supply between 2002 and 2007, affordability was an issue for a lot of people and that people on the average wage saw the average price of a house go up severalfold, in some cases ten to twelvefold over a period of time. In terms of a construction building programme at this moment in time, where are we with affordability? Is it possible, to your mind, that we can build houses that are somewhat in or around maybe four to five times the average industrial wage and provide people with an average house at that cost?

We are struggling to supply because the cost of building is higher than the sales price, so we ... and I think one of the problems of those years is that there was too much credit available to people to buy houses and there wasn't enough serviced and zoned land to supply where product was needed.

Okay.

So it was a double-edged situation. I think there is viability coming back in lots of Dublin, parts of Cork and other cities.

But at affordable levels is the question I'm asking, Mr. O'Flynn? Is-----

I think we've a cost-based problem. I think we-----

Maybe if I can ... maybe if I can reshape the question?

No-----

There's a difference between returning to a sustainable construction programme, where it's 12% of the economy, as opposed to 24%, but there is a question as well that has to be put, that we, we ... recovery does not mean prices of back in the heady days of 2005, 2006 and 2007?

Chairman, to answer your question, I think we've a cost-based problem, because we can't afford prices to go up too high. They need to recover more, a little bit more on the sales side, but I think on the costs side, on the VAT side, for example, I mean, there is ... on Part V, social and affordable housing, I was a big critic of not having the integration but having the costing loaded onto the private mortgage holder.

I think the whole ... there's up to 40% of a house, goes back to the Exchequer, in some form or other. To answer your question, I think we have a difficulty on the cost side, and, I think we need some more help on the sales side. But, it can't be all on the sales side, because, if your average couple - and we knew this was happening - if your average couple can't-----

This brings me to my next question.

-----buy a house, you have a business that's going nowhere.

Okay, and-----

We won't be able to fund it, so we have to look at both sides. This is my difficulty with Construction 2020. There's nobody looking at, how can we come up with a plan to build houses that people can afford. We're not dealing with it.

And by, by the mid-2000s that's exactly where we were, in that the typical Garda, nurse, or whatever, were not able to afford to buy your product, and-----

When that happened-----

Can you just hear me out a second?

Sorry, Chairman.

Thank you. The State, through Part V and other measures, as you mentioned, made interventions and, in the Cork region, that both you and I would be familiar with, we saw affordable housing which is social housing, which is subsidised to allow people to have the ambition realised to buy a home exceeding €200,000 and so forth. So, on the basis that there was an affordability issue, as you just mentioned, did you, at any time, spot that affordability issue in the 2000s, and at any time did you adapt or change your business model or talk to the banks about it?

I certainly realised we were pricing ourselves out of business, for want of a better description. I probably expected prices to level off for a long time. We were fortunate in that we were able to build, project manage and develop, but others couldn't. I definitely would have said it many times to ... at meetings with Departments, which I often attend - I attended some in the last few weeks, discussing this very issue - and, certainly would have said it to the Government of the day as well, because, we were ... I would have regular interaction through the CIF, or, in recent times, more with PII, about the difficulties of having a business model that's sustainable, fundable, and that'll deliver a product.

Okay. Going back into the future, again, is there a Rubicon that gets passed, that when the average household couple earnings ... that the price of the average home that would be in their affordability range passes a ratio point that we have an unsustainable model again?

I think we're fast going down that road, unless we have a serious look-----

In the new building market, now.

Yes, unless we have a serious look at the cost base, Chairman.

All right. Mr. O'Flynn, there was a nine-month time lag from the announcement of NAMA to the enactment of the enabling legislation and a further few months before business loans began to be transferred from the banks. Now, you've spoken in general, but I just ... this specific aspect of it, did this time lag have any particular effects on your business, and, if so, please elaborate?

It had enormous effect on our business in that the banks weren't able to operate, NAMA weren't fully in play, and we were left in a situation that we were between both, and, for a long period of that time, NAMA had to approve decisions that the banks were making. It was just ... it was ... it really did exacerbate a bad situation, and that's why I've always felt that, had a solution been found connected to the banks, you would have saved all that time, and you would have saved an industry that was in total meltdown.

Mr. O'Flynn, related on the NAMA operation again, NAMA adopted five approaches for managing debtors. Basically, there was a menu of them there, about five approximately. One was full loan restructuring;, two was partial loan restructuring; three was disposals links to key milestones; four, agreed disposable programmes; and five, enforcement. Typically, one of these approaches was applied to a debtor; if not, maybe a menu of them. Were any of those five approaches taken with you, collectively, altogether, or one or two of them?

I think you are talking about one or two of them, or a combination of them, that were put back to us as, "Here's the prescription, you need to take it".

Okay. And, in taking those approaches, would you have considered them fair, benign or adverse?

Look, I didn't expect NAMA to be an easy place for anyone. I did expect it to be commercial. I did expect it to be more understanding of the nature of the businesses we were in, and I did expect it to want to engage with a strategic look forward. It didn't have that, and I don't think it ever sought that as its remit, to be fair to some of the board and people in NAMA.

Perhaps there was a disconnect there between the Government and NAMA.

And on that broad range of, sort of, operations, because I ... with trying to comprehend the complexity of such a situation going in there ... and there are so many parties to it and so forth - banks, your own organisation, subsidiaries and so forth - and then debtors and creditors and everything else, was there any time during that period where NAMA gave assistance to any creditor issues that you may have had during your involvement with them?

Any assistance NAMA gave us on creditors we provided security they didn't have-----

Okay.

-----previously. And I said it in my earlier remarks to Deputy O'Donnell that we ... we weren't found wanting, even though we didn't have the various companies cross-secured. But, at that stage, I understood we were dealing with a different structure to what it turned out to be.

I'll move on to the whole, sort of, exiting of NAMA in a moment but maybe if I can just get a picture. When was the last significant big project that you undertook where you borrowed significant sums prior to the whole business product going south?

Probably the Elysian in Cork.

Pardon?

Probably the Elysian.

Okay.

Just came to completion right at the ... as the market disappeared.

Okay, and what was the cost of that development, about-----

Over €100 million.

Okay. And had you ... were you commencing other developments in and around that time where you had sought funding as well?

No, we put a pause on our housing schemes that we were developing at that time.

Okay.

We finished off houses that were under construction. We brought other houses to a convenient stop and we generally, what I would say, made sound commercial decisions as regards what to finish and what to leave, and we brought all our estates to a completion that any residents who bought were able to live and not feel they were living in a building site.