A Halloween Horror Story

Happy Halloween!

I don’t think there’s a person out there who doesn’t have some kind of horror story from their working life. From the bum-clenching, oh-god-how-awkward cringey stories that are really quite funny, to the truly terrible things that nightmares are made of.

Now, it would be easy to only focus on success, and the fantastic aspects of real estate and property development, but the reality is that things can (and do) go wrong, so this week, I want to go back to 2006 and share with you the horrific tale of my worst ever property deal.

Dream locations

Picture the scene – Southern Spain in the mid-noughties. I had a lovely holiday apartment, a great apartment in a posh area, down on the marina. Behind it, there was a huge piece of land, which had works going on.

I wanted to know what would eventually be built there, and after some inquiries I found out that it was a going to be massive promenade, with residential and retail units.

I figured I knew my way around retail and had this incredible vision of what it could be: a long, beautiful promenade of shops on one side, yachts moored on the other side – the most spectacular luxury fashion location.

I told the developers what I thought would work, but they weren’t into it. They planned to sell off units one by one, which I though was a bad idea: what if something cheap or tacky came along? I saw fashion houses, not pound shops! They told me that if I wanted to create something like that myself, to go for it.

Running with it

I decided to take the concept and promote it, taking me off on a big international roadshow, meeting major brands like Ralph Lauren, Gucci and Louis Vuitton to sell them on it. I felt like such a big deal, walking into huge meetings and talking up this amazing concept. I was head over heels in love with the whole idea, and had visions of myself as some kind of local celebrity, the guy with the big shopping centre who’d had an amazing vision and built it from scratch.

Now, lovely big retail centres cost money, and this was no exception. To take the option and scope out the feasibility of the whole thing I had to pay €600k, and if all that checked out, I’d need to raise total project funds of €42 million, 12m from me and my investors, and 30m from the bank.

The nightmare begins

So, in the week that the agreement to buy the place was signed, to buy a centre that was still under construction, Lehman Brothers collapsed, and financial markets started to implode. ?

All of those luxury brands I was in talks with pulled out, one after the other. They had agreed to move into the development on the basis of other luxury companies going there, so once one went, the others did too.

Within four months, every single one of the tenants I’d spent months assembling had pulled out, so I had an amazing 500m long waterfront retail centre with 42 units… and not a single tenant for any of them.

The real horror story

To make matters worse, not only had I moved my entire family to Spain, so that I could put all my attention into pulling this deal together, but all my projects back in Ireland also began to suffer. Then, the bank pulled their funding. I started looking in Dubai: most of the traditional banks were out of business, but perhaps I’d be able to find other wealthy investors.

I started spending weeks at a time abroad, leaving my wife on her own to look after everything whilst I was off trying to save the day. It all started to fall over: buyers starting to pull out of deals and banks starting to pull the funding they'd already agreed, other banks chasing me to repay existing loans, and investors calling for updates every day. It all became too much.

Then, the absolute nightmare scenario: the bank pulled their loan on my home back in Ireland. They used our move to Spain to suggest that the house in Dublin was now a second home. In the end they forced the sale of what was always intended to remain our family home.

Now, if your wife is angry at you for being away a lot, try adding the loss of your beautiful family home into the mix: it was the end of our marriage.

The end of an error

In the end, I spent about a decade trying to salvage this deal, but eventually, the Spanish commercial courts ordered that the property was to be handed back to the original developer, with a 100% loss of the 12m capital that we put in (3m of it my own). Obviously, I feel bad about my investors losing money, but there were far worse losses: the collapse of my marriage, time away from my children, other missed opportunities, all of that sacrifice had been for nothing. ?

But I learned some lessons!

Lesson 1 - Keep your ego in check

Never allow your ego and your emotion to rule your decision making. You have to stay rational and get rid of any kind ego stroking. I pictured myself as a big deal, a local celebrity, and that kind of thinking has no place in any kind of deal.

Lesson 2 – Don’t get spread too thin

Don’t spread yourself too thin across deals and jurisdictions - in this case I had so many projects back home in Ireland alongside this major Spanish project. It’s hard enough to manage one big deal in a crisis, but having multiple deals in multiple countries just made it impossible.

Lesson 3 - Don't go all-in on a deal

Never paint yourself into a corner. Don’t get yourself into a commitment that requires everything to work for you to survive. Avoid deals with a binary outcome – either a total loss or a win – with no in between. If this deal had gone well, I would have made millions, but I never really considered what I could (and did) lose.

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15 years on and I've lived to tell this tale which I think makes for a pretty good story. I still love the real estate industry, despite all that stress, and I would recommend people get into it… but be aware of the pitfalls!

I didn’t know what I didn’t know, so to avoid falling into the same trap, find out where your knowledge sits by taking The Property Investor Readiness Quiz.

Taking no more than 4-5 minutes, you’ll be asked 23 questions to assess you on your knowledge, your mindset and your resources. At the end of the quiz, you’ll receive an email with a personalised report providing insight and suggestions.

It’s a great way of getting an objective assessment of how you rank as an investor and will provide you with links to useful resources – try it now!

https://eliteproperty.scoreapp.com/

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