Chapter 26 RECESSION
the news from the other side of the Atlantic was not encouraging; according
to the American National Bureau of Economic Research the US economy T
had been in recession since December. That information meant nothing to Nicole
Kavanagh. In her luxury penthouse apartment overlooking the Guadalmina Golf
and Country Club golf course, a few kilometres from Marbella, she had little to
complain about.
Skynews was Nicole’s only permanent link with home as she slowly adapted to a
new life, far from Epsom in suburban England, in the comfort of her new and
spacious penthouse apartment in Spain. Of course she returned to the UK every
few weeks to see Ryan and Sarah, her grown up children, to meet her accountant
and keep track of her business affairs.
Her life in Marbella, whatever the troubles Spain was experiencing, was that of
leisure and tranquillity compared to the outside world. She recalled her grim
sojourn in India the previous year, a holiday that had ended at the Taj Mahal Palace
after fleeing from a terrifying cholera outbreak in the small tourist resort of
Kovalam in the south of Kerala. A few months after her return, she had been
shocked by the terrorist attacks on the very same Bombay hotel, transmitted in
real-time for Skynews viewers. She remembered her feelings of horror and more
guiltily a sense of schadenfreude. It was a reminder of the bombing of the London
subway in 2005.
No one was entirely safe from such abominations. Terror had struck Spain in
2004, with the terrible attack in Madrid; described to her by other expats, a tragic
event so often glossed over by the media back in the UK; two hundred Spaniards
had died after Islamist extremists exploded their deadly bombs in crowded
commuter trains.
But she was becoming inured to such alarming events, in the same way as she
brushed aside the sombre forecasts reported daily by television commentators
concerning Spain and the economy in general. Nicole had escaped the crisis in
London by the skin of her teeth, selling her large house in Epson at the peak of the
property boom, and not only that, she had also miraculously avoided the disaster in
the Spanish real estate market.
At least her condo had been completed with few of the problems that bedevilled
Spanish property construction permits, though there had been a stressful three
years of wrangling with the builders and their agents. It was now her home for a
good part of the year, fully paid up and beautifully furnished with ample space for
her guests.
Things had gone horribly wrong for many Brits in Spain. After three of decades
of prosperity the post-Franco boom was over. Spain had matured and its economy
resembled that of its northern neighbours. Thousands of Spanish workers were
losing their jobs with the country’s unemployment rate one of the highest in
Europe.
The Spanish construction industry, which had accounted for almost ten percent of
the country’s economy, had collapsed with numerous property firms, and most
notably Martínez, going under. The drama that had started in the construction
sector had now spread to the entire economy, though, surprisingly, its leading
83
banks were still in relatively good health, provided Latin American did not go
belly-up.
The Spanish property market was burdened with more than one million unsold
new homes and Nicole Kavanagh was keeping her fingers crossed, because if ever
she was forced to sell up it would be at a considerable loss. She was however an
optimist and she knew when spring came around in early March, as it did in
Marbella, life would be gayer.
Although Nicole was pleased with her new home, its value was now much less
than the price she had paid for it. As always she calculated in pounds sterling, so
whilst the price had fallen in euro terms, the difference she reasoned was at least
partly offset by a twenty percent rise of the euro against the pound.
Beyond Nicole’s narrow but comfortable world, the situation in Spain was slowly
going from bad to worse. Unemployment looked like it would soon reach the four
million mark with one quarter of the country’s total work force out of work. The
collapse of the construction and housing sector had begun to bite deep with
developers owing over three hundred billion euros to the banks, a sum equivalent
to a fifth of the country’s GDP. It was a certainty that many of the loans would go
bad as borrowers were stretched to breaking point.
She was oblivious to the fact that Spain had as many unsold homes as the US. In
spite of the constant flurry of bad economic news her golf pro was still smiling; he
had invested an inheritance of several hundred thousand euros in shares of Bankia,
a Spanish bank. It was his favourite talking point and with each lesson he
announced the latest market news to Nicole. Bankia was an exception, its shares
had, for the moment, weathered the storm and dividends were paid like with the
regularity of a Swiss watch. What Jose-Luis ignored was many Spanish banks, and
perhaps Bankia, were not writing their property loans to market value, in other
words the real risks were hidden in deep their books.
All that bad news seen from the tranquillity of her penthouse terrace, which
overlooked the golf course with a spectacular view of the mountain scenery
beyond, was somewhat abstract. She was far from being affected by the crisis,
though in terms of total assets her net worth had suffered a steep fall, due in part to
the value of her London properties, some of which still had outstanding loans. She
had hoped to sell them, rid herself of the loans, but that was no longer possible;
reasoning the crisis could not last for ever, she resigned herself to having weather
the storm. Nicole was right, the storm could not last forever, but it was certainly
going to last longer than she expected, or for that matter anyone else, much longer.
Her more immediate concern was a man. She dreamt of finding the kind of man
who could take her under his wing, who could provide her with companionship and
protection, a man with his own money, not a sponger. She was fifty and a good
looking woman, even if she was a little overweight; who wasn’t these days she told
her girlfriends. Whenever Nicole looked in the glass, that is to say frequently, saw
herself as being no different physically to the average English woman of her age.
The difference however was she could afford to dress well and pay for the kind of
84
beauty care that most others could not afford.
Lord Edenderry, a minor peer, fit the role. He was just the man for Nicole, at least
she thought so. Guadalmina Golf Club Villas had been developed by Martínez
Construcciones and Edenderry had promoted the sales from the UK end. His
business had been to find buyers, in the majority British or Irish. After the collapse
of Martínez, the appointed liquidators organised a fire sale and the golf course
development was sold to a property group owned by the Irish millionaire Brendan
Allen, whose group operated in Spain under the name of Inmobiliarias Córdoba.
Allen hoped to recoup his investment by renting the unsold homes to British and
European holidaymakers, and Edenderry, also an Irishman, was only too happy to
find another partner. He was one of the many penniless Irish lords who, according
to the brief citation in Burke’s ‘Landed Gentry of Ireland’, bore a hereditary title,
which he monied, like many of his kind, by bringing the kind of prestige that naïve
investors, especially foreigners, appreciated. It went down well back in London
when buyers like Nicole talked of her titled friend: Lord William, the thirteenth
Earl of Edenderry. The reality was quite different, the Earl was considerably less
well-to-do than Nicole, he was in fact in dire financial straits; his family’s already
modest domain had been sold to pay death duties when his grandfather, the
eleventh earl, died and what was left from the sale of the property seemed to have
dwindled to a mere pittance as Edenberry’s property investments went awry.
Edenderry, always impeccably dressed in a Savile Row pin-stripe, looked the
image of a City businessman. With his upper class accent he smooth talked
potential customers, certain of whom were wined and dined in prestigious hotels
and restaurants in London. Camping his role, he liked to tell prospective clients
how his father, once a London stock broker, being told his clerk lived on an estate
in Romford, replied, ‘How splendid. Does he keep horses there?’
In short, Edenderry was a salesman and his clients, neither widows nor orphans,
and not from Romford, were mostly better off buyers seeking a property in the sun
at the end of a successful career in the UK or overseas, and by definition worldly.
Business transited by a City mortgage broker named Temple Finance Brokerage,
which was now suffering from the credit dearth. As a friend of a lesser cousin of
Fitzwilliams, Edenderry developed privileged contacts with a Dublin mortgage
manager at the Irish Netherlands, and during the good times put a lot of business
his way.
Edenderry had taken advantage of his position to invest in Dublin BTLs, thanks
to highly leveraged mortgages. He was no different to many small Irish investors,
naively believing he was onto a good thing. On paper it looked good, in reality he
had fooled himself into thinking he was a man of substance. By buying BTLs in
Brendan Allen’s property developments in and around Dublin, and more recently
buying off-plan in the vast Pembroke new town project, Edenderry had unwittingly
put an end to the dream of recovering his families past prestige.
