Vast scale of operations of a State agency vital to Ireland's recovery is disclosed in a timely and transparent way, writes SIMON CARSWELL,Finance Correspondent
FROM ZERO to a working State agency with €72.3 billion in loans and a staff of 150 people in just 20 months is quite some feat.
Add to this the fact the National Asset Management Agency is one of the most controversial political creations and one of the most unpopular, and you get an idea of the work completed.
It was timely therefore that Nama should disclose more information than ever before when it published its first annual report, covering 2010, at the Treasury Building in Dublin yesterday.
For the first time, the State agency has published the list of properties that it has seized through enforcement actions.
While it is more of an attempt to flog properties to generate much-needed cashflow, it is an important step in improving the transparency of one of the most powerful agencies in the State and one of the most influential in terms of ensuring an economic recovery.
Frank Daly, chairman of Nama, said that the agency was precluded by its legislation from publishing the names of its 850 debtors – not that the agency would want to because of the damaging effect it may have on functioning businesses in Nama, he said.
On its website, the agency has published a list of 847 properties in the Republic, Northern Ireland and the UK, and the receivers and administrators who now control them on behalf of Nama.
They range from hotels and airports to public houses, car parks, medical centres and office blocks.
Among the properties are the Weston airport in Leixlip, Co Kildare, the Longford Shopping Centre and the Booterstown Marsh in Dublin.
The hotels include the Fota Island and Castlemartyr hotels in Co Cork, Portmarnock Hotel and Golf Links in Co Dublin, Tulfarris House and Golf Resort in Co Wicklow, the Maldron in Citywest, and the Clarion Hotels in Liffey Valley and the IFSC in Dublin.
The properties illustrate the enforcement action taken by the agency in the past 18 months.
Up to the end of June, some 73 receivers had been appointed to the assets of Nama’s debtors but it had also declined requests from the banks in another 33 cases.
“This shows we are not just willy-nilly taking the insolvency route – everything is considered,” said the chief executive of Nama, Brendan McDonagh.
The agency has not just relied on enforcement action to generate sales. Some €3.9 billion has been raised through property sales on Nama’s direction – 20 per cent in Ireland and 80 per cent overseas.
McDonagh said that on asset disposals outside Ireland the agency has made money over and above what it paid for the loans but the same cannot be said for some asset sales in Ireland.
This was “reflective” of the state of the domestic market, he said.
Set up in November 2009 to purge five financial institutions (four of which have since been nationalised) of their most toxic loans, Nama has acquired 11,500 loans of €72.3 billion secured on 16,000 properties at an upfront cost to the State of €30.5 billion.
This has been paid for by issuing bonds to the banks. Nama has generated enough cash to repay €1 billion due to the banks.
McDonagh said Nama had cash balances of €1.1 billion at the end of June and this had risen to €1.4 billion by Wednesday night.
The level of performing loans – loans on which the bank is earning interest – remains at 23 per cent, but McDonagh still believes that the agency will make a €1 billion profit over its 10-year lifetime.
One of the most startling disclosures by Nama yesterday was figures showing the concentration of such vast borrowings among a small number of borrowers.
The three most indebted clients of Nama had combined borrowings of €8.4 billion – an average of €2.8 billion each.
The next nine biggest borrowers had debts averaging €1.6 billion each. The top 12 had total debts of €22.3 billion.
The top 180 debtors – who will be managed directly by the agency – owe €62 billion of the €72 billion of loans on the books of Nama.
“That is a truly astonishing figure,” said McDonagh.
While Nama is generating plenty of cash – €2.6 billion in its first 15 months – the bottom line is less healthy. An operating profit of €305 million for 2010 distilled down into a first-year loss of €1.1 billion after the agency took a bad loan charge of €1.485 billion.
After inflicting an average haircut of 58 per cent on the banks in the acquisition of the loans, Nama has written the loans down by another 5 percentage points as a result of further declines in the property market since the loans were valued at the end of 2009.
McDonagh described the charge as “very conservative”.
Some €719 million relates to €13.3 billion of loans assessed on a case-by-case basis; the remaining €766 million is a “collective” charge on loans of €16.1 billion.
To recover debts from unco-operative or unrealistic borrowers, the State agency has taken enforcement actions against 27 debtors.
Of the top 180 borrowers, 91 of their business plans, which are required to determine whether they are financially viable or not, have been reviewed and these account for 77 per cent or €55 billion of the book value of the loans.
The business plans for the remaining 89 borrowers will be assessed by the end of the year.
Nama has loans on 143 hotels, of which 83 are in Ireland. Most of them, some 30 hotels, are in Dublin, followed by Galway and Meath, where there are eight in each, and Kildare with seven.
The agency has loans linked to eight five-star hotels, 33 four-star, 32 three-star and one two-star hotel, for which “all offers will be considered”, said McDonagh.
“We don’t want to be in the hotel business. We want to get out of that business as quickly as possible,” he said.
Of its Irish hotels, five have been closed, while about 30 are run by owners who borrowed the original loans on the properties.
Daly said that there had been suggestions that Nama ran the hotel industry in Ireland and was “maybe ruining it as well” when in fact Nama had less than one-tenth of the 900 hotels in the country.
“We are not in the business of supporting any hotel that is not commercial viable,” said Daly.
McDonagh said that the agency was stepping up its efforts to recover debts from borrowers and was pressing for any asset transfers to third parties – wives for the most part – to be returned.
“We are working very hard to get as much money back but we are not being any way insidious about it; we are being business-like and tough but fair,” he said.
The agency was also not accepting certain salary demands proposed within business plans.
He referred to one “gallant proposal” from a developer who said that he should earn the €1.5 million a year he was paid in the boom years. “He is nowhere in that kind of stratosphere now,” he said.
Developers have had to change their lifestyles to ensure Nama was repaid, he said.
“The planes are gone, the helicopters are grounded and are being sold.”
A colleague told him earlier this week that he had just secured €200,000 worth of jewellery bought by a debtor for their partner which would be sold.
A “handful” of developers had not disclosed everything they owned in statements of affairs they had submitted to the agency to disclose their net wealth, he said.
Assets such as jewellery would be sought from debtors to repay their debts to Nama.
This could be difficult “if somebody else is wearing it”, said McDonagh.
NAMA THE PROPERTY MARKET: HOW THE DEFERRED PAYMENT SCHEME MIGHT WORK FOR HOUSE BUYERS
1 PROPERTY IN NAMA
A property in Nama is for sale at €200,000 in 2011. The proceeds of the sale will go to Nama to pay down debtors loans.
2 THE PURCHASERS
The purchasers approach a bank with €20,000 deposit, seeking an €180,000 mortgage. The purchasers are however worried that the value of property may fall, leaving them in negative equity.
3 THE NAMA DEAL
Nama will defer 20% of the property's current value, €40,000 in this example. The payment of this amount will only be due to Nama if the value of the property is maintained or increased over the next five years
4 THE MORTGAGE
All dealings by the purchasers are with the bank - they do not ever deal with Nama. The bank approves the €180,000 mortgage, the purchase is completed and repayments begin.
2016
5 THE OUTCOME
Scenario 1:The property retains or improves its value. Nama collects its outstanding €40,000 from 2011 purchase price. Purchasers repayments do not alter.
Scenario 2:Property's value falls and is now independently valued at €160,000. Nama waives €40,000 from purchase price and couple's repayments are now based on €140,000 rather than €180,00. Bank and couple reschedule remaining repayments to reflect new position
