Joint ventures likely to develop sites

UNFINISHED PROJECTS:NAMA WILL fund the completion of some unfinished developments "on a partnership or joint venture basis" in order to boost its rental income, the agency's draft business plan states.

The proposed investment strategy for Nama also indicates that the Minister for Finance is likely to seek a Dáil resolution permitting the agency to borrow additional sums to develop and enhance such assets.

The draft Nama Bill had limited the amount Nama could borrow for purposes other than the acquisition of bank loans to €5 billion.

However, in order to maximise Nama’s cash income from the developments and land assets in question, it now appears that this €5 billion limit will be insufficient.

Some €31 billion of the €77 billion in property, land and development loans to be transferred to Nama is already “cashflow-generating”. However, some €46 billion worth of assets do not currently produce any income other than interest on the loans.

Some of the projects originally envisaged under the loans will not proceed as they no longer make commercial sense, it says. Other projects “may be viable if alternative uses or alternative project timescales are considered”.

Under another category, the plan indicates that it may be necessary for Nama to encourage borrowers to sell land and development assets that do not produce a cashflow. This should be done “at appropriate prices in the early years of Nama”.

Other projects “remain commercially viable” but require additional investment. “It may be necessary for Nama to invest funds in them on a partnership or joint venture basis,” the draft plan states.

It adds that Nama will “inherit any commitments entered into by the banks as far as the drawdown of funds is concerned”. There is an estimated €6.5 billion in undrawn commitments on loans transferring to Nama, which by itself would exceed the €5 billion limit.