The statement from NAMA comes today after reports over the weekend that NAMA was effectively paying developers salaries up to €200,000 per annum. RTE put this to NAMA and the reply seems puzzling when you consider the process by which NAMA is agreeing developer business plans.
To review : once NAMA take over a developer’s loans from the NAMA PI (Participating Institution – AIB, Anglo, BoI, EBS and INBS) they require the developer to produce a business plan normally within 30 days. And not just any old business plan, NAMA provides developers with a very detailed template that the developers must complete.
And lo and behold! That template makes very clear the reward that the developer plans to receive. Of course NAMA may seek modifications to the business plan but it seems disingenuous for NAMA to claim it doesn’t specify a salary when it demands developers to specify a salary and it is part of the business plan that becomes subject to review. Even if what NAMA claims is true – that they only specify an allowance for the company and it is up to the owners to divvy that allowance between various salaries and overheads – then that too is disingenuous as NAMA should know the range of rewards on offer to the business owner.
This is an area which NAMA needs navigate with care. Remember the political rhetoric about NAMA not being a bailout for developers? NAMA is being faced with cold reality where it needs partners to complete projects and the decision might be between paying a third party developer unconnected with NAMA €250,000 per annum to finish the project or pay the NAMA developer €200,000. And for all the criticism and anger, the reality is that a developer that knows their project inside-out may well deliver a better result for NAMA. And in that case is NAMA to cut off its nose to spite its face and engage the clean sleeve third party at a higher cost (and a higher risk of project failure)? Common sense would suggest not but NAMA needs be sympathetic to a public pumped up on rhetoric and which is paying for actions in which these €200,000-a-year developers had more than a small hand. But for NAMA to say it doesn’t specify salaries is, I think, misleading – the whole process of agreeing a business plan will surely make NAMA aware in very great detail the reward on offer to the developer. Or if it doesn’t is NAMA adequately reviewing business plans?
UPDATE: 26th October, 2010. This issue is not being handled well by either NAMA or the government. In what seems like a very poorly worded position on RTE radio yesterday reported in the Irish Times today, the Minister for Justice and Law Reform Dermot Ahern says “Ultimately, there will be excessive pain for these people one way or the other” (and many people might feel that losing a business which had limited liability and being offered employment by NAMA at rates which might yield €200k per annum is not “excessive” pain – indeed it is probably very “manageable”) and developers will “potentially lose their family homes and all the assets that they have” (no they won’t if they’re married and seek protection under the Family Home Protection Act – the Minister knows this perfectly well but he is overcompensating for a public that is very uneasy about multi €100k rewards for developers). NAMA itself is saying that it is imposing 50-75% reductions on developer overheads but that it is not taking control of developers’ rewards which I think many people will find disingenuous.