“With regard to the reason behind this, a more disturbing case, the details of which I will give to the Minister, is the situation of Nos. 2 to14 Baker Street, which is an extraordinary loss to the taxpayer. I see my colleague, Senator Paul Coghlan, shaking his head when he has not even heard the evidence, which I think means his mind is closed on this issue. For his benefit, let me outline what happened. In September 2005, Nos.2 to 14 Baker Street was purchased fromBritishLand[by McAleer and Rushe, presumably] for €47.5 million. When the bust came, they [ McAleer and Rushe, presumably] sold it after receiving planning for 50% more square footage on the site in 2009. On 16 April [2009, presumably] they [McAleer and Rushe, presumably] sold it back to British Land for €29 million, representing a loss of €28.2 million to the Irish taxpayer. This property was not placed on the open market. How was that in the best interests of the Irish taxpayer? Could my colleague, Senator Coghlan, outline how on 16 April, a trust was set up in Jersey? A legal agreement signed in Westminster City Council shows that McAleer and Rushe had a beneficial interest in this trust. Was this to deceive the Irish taxpayer? On 21 September 2011, in a report and a press release to the market ,British Land said:
We repurchased approximately 50% of the value it previously sold for in 2004. We structured a three-way deal to purchase the site from McAleer and Rushe, Bank of Ireland, with the consent of NAMA”, (I ask Senator Coghlan to note). This acquisition has already performed very well. Since purchased the valuers have increased the site value by 52%.
This is in one year. Does this tell us it was undersold? Does this tell us that the market value was achieved? It most certainly tells us that.” Senator Mark Daly speaking in the Seanad debate in which he attempted to advance his NAMA transparency Bill
I must admit to having rarely watched or visited the Seanad, Ireland’s “upper house” in our bicameral parliament. So yesterday was a rarity to watch the Fianna Fail senator from Kerry, auctioneer Mark Daly (pictured above) present his Bill – available here with commentary – aimed at forcing NAMA to set out all its property for sale – so as to avoid suspicion of secret sales below market value – and to publish achieved selling prices – so as to provide transparency in what NAMA was basically set up to do. The 60 senators are mostly quasi-elected but often just nominated, and the high-minded hope is that experienced and wise heads can initiate and improve the oversight and legislative functions of government. Aside from the (very few) senators taking part in yesterday’s debate, the Minister for Finance Michael Noonan was also present to deliver the Government’s response to the Bill.
The Bill was always going to be problematical because of the NAMA Act and commercial and contractual issues. The Bill did not address these which is a pity. With respect to the serious allegation referred to above on Baker Streetin London, you will find background on this property transaction here and here. The Senator appears to be claiming that Northern Irish NAMA developer McAleer and Rushe sold the property on Baker Street below value, because subsequent to the sale it had increased in value by 50% in over two years – the Senator says one year but April 2009 to September 2011 is 2.5 years. The Senator seems to be saying the property did not come on the open market before it was sold in April 2009. The Senator seems to be saying that McAleer and Rushe benefited from the sale ex post facto in that there was supposedly a profit-share arrangement. And there seems to be an allegation of underhandedness in suggesting a trust in a tax haven was formed at the time of the sale in which McAleer and Rushe were beneficiaries. The property was subject to a Bank of Ireland loan apparently.
This would appear to be a Bank of Ireland matter in that NAMA was only created in December 2009, some eight months after the transaction. The Senator asked Bank of Ireland about the matter and seems to have received a letter which he says “I received a letter which told me they could tell me nothing”. Since the Irish state bailed out Bank of Ireland to the tune of €4.7bn, it is a matter of public interest. It doesn’t seem to have anything to do with NAMA though.
Senator Daly made more convincing reference to the sale of the 450 acres in Corkreported in the Irish Examiner and subsequently here. However that can’t be a transaction that Senator Daly had in mind when he called shenanigans last year because it seemingly only completed April 2012.
Senator Daly’s party colleague, Thomas Byrne also suggested unsatisfactory behaviour when he said “apartments in my area are going at a very cheap price and they are all being sold privately. I do not see any advertisements for their sale. Apartments taking in rents of up to €10,000 a year are being sold at about €85,000 to €90,000 in private sales by banks. This results in a significant return to investors who are able to find out which properties are for sale. A local auctioneer or a willing seller will be looking for substantially more than what the banks are willing to take for the properties. These properties are being sold by the banks with a return of 12.5% to 13% but many people do not know about this and this information must be made available to all.” But what about details like addresses? No details were forthcoming from the Senator despite the presence of privilege attaching to statements in the Seanad. He further said in respect of a different matter “I am aware of a situation and I am happy to provide the details to the Minister after this debate as I am not prepared to put those details on the record of the House. An auctioneer was called by a legal adviser in IBRC and asked if it would be appropriate for a person whose property had been repossessed to bid at an auction.”
The objection from Minister Noonan to the Bill was set out thusly “the proposals in this Bill have been considered and it has been concluded that the Bill as initiated would place these bodies at a competitive disadvantage to other institutions disposing of assets. Were these proposals to be implemented they would undermine the commercial mandate of NAMA and IBRC. Implementation of the policies in this Bill would also be likely to leave these bodies open to constitutional and other legal challenges”
It is a shame that the Bill died because if attention were focussed on the obstacles, it is possible that a solution might be found:
Contractual: Personally I have no difficulty with NAMA imposing draconian secrecy on sales of property where a developer repays 100% of the outstanding loan – that’s the original loan value plus all contractually due interest, not the NAMA value. However if a sale does not realise enough to repay 100% of the outstanding sum, then the developer has broken his contract with NAMA, in that he is not repaying the amount due under the loan contract. Somehow that seems to be a more significant failure under the contract than NAMA providing the details of sale prices.
Commercial: In the UK sales prices and the identities of purchasers and sellers are publicly available from the Land Registry. Such transparency has not undermined the UK market. But the contention is that such transparency would undermine NAMA. Perhaps Minister Noonan might like to discuss this divided opinion if the UK ever decides to conduct its own review mission to see how its €4bn bilateral loan to this country is performing. Yes that’s sarcastic, the Brits are not that dumb and their transparency supports and enhances their property market. Yet here in Bailout Ireland, our Minister for Finance seems to argue that such transparency would undermine NAMA!
NAMA Act: The NAMA Act imposes confidentiality on NAMA’s dealings with debtors and it is the NAMA Act that NAMA normally uses to shield itself from intrusive questioning if there are suspicions about any dealings. Seems like a solution would be to amend the NAMA Act in cases where there was default by a debtor.
NAMA is overseeing the disposal of around €750m per month every month by reference to NAMA acquisition values, and at present there is little external oversight. The Comptroller and Auditor General seems to have little, if any, expertise in domestic and international disposal of property and loans, and of asset management generally. The public accounts committee and the finance committee generally only get the highest level responses from NAMA which uses the NAMA Act to suppress information on individual deals. Ditto with parliamentary questions. It is hardly beyond the wit of such a well-resourced parliament to draft legislation that might meet NAMA’s commercial objectives but at the same time dealing with the confidentiality provided for in the NAMA Act or in contracts, but where the developer is in default.
In terms of the 2-hour debate itself, a number of issues arose about the functioning of the Seanad. At a maximum I counted less than 15 senators including the Chathaoirleach in the Seanad which is really just a big room with pretensions of grandeur at one end of Leinster House.When the vote was called, there were 41 votes cast, 24 opposed to allowing the Bill continue its passage through the Oireachtas and 17 in favour. Presumably the 25-odd senators not present in the Seanad itself were in their offices or other parts of the building – perhaps including the bar or restaurant – during the debate itself. And where was one third of the Seanad when the vote was called? As regards the quality of the debate, of the speakers, less than half focussed on the content of the debate. Fianna Fail’s Averil Power (above) spoke about Priory Hall,UK bankrupt developers and unfinished housing – nothing whatsoever to do with the focus of the Bill. Sinn Fein’s Trevor O’Clochartaigh listed everything he knew about NAMA, a tiny portion of which was relevant to the debate. Many others talked about NAMA’s €2bn investment in the Irish economy and other extraneous matters which again had zero to do with the meat of the debate. For critics of the Seanad, and there are many, the display was not edifying with perhaps four senators – Thomas Byrne, John Gilroy (pictured below), Sean Barrett and Mark Daly – focussing on the issues at hand.