In 2009 when NAMA was a glint in Peter Bacon’s eye, who would have thought that NAMA might itself become a major new lender for Irish property? So far we have two announced initiatives from NAMA
(1) Staple or vendor financing which applies to commercial property, and this is where NAMA will defer part of the purchase price. So if you buy a €100m commercial property from NAMA, then you may have to pay NAMA €30m in cash today, but the remaining €70m will be treated as a loan which you pay to NAMA over a period of years.
(2) The 80:20 Deferred Payment Initiative which was launched last month and which applies to residential property in theRepublic ofIreland. This is where NAMA will sell you a property at a set price, but if the value of the property declines over the next five years, NAMA will give you a refund. So you might buy a €100,000 property from NAMA today. And if the property has dropped in value in five years time by say €15,000, then NAMA will give you a refund.
However it seems that NAMA is set to provide bespoke financing options for residential purchases. On Wednesday this week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance, Michael Noonan if NAMA had financing products other than staple financing and the 80:20 scheme. The Minister replied that so far NAMA hasn’t but that NAMA “would not rule out in individual circumstances arrangements that include an element of deferred payment in respect of residential property transactions” Here is the full exchange (with emphasis added)
“Deputy Pearse Doherty: if the National Asset Management Agency provides or has provided financing to purchasers other than staple financing for commercial property and the deferred payment initiative for residential property. [28480/12]
Minister for Finance, Michael Noonan :I am advised by NAMA that it does not and has not provided financing other than staple financing for the purchase of commercial property under the control of its debtors and receivers. Similarly, NAMA has advised that in the case of purchases of residential property controlled by its debtors and receivers the Agency does not and has not provided financing.
The Agency has recently introduced its 80:20 Deferred Payment Initiative, which has been launched on a pilot basis in respect of 115 houses in Counties Dublin, Kildare and Meath. Financing under the Deferred Payment Initiative is currently available from one of Bank of Ireland, AIB through its mortgage subsidiary EBS, and Permanent TSB with normal lending terms applying. It should be noted that this is not mortgage financing by NAMA as the source of the financing on that Initiative rests with the banks. NAMA is, in certain circumstances, willing to fund the purchase of commercial property under the control of its debtors and receivers through staple financing. Applied to the right product and right purchaser, staple financing provides, I am advised by NAMA, an opportunity to bring more buyers, including international buyers, into the Irish commercial property market.
I am advised by NAMA that it would not rule out in individual circumstances arrangements that include an element of deferred payment in respect of residential property transactions controlled by its debtors and receivers. NAMA have advised that they will look at other requests for financing on a case by case basis.”
It is interesting that NAMA denied that in respect of “residential property controlled by its debtors and receivers the Agency does not and has not provided financing” because the speculation going around Dublin is that a substantial property on one of the capital’s best roads was recently sold in a NAMA transaction which involved the purchaser getting a loan from NAMA of nearly €500,000. It would seem from the above response that such a transaction has not occurred unless NAMA is being (very) Jesuitical in the difference between “financing” and “deferred payment”. And indeed it would seem that there is a difference in NAMA’s mind between “financing” and “deferred payment” because in respect of “financing” it says it “does not and has not provided financing” yet in respect of “deferred payments” it says it would not rule out such requests. The interpretation on here is that “deferred payment” equals a form of “financing” which is why the title of this blogpost is worded as it is. In the sense that a deferred payment may be for variable amounts at variable interest rates for variable periods of time, it seems valid to characterise such arrangements are “bespoke”.