What exactly are the metrics for evaluating NAMA’s performance?

Objectives I learned some time ago as a manager should be SMART – I was told that in an email from Human Resources and thought they were being condescending sods by capitalizing the letters in ‘SMART’ but no, SMART is generally taken to stand for

Specific

Measurable

Attainable

Relevant

Time-bound

These days, Human Resources may add an “ER” at the end standing for evaluate and re-evaluate, but you get the idea.

So what are the objectives of NAMA? Let’s see from NAMA itself.

The Agency will have a commercial mandate and will have the central objective of maximising over time the income and capital value of the assets entrusted to it.

Fine Gael (in Richard Bruton’s worthy letter to Brian Lenihan last August 2009) assert that NAMA’s over-riding objective is “to maximise the returns to taxpayers on assets purchased by collecting as much of the debts owed as possible”. There is a call for a framework to be put in place to ensure this “over-riding” objective is attained. Richard Bruton didn’t call for SMART(ER) objectives but he certainly grasped the principles.

So where are objectives like freeing up lending, protecting institutions that are too big to fail, avoiding encumbering competition (in both the banking and property sectors)? When will reviews kick in? What metrics have been assigned to these objectives and who is overseeing and reporting them? Should the first tranche of loans (estimated at €17-19bn gross) be substantially downsized and the operation of NAMA reviewed and evaluated after the first loan has been bought (“the point of no return”).

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NAMA is getting down to the nitty-gritty of valuing the first loans.

For those working in NAMA and their advisers, this must be a pretty stressful time, with the hopes of the State resting on their shoulders that they make correct calls with valuing the first tranche of loans, the latest statement from Brian Lenihan being that they will be transferred by the end of February 2010 (“the point of no return”).

Today we are reminded that developments are complex creatures with different species – some developers owe money to the banks alone, others owe money to contractors and suppliers as well. Where are these other creditors in the pecking order. The Irish Independent asserts that the NAMA legislation in Ireland at least (other jurisdictions might not be prepared to override sovereign legislation to accommodate Ireland’s NAMA) will place NAMA as the first creditor and will presumably recoup its investment before any proceeds are paid to other creditors. This is an intricate point, and I wish NAMA well with working its way through it.

We also learn today about further problems in establishing ownership rights in NAMA loan assets. We already knew that some banks were having difficulty with establishing primary, secondary and other charges over property assets. We now learn that one of the tax loopholes operated by some developers was avoiding a transfer into the developer’s name of an asset in order to minimise or defer stamp duty costs. What this means is that the banks and ultimately NAMA will have further headaches in legally certifying the title or incurring not insubstantial costs in title insurance. Again good luck to NAMA.

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