On the face of it, it would appear that the first developer business plans will be due at NAMA within the next week. It is odd that although NAMA, through the NTMA, have issued an invitation to tender document for an outside company for the “provision of advisory services in connect with the review and evaluation of Borrowers’ Business Plans to the National Asset Management Agency (NAMA)” no firm or firms appear to have been appointed yet. As reported last week the Construction Employers Federation in the North has urged its members to develop plans promptly and not bury their heads. It is to be hoped that CIF is urging its members along similar lines as there is a pot of up to €5bn available for economically sound developments, and this €5bn may be the tip of the iceberg if public-private money is added to the pot and if NAMA pursues a role of marrying investors with distressed developers as it indicated at the Oireachtas last week.
The issue of business plans comes into focus with a speculative article in today’s Irish Times which examines the future of a site in Cherrywood where the lead owner is Dunloe Ewart in which the developer Liam Carroll is claimed to hold interests. The article cites a government spokesman suggesting that the site may be transferred to NAMA and that it may become a top priority for development What might make this controversial is that the site competes with a planned development at neighbouring Carrickmines. Also of interest is that the government might even at this stage when only 1/15th of the NAMA loans have been transferred, be talking about top priorities. Lastly it is interesting that the government appear to be taking for granted that the site will end up with NAMA, remembering that the draft NAMA business plan predicted that 80% of loans would be repaid with the assumption that in those cases NAMA would not be handling the assets.
Expect to hear a lot more about developers’ business plans in the coming days.
NAMA Wine Lake 
I suspect that these will be the first business plans prepared by many of the big developers in recent years. They would have been more used to back-of-envelope and and one-pager plans.
As a strong believer in the role of business plans, I would have expected that developer business plans, if they had been produced, would have highlighted overcapacity (e.g. in hotel sector), cyclic trends (houses and offices) and would have resulted in the shelving of many grandious schemes and saved taxpayers a bomb.
I would tend to agree with you but remember that many developers were operating in markets where assets were appreciating rapidly and where stopping to soberly consider the emerging bubbles might have been seen as unnecessarily delaying making large profits. And for a few years in the late 1990s and early/mid 2000s that was the case – fantastic profits were made. In fairness the property collapse came at the same time as the banking collapse and even the best run businesses might not have considered that a realistic threat (I wonder how much consideration Ryanair, the present paragon of a well-run business, would have given to a 7-day stoppage in business because of ash from Iceland?).
The banking and building collapses were interconnected and it was very clear that a cyclic bubble had been created so any independent-minded planner would have backed off chasing the bubble. The key benefit of business planning is often the process of thinking, questioning etc.
No amount of planning at Ryanair could have anticipated a 7-day stoppage. It copes because it is well-managed, maintains a sound balance sheet etc. unlike the developers who were mega-geared and defacto could not be considered well-managed.
Brian
PS Have heard from Nama but have not secured a response on my concerns about rolled-up interest. Not optimistic but I will pursue other routes.
Having seen businesses with and without business plans, I would agree that overall business plans help because they do exactly what you say. If there is substantial investment or third party investment then I would say you should always have a business plan. So yes the developers borrowing €1-2bn should certainly have had business plans in my view – and given the scale of investment they should have been more akin to telephone directories and not one-pagers. What depresses me is that NAMA is investing, what €40-50bn latest estimates, and has what most people would describe as a back-of-the-envelope plan which the NAMA CEO says was “for illustrative purposes”, which as you say Brian prompts serious questions about the components and their interaction.
Good luck with your correspondence with NAMA. I read today that they have now about 20 employees, though they are obviously being supported by the NTMA and I’d guess the DoF – I would guess you might get a reply around June.
Am responding to your post 23rd April at 09:23 – there was no specific reply button.
While I’m big into business plans, I’m not OTT. It is interesting that about half the INC 500 started without formal BPs. This may be becaue the promoters knew their industries inside out and were not seeking external support.
As an aside, IMHO a BP for a single SBU should never exceed about 40 pages (ex appendices etc.). 20 is a good target. Anything more and we are into padding.
I did a review of the non-financial aspects of the draft Nama plan at http://www.planware.org/briansblog/2009/10/nama—a-flawed-business-plan.html
I wonder whether the next plan will be any better?
Expect to hear in ages you mean, NAMA will decide in September said Brendan Mc in one of his ( to be very) rare appearances.
http://debates.oireachtas.ie/DDebate.aspx?F=FIJ20100413.xml&Node=H2#H2
“Our sole focus at NAMA is to bring proper and disciplined management to these acquired loans and borrowers, with the aim of achieving the best possible return and protecting the interests of the taxpayer. We have already held meetings with many of the borrowers whose loans have been acquired as part of tranche 1. Each borrower will have to submit a comprehensive business plan in accordance with NAMA’s template, within 30 days of being acquired. The individual borrower’s viability will then be rigorously assessed over the coming two to three months as part of the business plan review process. We are willing to engage with an open mind to our acquired clients, but we require full disclosure of all material information and we will not waste time with borrowers who do not wish to co-operate or who have not yet accommodated themselves to the current realities of the property marke”
Of the 10 developers in the first tranche whose identity has not been publicly confirmed – how many would you expect to actually produce business plans? All 10? And despite the non-lobbying rules at NAMA recent Dail debates have had pepperings of pleas in respect of reputed NAMA-bound assets. Add to that evidence that NAMA may start disposing of assets within weeks (either with or without input from developers) and I would say that we will be hearing sooner rather than later about developers’ business plans. INBS say in their annual report (available at http://www.irishnationwide.ie/reports/inbs/Irish%20Nationwide%20AR09%20Final.pdf) that the first loans transferred on 27th March 2010 so I guess there might be plans submitted to NAMA by Monday next week (26th March 2010). I wonder how it might work if Developer A has loans from more than one institution including Anglo which hasn’t transferred yet – would the 30 days start from the first transfer or the last transfer in the first tranche?
Thanks for the link to the hearing.
They will all produce business plans just like Liam Carroll did for Justice Frank Clark last year.
Sadly for Liam and his co directors the learned Judge had an honours degree in mathematics. Darn!!
So will some of the NAMA staff.
I hope the third party contract firms that NAMA is engaging to examine the business plans have the competence and character to examine these plans. If they get it right, then NAMA could start releasing €5bn development pot and possibly secure third party investment or marry up investors with developers – there is an opportunity here.
By the way, NAMA refused last week to confirm the identities of the first 10 borrowers although there has been widespread speculation. NAMA say that unless there is default then the borrowers are entitled to the same level of confidentiality as normal bank customers. The user Dreaded_Estate pointed out over on irisheconomy.ie that 80%-odd of the loans will be repayable this year so disclosure may come sooner rather than later. So whether Liam Carroll is amongst the NAMA borrowers or the first 10 remains speculative.