Archive for June 13th, 2010

To many people in the State, enforcement at NAMA should mean a couple of boyos going round with baseball bats and getting as much moolah out of the developers as possible – such is the widespread bad feeling towards developers who are blamed for bringing the country to its economic knees. NAMA on the other hand has more civilised ideas of enforcement which involve inviting developers to produce business plans to resolve the debt owed. NAMA should be clear about its remit – it only has to peruse the NAMA Act to see that its main objective is to get as much money back for the taxpayer as possible. Although many would like to see the developers getting a kicking, ultimately we want NAMA to be a financial success. Yet NAMA may be putting profit optimisation at risk by developing guidelines that play to public optics.

Any developer getting a copy of a confidential Construction Industry Federation circular, reported about in today’s Independent, might have reason to be confused. The circular says that member developers should work to adjust their lifestyles and that management costs built into developer business plans must be relate to the standards of an “ordinary lifestyle”.  It goes on to say that if they don’t adjust their lifestyles then they must accept the consequences. It is unclear to what extent, if any, the reported circular relies on guidance from NAMA. However it chimes with noises that have come out of NAMA before, for example NAMA CEO, Brendan McDonagh’s statement to the Oireachtas Joint Committee on Finance and the Public Service : “The strong view of the board of NAMA is that if somebody owes us money and is displaying obvious wealth almost in defiance of us, we will fight tooth and nail to recover the full amount.”

Perhaps the best advice to any developer producing their business plan is to study the Monty Python “we were so poor” script (available here in full) in which a group of wealthy fine-wine-drinking men who’ve made it, recount how poor they once were, each one trying to outbid the other with tales of woe. Perhaps NAMA developers could borrow such imagery when presenting their business plans by emphasising to NAMA how impoverished they are now and how little their plans will improve their prospects.

On a more serious point, if NAMA receive two business plans. Developer A’s plan includes a €20 per hour management fee payable if their property sells for the long term economic value (LEV). Developer B’s plan doesn’t have a management fee but Developer B is to be paid 10% of the difference between the value achieved by the property less its LEV. It would actually be Developer B’s plan that presented the best financial plan for NAMA by reference to the LEV even though Developer B could end up with €millions more than Developer A. And given the usually-pivotal role of developers in finding buyers and doing deals, NAMA would want to deeply consider alienating a developer that might be able to maximise a property’s worth. Would NAMA knock back Developer B’s plan because the concept of him making substantial sums (even if NAMA’s overall financial performance is enhanced) creates such repulsive optics? NAMA’s language and CIF’s circular could certainly suggest this is the case. And that would be perverse.


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