New feature – NAMA asset performance

Taking a break from the flood of information issuing from NAMA yesterday (Business Plan, Quarterly Report, Annual Report, Codes of Practice – you’d almost forget the fact that the EU published their response to the Anglo restructuring plan and which concluded the Minister for Finance broke State-aid rules in December 2009!), today sees the launch of a new feature on the blog which aims to track the change in property prices for NAMA’s key markets from 30^th November, 2009 , the date chosen by NAMA to value the Current Market Values of assets backing the loans it is taking over pursuant to section 73 of the NAMA Act.

Last week in the Oireachtas, Labour Deputy and Finance Spokesperson Joan Burton asked the MfF what effect changes in property values from the NAMA Valuation Date had on the finances of NAMA and the MfF stated that the effects had been “broadly neutral”, which might come as a surprise to many. However the MfF pointed out that a large portion (he said one third) of property backing NAMA loans is based in the UK which has seen a recovery in commercial prices since last November 2009. He went on to say that this recovery offset the decline in Irish commercial property. He didn’t mention residential at all.

So from today, we will show on here the latest price movements by reference to 30^th November, 2009 for the Irish & UK commercial and residential markets. NAMA’s Business Plan yesterday didn’t show a split between markets but last October the draft Business Plan said it was 66.8% Ireland, 26.9% UK and 6.3% Rest of World. With changes to the loan mix and currency movements that may change so you will need make your own assumptions about the split of the NAMA portfolio to judge (broadly) how NAMA’s assets are doing.

The four sources for the statistics are Ireland Commercial (Society of Chartered Surveyors/Investment Property Databank), Ireland Residential (Permanent TSB/ESRI House Price Index), UK Commercial (Investment Property Databank), UK Residential (Nationwide Building Society) – take a look at the entry last week to see the background to these indices. The UK indices are produced monthly. The Irish Indices are produced quarterly (next sets due in the next three weeks). I have divided the quarterly decline in commercial in Q4, 2009 by 3 to approximate a monthly decline in December 2009.

There is no split of the property backing NAMA loans between residential and commercial nor any formal uptodate split between Ireland/UK/RoW. If such splits are produced then we could incorporate the four indices into an approximation of one index (RoW is complicated but it apparently accounts for less than 10% of the assets).

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Paddy McKillen versus NAMA (and the State and the Attorney General)

It had to happen, a legal challenge to NAMA. Even from the outset NAMA were upfront about risks of legal challenges, highlighting the risk in what it numbered its first area of risk in the draft Business Plan (“A further risk is the prospect of legal challenges to NAMA’s business operation which may delay and impede it in achieving its objectives”).  The Irish Times today reports that Paddy McKillen, one of the oft-reported Top 10 developers in the first tranche (reports denied by his spokeswoman) is seeking a judicial review of NAMA’s role in his and his companies’ loans. According to the article in the Irish Times his companies’ spokeswoman says “There is no justification in Nama taking our loans. All our loans are fully performing against quality assets, with no land and developments. We are simply protecting our business”.

Paddy McKillen’s assets are reported to include the Jervis Street Shoping Centre, a substantial shareholding in Coroin (holding company for Claridges, the Berkeley and Connaught hotels in London), Fosse Park (Leicester), a shareholding in the Powerscourt Centre, Champion Sports Group, Captain America restaurant, properties on Bond Street, a quarry in Vietnam and Chateau La Coste (winery and hotel in Aix-en-Provence). The judicial review is reported to be on behalf of Paddy McKillen and 15 of his companies.

Of course any legal action by any debtor could influence NAMA in its treatment of that debtor. Let’s see how robustly NAMA deals with this present action – certainly other NAMA debtors will be watching the case closely.

UPDATE: The Irish Independent today reports that the application for what the Irish Times yesterday said was a judicial review may go to the Commercial Court, Ireland’s successful fast-track court for dealing with certain commercial disputes. The case has apparently not yet been admitted to the Commercial Court. The Independent reports that the application was made on July 1st, 2010 and set down for “mention” on 19th July, 2010.

Remember for all the latest developments and up to date news on the case together with a comprehensive background click here.

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NAMA publishes its Codes of Practice

Apparently submitted by NAMA to the DoF on 12th March, 2010 the Codes were amended and agreed by the DoF on 5th July 2010 and published by NAMA on 6th July, 2010 and are available here:

Disposal of bank assets

Conduct of officers of NAMA

The commercial interests of non-participating institutions

Servicing standards for acquired bank assets

Risk management including with regard to debtors

These are fairly lengthy documents and will be analysed on here in due course.

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