Emmet Oliver at the Independent today draws attention to a report in Chicago’s Real Estate Daily (CRED) news website produced by Crain’s Chicago Business, a regional business newspaper, of an attempted sale by Anglo of a USD $100m loan in respect of an office building at, 225 West Washington Street, Chicago, Illinois 60606. The loans were apparently advanced by Anglo to a group which included property giant Golub & Co and a group of Irish investors put together by what was Quinlan Private (now Avestus). It is reported that Golub is bidding for the loan (CRED citing Lee Golub) and it is speculated that it may sell for a 20% discount.
The building itself was built in 1987, offers 483,497 sq feet over 28 storeys. The anchor tenant is understood to be Allianz SE. There appears to be about 100,000 sq ft available for rent presently. CRED reports that the original loan was for USD $81m and was granted in 2005. This was topped up so that the loan today stands at a reported USD $100m. The building itself was bought for USD $100m in 2005 representing a €207 psf purchase price.
Two of the rage-inducing criticisms of the bailout of the banks and the creation of NAMA were that the developers would be able to buy back their assets at a discount at some future point and that the borrowers would not be pursued for the full value of the loans. The Irish Independent reported in June 2010 that the Construction Industry Federation had sought to lobby the government to allow NAMA developers to buy their own loans back – the Independent says that these overtures were rejected by government. At the Oireachtas Joint Committee on Finance and the Public Service hearing on 31st August, 2009 Minister for Finance Brian Lenihan said “another point that has arisen frequently in the public debate is that somehow a developer who owed money could buy assets at a discount and start off in business again. If I was advising NAMA, the first thing I would do if a developer bought my assets would be to take the money off him and immediately execute a mortgage against the property, sell it and repossess it. I suspect there might not be many developers interested in doing this. I suspect that developers in this position might flee the jurisdiction rather than buy assets which could be enforced by NAMA. It is an issue that could arise with overseas assets. It is an issue we have examined and directives will have to be given by the Minister on the matter” There were frequent undertakings that loans/assets would not be sold back to the borrowers for a discount and that the borrowers would be pursued for the full value of the outstanding loans.
And yet here we have an example of Anglo apparently selling a loan back to a borrower. Worse, although the loan on the building wouldn’t fall under the “land and development” category of loans for which NAMA was primarily set up, it would seem probable that it is an associated loan of land and development loans – I base that probability on the report that the co-owners of the building are a group of Irish investors put together by Quinlan Private and that there was widespread spending across all property assets by the same people during the boom.
The status of the sale of the loan on 225 West Washington Street isn’t known. But it would seem that Anglo and its controllers at the Department of Finance, not to mention NAMA have some questions to answer. Lastly as noted by the Independent, Anglo are apparently planning to sell a total of €0.7bn of loans in the US. In addition there is €1.2bn of loans which NAMA agreed not to buy in August 2010 (both the €0.7bn and the €1.2bn are referred to in the footnotes on the bottom of page 1 of the recent Anglo press release accompanying the publication of the 2010 interim report) . Just one month ago Anglo CEO Mike Aynsley was talking about €2-4bn of loans not going to NAMA by agreement with NAMA. There is plainly a need to get clarity on what is happening here and establish whether the taxpayer is being disadvantaged.
UPDATE: 5th September, 2010. The Sunday Tribune reports that Anglo has sold “nearly” €400m of loans in the US securing more than their stated net value in the Anglo books. Again the questions remain – who were the loans sold to, should they have been transferred to NAMA? The Tribune reports that €350m of the loans relating to New York hotels were placed on the market in June 2010.
UPDATE: 24th October, 2010. Ireland’s Sunday Tribune reports that Anglo has auctioned off the loan which has a par value of USD $101m for USD $60m. The buyer is not identified but the Tribune claim that there were 10 bidders for the loan.
NAMA Wine Lake 
[…] NAMA is apparently allowing Anglo to sell good quality US loans to the original borrowers at a disco… […]
This is where we meet the great cultural divide. Welcome to the real world of Capitalism!
In the USA, it is accepted practice to sell a loan to the highest bidder, whether or not that bidder is the borrower.
For example, the Carlton Group is just one of many brokers that auction major non- performing and distressed loans ON THE INTERNET to WHOEVER offers the best price. See:
http://www.carltonexchange.com/
Brian Lenihan was talking rubbish at the Oireachtas Joint Committee on Finance and the Public Service hearing on 31st August, 2009. It was more government lies and “spin” to keep the populace and the media happy.
It is impossible to exclude existing borrowers from re-acquiring their assets at a discount if those assets are presented to the market – and any lawyer will confirm that NAMA would be exposing themselves to multiple lawsuits from developers if, without agreement, the assets in question were not sold publicly.
A developer may not necessarily repurchase those assets in the same vehicle that originally owned them. It can be a different legal entity and it cannot be prevented from buying at market level, even if it is below the old loan level. That is not to say that NAMA cannot pursue the debtor shortfall for any personal guarantees it may hold – but that is a different issue.
It is naive of the Minister to suggest that once a property is purchased legally by any entity NAMA can “take the money off him (the developer) and immediately execute a mortgage against the property, sell it and repossess it.” He’s supposed to be a barrister….. and he’s directing our financial recovery. God help us!
Sorry, that last paragraph should read “any entity in which the original borrower may hold an interest” – which he would be foolish to be seen to do in any event.