It’s not often that the NAMA CEO talks in public, and when he does there’s usually something newsworthy. He was in action this morning at the Cantillon School of Economics in Tralee – a three-day gathering that addresses through speeches, get-togethers and Q&As the economic issues of the day.
This morning NAMA CEO, Brendan McDonagh gave a speech on the theme of “Different models for supporting banking institutions” along with speeches on the same subject by Trinity College Dublin professors Brian Lucey and Antoin Murphy. There will be a 30-minute panel discussion before lunch.
The only revelation to emerge from Brendan McDonagh’s speech was the fact that NAMA is in advanced discussions to dispose of €500m of property. RTE are headlining a projection in the June 2010 NAMA Business Plan that NAMA achieve a pay down 25% of its loans by 2013 but that’s old news. What makes the €500m disposal interesting is that NAMA has stated in their Codes of Practice that it will comply with the provisions of the Codes of Practice for the Governance of State Agencies (2009) which state
“18.1 The disposal of assets of State bodies or the granting of access to property or infrastructure for commercial arrangements e.g. joint ventures with third parties, with an anticipated value at or above a threshold level of €150,000 should be by auction or competitive tendering process, other than in exceptional circumstances (such as a sale to a charitable body). The method used should be both transparent and likely to achieve a fair market-related price. The anticipated value may be determined either by a reserve price recorded in advance in the State body’s records or by a formal sign-off by the Board on the advice of the Chief Financial Officer (CFO) or, if delegated by the Board, sign-off by the CFO or the Board Audit Committee, that, in its view, the anticipated value is likely to be less or greater than €150,000. In determining market value, regard should be had to accounting standards best practice in Ireland. Compliance with use of Auction or Tendering Requirements”
So if NAMA is disposing of €500m of assets where is the transparency? Where is the tendering process? Where is the auction? Something in my bones tells me that NAMA’s judicial review with Paddy McKillen next month might not be the only judicial review action encountered by NAMA!
If any other gems emerge from Cantillon they will be posted here in this entry. UPDATES from Trinity College Dublin professor Brian Lucey – the NAMA CEO again criticises lending practices – lending 100 people €50bn was a “gross failure of banks boards”, Brendan McDonagh suggests NAMA is best practice in Europe and that the SPV is only an accounting exercise (let’s hope Eurostat aren’t watching!).
Daniel Barr, Head of Bank Support at Riksgälden, The Swedish National Debt Office says that the Swedish banking crisis resolution was much simpler than NAMA. He says the Swedish response was prompt, transparent and focussed on the long term cost to the taxpayer. The Irish guarantee is more extensive. Sweden recovered most of its investment in the banks and its asset management agencies (Securum/Retriva).
Panel discussion in full flow. Brian Lucey praises NAMA staff but suggests it’s the wrong solution to some problems. The alternative suggests Prof Lucey was capitalism! Antoin Murphy calls for council of economic advisors. What that? Something like the UK’s independent central bank monetary policy committee and its new office for budget responsibility? Prof Murphy also supports the guarantee though acknowledges harsh budgets for foreseeable future.
UPDATE 11th September, 2010: A number of reports on the Cantillon appearance by the NAMA CEO. The RTE €500m of property near sale story gets significantly altered by the Independent who say the property will be disposed of at auction. The Independent also reports that NAMA is considering action against 12 developers owing €300m. The Independent claims this is NAMA’s first recovery action. I am a little puzzled as to why all the Irish papers missed the High Court application by NAMA at the start of August 2010 against Paddy Shovlin – silly season so couldn’t be ar*ed to consult court records? Meantime the Irish Times gives an update on developer business plans which is worrying because it seems NAMA is making very slow progress. NAMA has not yet posted Brendan’s 25-minute speech at the Cantillon School on its website.
UPDATE: 15th September, 2010. NAMA has now released Brendan McDonagh’s speech.
NAMA Wine Lake 
The disposal of assets needs to begin. It is twelve months overdue.
There is a natural progression to the property cycle. Projects fail, the price of the asset drops until it reaches a point where it’s profitable for someone else to pick it up and remarket it. They reposition the project and then what was formerly not feasible, becomes feasible and employment is created.
The repositioning and repricing can’t begin soon enough. What we have at the moment is just talk. The sooner we see some action – the better.
There is no sign of the asset sales progressing. If they are imminent, the first wave will be UK property.
Almost €10 billion of the €27 billion of loans that Nama has taken so far are secured against UK property and more than 30% of that is commercial investment property. Therefore Nama currently holds UK property loans with an approximate rebased value of €5 billion (with more to come).
A €500 million sale would represent 10% of their current UK portfolio or approximately 30% of their acquired commercial investment portfolio if (as is rumoured) all the proposed sale properties is represented by London retail and commercial assets.