Whilst many papers yesterday led on NAMA’s pursuit of €300m from 12 individuals (averaging €25m per person), I regard that as shaking a stick at the smaller developers whose loans will be transferred in later tranches – at least tranche 4 onwards if you’re talking about €25m loans. NAMA has taken action against one developer to date – Paddy Shovlin. National Asset Loan Management Limited has three applications all dated 6th August 2010 against Paddy Shovlin “and others” at the High Court.
The greater news story coming from the Cantillon School of Economics in Tralee where the NAMA CEO, Brendan McDonagh, gave a speech and took part in a panel discussion and apparently spoke to the media was that NAMA was close to disposing of €500m of property.
It says something about the suspicions about NAMA’s secretive operations which aren’t covered by the Freedom of Information Act that commentators were immediately talking about shenanigans. How had NAMA calculated the selling price? Who were the buyers? Were the buyers the same developers whose loans are being taken over by NAMA? Was the taxpayer, in whose name NAMA is given life, being bilked out of the true value of the assets being sold?
Unfortunately little else was reported on Friday. Yesterday the Independent seemed to clarify some details of the sale when it said “The agency is also preparing to sell off land worth around €500m as it tries to meet a target to dispose of a quarter of its portfolio by the end of 2013. The land will be sold by local auctioneers and those buying the land will not know that it is being sold by NAMA. The only signs that NAMA is active will be “realistic asking prices”, Mr McDonagh added.” And then yesterday, a journalist at the Tribune asserted that NAMA was only selling loans at this stage and that one of the main “assets” being sold was a €250m bank loan held by NAMA Top 10 developer, the Cosgrave brothers, relating to a 1.1 acre holding of land and property on London’s Oxford Street. The Cosgrave brothers filled the Top 10 slot left vacant when Paddy McKillen launched his judicial review action.
The public however need get used to the concept of NAMA selling assets, be they bank assets (ie loans) or real property (either repossessed or disposed of by NAMA developers under NAMA’s auspices). And the rules are confused. Loans can be sold on by NAMA using whatever means NAMA deems appropriate. NAMA has published a Code of Practice which states (and this is just reconfirming what is stated in the NAMA Act):
“1.4 This Code does not cover the disposal of property and assets other than bank assets. NAMA confirms that the disposal of property and other assets will be subject to the provisions of the Code of Conduct for the Governance of State Bodies (2009).”
“a) Sale by NAMA directly – NAMA may sell certain bank assets to other financial institutions or other third parties.
b) Sale by an appointed agent(s) – NAMA may appoint agents to sell bank assets on its behalf.
c) Sale by tender – AMA may decide to sell bank assets using a tender mechanism.
d) Any other disposal mechanism that NAMA considers appropriate – these are varied but NAMA may decide to securitise its bank assets or utilise any other financial mechanism that may be appropriate”
On the other hand, with respect to property that NAMA owns (ie through foreclosure and repossession action), NAMA says it will comply with the Code of Practice for the Governance of State Agencies (2009) which states
“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
18.2 If an auction or competitive tendering process takes place and the highest bid is not the bid accepted, then specific Board approval is required before the disposal of the asset or granting of access to property or infrastructure for commercial arrangements with third parties can be completed. For reasons of transparency, such approval together with the reason why a lower bid was permitted to be accepted should be noted in the minutes of the Board.
18.3 Where an auction or competitive tendering process is not used and the agreed price is €150,000 or more, then specific Board approval is required before negotiations start and also before the disposal of the asset or granting of access to property or infrastructure for commercial joint-venture arrangements with third parties can be completed.
18.4 No disposal of an asset or grant of access to property or infrastructure for commercial arrangements with third parties should be completed until the officer authorising the disposal or grant of access has certified formally that (i) Board approval is not necessary, with the reasons therefore, or (ii) Board approval, where necessary, has been obtained.
Directors and their Families
18.5 Disposal of assets to Directors, employees or their families or connected persons, should, as with all disposals, be at a fair market-related price. Where the Board is considering a proposal for any such disposal, the Director connected to the potential purchase should absent him or herself from the Board deliberations on the issue. A record of all such disposals to such persons (to include details of the asset disposed of, price paid and name of the buyer) should be noted in a register kept for this purpose (minor disposals below €5,000, or a threshold approved by the Board may be omitted from the register). This register should be available for inspection, if requested, by the Board or by any Director. The Board may specify that any disposal above an approved threshold should be formally endorsed by the Board who may impose specific restrictions with regard to any such disposal.
Reporting of Disposals
18.6 Details of all disposals of assets or grants of access to property or infrastructure for commercial arrangements with third parties (save for connected third parties which is dealt with in paragraph 18.5) below the threshold value of €150,000 without auction or competitive tendering process should be formally reported to the Board, including the paid price and the name of the buyer, on an annual basis.
18.7 Details of and explanations for the disposals of assets or grants of access to property or infrastructure for commercial arrangements with third parties above the threshold of €150,000 which have not been subject to auction or competitive tendering process should be included in the Chairperson’s annual report to the relevant Minister (see paragraph 13.1).
18.8 The Chairperson, in the annual report to the relevant Minister (see Paragraph 13.1), should affirm that the disposal procedures, as outlined above, have been complied with.”
It is not clear what protocols exist for developers selling property themselves secured by loans now owned by NAMA. And indeed NAMA have a say in loans which are scheduled for transfer in the remaining batches.
It would help NAMA’s reputation if some clear statements were forthcoming. It would be a very clever person that would predict events that would bring protests onto the street against NAMA but suspicions of underhand transactions involving property bought in the taxpayer’s name might just be enough. NAMA has been scrupulous in many of its operations for example tendering for contracts (though that didn’t stop untendered substantial secondment fees being paid to Pricewaterhouse Coopers in the period up to 31st March 2010). Some reassurance at this point by NAMA might be in everyone’s interest.
NAMA Wine Lake 