Really? This is an extract from the NAMA Developer Business Plan Data Pack with an example inserted by me.
The statement from NAMA comes today after reports over the weekend that NAMA was effectively paying developers salaries up to €200,000 per annum. RTE put this to NAMA and the reply seems puzzling when you consider the process by which NAMA is agreeing developer business plans.
To review : once NAMA take over a developer’s loans from the NAMA PI (Participating Institution – AIB, Anglo, BoI, EBS and INBS) they require the developer to produce a business plan normally within 30 days. And not just any old business plan, NAMA provides developers with a very detailed template that the developers must complete.
And lo and behold! That template makes very clear the reward that the developer plans to receive. Of course NAMA may seek modifications to the business plan but it seems disingenuous for NAMA to claim it doesn’t specify a salary when it demands developers to specify a salary and it is part of the business plan that becomes subject to review. Even if what NAMA claims is true – that they only specify an allowance for the company and it is up to the owners to divvy that allowance between various salaries and overheads – then that too is disingenuous as NAMA should know the range of rewards on offer to the business owner.
This is an area which NAMA needs navigate with care. Remember the political rhetoric about NAMA not being a bailout for developers? NAMA is being faced with cold reality where it needs partners to complete projects and the decision might be between paying a third party developer unconnected with NAMA €250,000 per annum to finish the project or pay the NAMA developer €200,000. And for all the criticism and anger, the reality is that a developer that knows their project inside-out may well deliver a better result for NAMA. And in that case is NAMA to cut off its nose to spite its face and engage the clean sleeve third party at a higher cost (and a higher risk of project failure)? Common sense would suggest not but NAMA needs be sympathetic to a public pumped up on rhetoric and which is paying for actions in which these €200,000-a-year developers had more than a small hand. But for NAMA to say it doesn’t specify salaries is, I think, misleading – the whole process of agreeing a business plan will surely make NAMA aware in very great detail the reward on offer to the developer. Or if it doesn’t is NAMA adequately reviewing business plans?
UPDATE: 26th October, 2010. This issue is not being handled well by either NAMA or the government. In what seems like a very poorly worded position on RTE radio yesterday reported in the Irish Times today, the Minister for Justice and Law Reform Dermot Ahern says “Ultimately, there will be excessive pain for these people one way or the other” (and many people might feel that losing a business which had limited liability and being offered employment by NAMA at rates which might yield €200k per annum is not “excessive” pain – indeed it is probably very “manageable”) and developers will “potentially lose their family homes and all the assets that they have” (no they won’t if they’re married and seek protection under the Family Home Protection Act – the Minister knows this perfectly well but he is overcompensating for a public that is very uneasy about multi €100k rewards for developers). NAMA itself is saying that it is imposing 50-75% reductions on developer overheads but that it is not taking control of developers’ rewards which I think many people will find disingenuous.
NAMA Wine Lake 
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If NAMA can’t tell us where the money goes, then this is 1970’s Soviet Union behavior.
Also, it seems the chances of a ‘v’ or even ‘u’ shaped recovery, not just for property but for the economy, as a whole are in danger. The time frames are so long.
For bounce you would think you need stimulus and some thinking about engaging the bounce in advance, like now. Instead all there is stalling and cuts.
Someone in the media pointed out this weekend that nobody wants the IMF on their watch.
IMF or no, this reminded me that essentially career politicians are still career politicians. Logic and reality will not prevail. For too many in power, this has become personal. For too many of us, we forget this. Hence we are screwed.
Unless something changes there might be no bounce, just a long drag along the bottom, parallel to the trajectory of the wine lake.
“NAMA is being faced with cold reality where it needs partners to complete projects and the decision might be between paying a third party developer unconnected with NAMA €250,000 per annum to finish the project or pay the NAMA developer €200,000.”
Nama could as easily get a project facilitator for €150k who could be more competent (i.e. has not a track record of business failure) and carry less baggage. Would the €200k relate to 50+ hours per week or the odd day per week? Maybe, the developers should be made to face cold realities (as you say about Nama).
I have often wondered whether these “developers” will be forgiven about half their borrowings if they play ball with Nama and help it break-even on a cashflow basis. If so, the 200k p.a. becomes insignificant.
I think many people today will be furious at the rewards seemingly on offer to developers who after all would have gone bust and might be unemployed were it not for NAMA. And I think NAMA is being disingenuous in saying it doesn’t specify pay rates for developers, just the overall overhead which has been trimmed from fomer days (and I am thinking of the multimillion management charges levied by Treasury on REO – will those “only” be €1-2m per annum from now on???). As I say disingenuous and not being handled well.
If a “project facilitator” can be engaged at less than the developer’s company and the prospects for the project remain the same then of course NAMA should go that route. The reality is that the developers themselves will probably have the contacts and expertise and know the history inside-out on a project and are probably better placed to make the project succeed. If that is the case I would prefer for NAMA to try a bit of honest engagement with the public and explain the rationale – we are grown-ups. Trying to throw a fire-blanket on the issue by abandoning responsibility for specific line-items in the business plan when they insisted on huge oversight on a line-by-line basis doesn’t really wash.
Mind you what’s €200k for a developer when an Insolvency Practioner can pull down €1.5m per annum (40 hours x 52 weeks)? See
https://namawinelake.wordpress.com/2010/10/26/wanted-insolvency-practitioner-at-nama-pays-e7200-e32000-per-week-well-wayne-rooney-has-set-the-bar-at-a-high-level/
To get out of this hole, many talents will be required, including project managers, developers and builders (I’m not sure what a facilitator is – it’s a new buzzword on me…. NAMA seems full of them!). The reason is that only a limited number of developers will survive this implosion and be there to create employment when the cycle turns up.
There are political and financial issues when it comes to dealing with the developers. The political requires that the developers cannot be seen to have their debts written down and cannot be seen to profit from any recovery. The financial issue means that if there is no incentive, most will walk away. Many have already done so. It will be interesting to observe the outcome of this conundrum.
Forgiveness of personal guarantees is an illusion. How do you forgive €100 million of personal guarantees from someone is only worth €1 million or in most cases – is broke. They are not collectible. We are talking Walter Mitty territory here – Fantasyland!
The very fact that the banks looked for this level of guarantee from their debtors, knowing that they did not have the assets to back it, renders them invalid.
In any event, like the Wild Geese of a couple of centuries ago, I despair of our political leaders and the fate of the country that I love. I leave to find a life and a future elsewhere.
WSTT
Congratulations on a monumentally good decision, I rarely met someone who regrets making it. California, nanotechnology, that’s where it’s at.