It seems that NAMA is to dispose of up to €5bn of UK loans/assets in 2011 which draws attention to the “M” in NAMA, indicating “Management” and meaning that NAMA will seek to dispose of assets at the optimum point. If the redemption of the loan at 20 Grosvenor Square proceeds as planned then NAMA will see a tidy profit on that residential transaction reflecting the relatively buoyant central London residential property market. NAMA has a number of landmark commercial developments also, including the Battersea Power Station site (mixed residential/commercial) and loans to the Maybourne group of luxury London hotels, some of which were reportedly sold to Robert Tchenguiz recently.
But most of NAMA’s assets in the UK will be everyday commercial assets like the one above, the Matrix building on Aldgate High Street in the City of London, controlled by NAMA following the appointment of administrators to companies within the Beetham Organisation group. 2010 was a good year for commercial property in the City and West End and the early indications are that growth is continuing in 2011, which may make disposals of assets such as the one above all the more attractive especially as NAMA’s home market, Ireland is continuing to tank.
Today sees the publication of the UK February 2011 IPD Monthly Property Index – the index covering UK commercial property up to the end of February 2011. The IPD (Investment Property Database) index is the only UK commercial index referenced by NAMA’s Long Term Economic Value Regulations (Schedule 2) and is used to help calculate the performance of NAMA’s “key markets data” shown at the top of this page.
The Index shows that capital values are still increasing but at a modest rate compared with the end of 2009/start of 2010. The Index rose by .2% in February 2011 compared with January 2011. Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 10.4%. Commercial prices in the UK are now 34.9% off their peak in June 2007. On an annual basis prices are up by 4.8%. The NWL index is now at 893 which means that NAMA needs to see a blended increase of 11.9% in property prices across its portfolio to break even at a gross profit level (taking into account the fact that subordinated bonds will not need be honoured if NAMA makes a loss).
Given that NAMA has valued the loans it is acquiring at 30th November, 2009 it would seem to make sense if it disposed of UK property first given the pressure the agency is under to generate cashflow and some sales – it hardly makes sense to sell off Irish property which has dropped by 12% since November 2009 unless the assessment is that it might continue to fall and not recover for a considerable period, possibly beyond NAMA’s life expectancy (or that a future recovery in UK property would exceed any falls in Irish property).
The first table below shows the month-on-month % change in commercial property capital values since 30th November, 2009. The IPD index is broken down into three components – retail, office and commercial. The second table shows the change in value of an index set at 100 at 30th November, 2009 and applying the month-on-month % increases in a compound manner. Overall it shows that commercial property in the UK is worth 10.4% more at the end of February 2011 compared with the end of November 2009.
NAMA Wine Lake 