Last September, 2010 there was an entry on here which examined the sale by Anglo of a loan in respect of 225 West Washington Street in Chicago. It seemed back then that the loan was being sold back to a subset of the original borrowers at a discount. It was unclear if the loan was NAMA-bound as it was an investment property as opposed to what might be widely considered development land but the involvement of Derek Quinlan’s Avestus group should have meant it was NAMA bound, if only as associated lending. NAMA was never challenged here at home about the sale.
And last week, there was a press report of another sale in Chicago, this time of 1-15 East Oak Street, a six-storey 112,000 sq ft retail building on a street which was described by the vendor’s agents as the “Chicago equivalent of Rodeo Drive” – Rodeo drive being an upmarket shopping street in Beverley Hills, I suppose Grafton Street would be our nearest equivalent. The building was constructed in 2009 with a USD $93m loan from Anglo to a joint venture of two Chicago developers, Mark Hunt and Fred Latsko. The building is reported to have been sold this month to Israeli conglomerate, the IDB Group. The price achieved is reported to be USD $117m, equivalent to €1,050 a sq foot – considered a top price by vendors selling agents, Jones Lang LaSalle.
It is not clear if the loan had transferred to NAMA. It is clearly a development loan and has a value over €5m, the minimum NAMA threshold for Anglo’s loan exposures, so on the face of it, it was eligible. That said, there seems to have been some agreement between Anglo and NAMA that some US loans would not be acquired. Like the sale of the loan last September to the original developers, this agreement has never been explained by NAMA.
But how might NAMA/Anglo have lost USD $20m?
Anglo is reported to have foreclosed on the property last September, 2010 on foot of its USD $93m loan to the two developers. If Anglo/NAMA owned the building in its own right then they would be expected to benefit from 100% of the sale price USD $117m, and have effectively made a profit of USD $24m on the transaction. I am not aware of any law in Illinois that would require the foreclosing company to return any excess on the sale price above the loan to the original borrower. Instead Anglo is reported to have dismissed the foreclosure case last month, according to Crains (US publishing group), citing Cook County court records. Anglo/NAMA should of course be pleased to have recouped 100% of its loan but is it a case that heads, developers win when a foreclosed property is sold at more than the loan value and tails the bank (that is, the Irish citizen) loses when a foreclosed property is sold at a loss?
At some point, it is to be hoped that NAMA or Anglo is held to account on these loans.
NAMA Wine Lake 
Great post.
Pure panto. NAMA and the Beanstalk. Wherein a young fool is tricked into exchanging his family’s only asset for a bag of beans – hilarity ensues.
In the US, proceeds in excess of the loan amount and late fees/penalties have to go to the borrower.
As I said in an earlier comment, I don’t think any US borrowers are in NAMA. There’s probably a legal reason.
@Frank, is that a supposition or guess on your part or do you have a source for commercial lending arrangements in the state of Illinois?
Foreclosure by judicial sale, more commonly known as judicial foreclosure, which is available in every state (and required in many), involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left.
Regarding my second point about US borrowers, it’s just my opinion. I know a number of US loans and borrowers that clearly qualify for NAMA but are not in NAMA. Anglo, alone, had an approximately $10bil loan book in the States. Can you name one American borrower in NAMA?
See this article:
http://articles.boston.com/2010-11-19/business/29308808_1_real-estate-irish-bank-million-loan
@Frank
1. “Can you name one American borrower in NAMA?”. No I cannot. I have tracked 77 developers as NAMA -bound which have been reported in the mainstream media or in company statements or court documents or company accounts . Not one is American to the best of my knowledge. That said, NAMA is taking on 850 borrowers so there’s a lot that have not been publicly identified yet. There are quite a few British developers in NAMA – the Beetham Organisation which is Liverpool through-and-through and Brendan Flood’s Modus (Brendan might sound Irish but he was born in Yorkshire and as far as I know has no assets in Ireland) – these would be two examples. There are others. I know of no obstacle to NAMA absorbing US and non-Irish/British developers – and I am familiar with the legislation and codes.
2. I understand what you & WSTT say about excess receipts over the value of the loan going to the borrower but what I had in mind was what Jake describes above. I do not know what the law is in Illinois.
3. Although NAMA is known as a “bad bank”, it was designed to take over all “land and development loans” and associated lending to “land and development” borrowers as well as borrowers deemed systemic to Irish banking. As WSTT says this was a strand to Paddy McKillen’s objection to being absorbed by NAMA – his loans are not impaired, he claims, and shouldn’t have gone to NAMA. The courts disagreed. And it seems that NAMA has gotten back 100% of several loans eg 20 Grosvenor Sq where the lender was as British as they come, Richard Caring.
Here is an example from one state, each has its own law. It is not automatic and you are number 5 in line.
For example, the Texas Tax Code chapter 34 allows for lienholders to petition for excess proceeds pursuant to a tax sale foreclosure of property. See Tex. Tax Code Ann. § 34.04(a),(c) (West 2008). The relevant provision(s) state:
(a) A person, including a taxing unit, may file a petition in the court that ordered the seizure or sale setting forth a claim to the excess proceeds. The petition must be filed before the second anniversary of the date of the sale of the property. The petition is not required to be filed as an original suit separate from the underlying suit for seizure of the property or foreclosure of a tax lien on the property but may be filed under the cause number of the underlying suit.
* * *
(c) At the hearing the court shall order that the proceeds be paid according to the following priorities to each party that establishes its claim to the proceeds:
(1) to the tax sale purchaser if the tax sale has been adjudged to be void and the purchaser has prevailed in an action against the taxing units under Section 34.07(d) by final judgment;
(2) to a taxing unit for any taxes, penalties, or interest that have been due or delinquent on the subject property subsequent to the date of the judgment or that were omitted from the judgment by accident or mistake;
(3) to any lienholder, consensual or otherwise, for the amount due under a lien, in accordance with the priorities established by applicable law;
(4) to a taxing unit for any unpaid taxes, penalties, interest, or other amounts adjudged due under the judgment that were not satisfied from the proceeds from the tax sale; and
(5) to each former owner of the property, as the interest of each may appear.
“I am not aware of any law in Illinois that would require the foreclosing company to return any excess on the sale price above the loan to the original borrower.”
It is the law in the USA that a mortgagee cannot collect more than it is owed from a property sale – unless of course they are owed money elsewhere by the same borrower and there are cross guarantees. It is logic – but maybe not to Irish minds that seek blood!
BTW, I am aware of an American asset, held by an American entity that has been absorbed by NAMA. But, I think that it is the exception, not the rule. And it was categorised as a development, not an investment.
@WSTT
Sarasota?
If this building was destined to make money then it couldn’t have been sent to NAMA, correct? Isn’t the whole point of NAMA to take only the dud “non-performing” loans from the banks and operate at a loss?
I don’t fully understand the post. Are you saying that because the loan was never transferred to NAMA, if the building sale ever makes a profit, that profit will go to the developer and not the bank/NAMA?
Inversely then, is it true to say that if a loan IS transferred to NAMA, then in the event of a profit, NAMA reaps the proceeds and the developers (original loan recipient) does not profit? Are you sure about this? Is this really true?
Is this what Paddy McKillen is complaining about? If NAMA takes his properties, they don’t just get the losses, but any profits as well? I’m highly skeptical. How is NAMA supposed to appropriate mortgaged properties in this way unless the developer has defaulted or is bankrupt?
“If this building was destined to make money then it couldn’t have been sent to NAMA, correct? Isn’t the whole point of NAMA to take only the dud “non-performing” loans from the banks and operate at a loss?”
No, all loans are going to NAMA, good and bad. Your point was Paddy McKillen’s point also.
@OMF
“I don’t fully understand the post. Are you saying that because the loan was never transferred to NAMA, if the building sale ever makes a profit, that profit will go to the developer and not the bank/NAMA?”
I presumed that NWL is pointing out that if NAMA as senior debtholder can claim 100% of the profits from a foreclosure sale, then NAMA as junior debtholder has worthless loans – by senior and junior I guess I mean in terms of size, not actually in terms of seniority of payment. That’d be a whole other kettle of frogs.
The post was intended to highlight two issues in addition to announcing a major sale of an Irish-associated property in the US (it doesn’t appear anywhere in the domestic press at all but give them a couple of days…)
(1) There is no mention of NAMA in a sale of what appears to be a NAMA-eligible loan that was redeemed 100%. NAMA would have been expected to have acquired the loan at a discount and is presumably foregoing a profit between the $93m loan and the price at which NAMA would have acquired the loan.
(2) I have previously come across the notion that in some instances in the US, the forecloser of commercial property profits from any excess realised on the sale and that may mean that Anglo/NAMA might have pocketed upto the full $117m sale price. Anglo was reported to have foreclosed last September 2010 and it is curious that in March 2011 the property was seemingly handed back to the developers to sell at what appears to have been a profit.