In what must be one of the most dramatic announcements by NAMA to date, its head of lending and corporate finance, Graham Emmett is reported to have told an audience in London on Tuesday this week, that NAMA would dispose of all of its assets in the UK by the end of 2013. Graham was speaking at the launch of the DTZ Money into Property UK report – his speech does not appear to be available yet so the best reporting is that by Property Week. This news is a bombshell because NAMA’s line previously, including that advanced by its CEO, Brendan McDonagh in an interview with Neil Callanan for the Financial Times in April 2011, was that it would dispose of only 25% of its UK portfolio by end of 2013.
NAMA’s UK portfolio is estimated to be worth €19bn at nominal value. It is unclear how much NAMA paid for these loans. NAMA’s average discount has been 58% but the expectation would have been that the UK discounts would have been far less than this. NAMA is understood to have received 100% of the nominal value of the loan for Richard Caring’s 20 Grosvenor Square building, for example. A 58% discount would imply a €8bn value at November 2009. Graham Emmett repeats the claim that the majority of NAMA’s UK portfolio is secured on assets located in London and the south-east ofEngland. NAMA has to date approved the disposal of €3.3bn of assets with “the majority” in theUK.
The reasoning for the rapid UK sell-off is, according to Property Week, the UK is a more liquid market than Ireland. The difficulties of disposing of property in a buoyant market first whilst nursing assets in other markets which continue to decline in value, was examined on here last week; a conclusion was that it would not be wise to dispose of assets in buoyant markets if the future rate of growth in those markets was greater than the declines in poorer performing markets.
UPDATE (1): 28th May, 2011. Emmet (two “m”s and one “t”) Oliver in the Irish Independent today seems to have been the only journalist to have gotten a reaction from NAMA to their Head of Lending’s statements in London. “NAMA will explore opportunities to dispose of assets in all markets over the coming years and will not restrict its disposals agenda to any one area or country, nor is it committed to exiting any particularly market by a particular time” was the NAMA reaction given to the lucky Emmet. Emmet is less fortunate with his spelling – NAMA’s Head of Lending, according to NAMA is Graham Emmett (two “m”s and two “t”s) and not as spelt by Mr Oliver.
UPDATE (2): 28th May, 2011. Actually the Irish Times today also reports a response by NAMA to Graham Emmett’s statements – “Last night, a NAMA spokesman said that “too much attention has been given to specific comments” and that it “may hold on to some assets for a longer time”, adding that the timescale would be set “by the appetite in any market to acquire assets at reasonable prices”.”
NAMA Wine Lake 
@BR, this addressses your comment left under the Nationwide House Price thread from today.
I suppose that like the Lord, what the ECB giveth with the right hand, it can take away with the left hand. The ECB has never entered into a formal agreement with Ireland that it will always accept NAMA bonds as collateral for its repo operations. It has up to now accepted them with what appears to be a 1.5% haircut – in other words if AIB has €100 of NAMA bonds, then the ECB will give AIB €98.50 in return for the bonds and charge a very low interest rate on the €98.50 – which is very generous of the ECB.
But the ECB can change its eligibility rules for collateral at the drop of a hat. And if it did, the banks might find that the NAMA bonds aren’t worth the paper on which they’re written and as no-one else seems to want to lend to Irish banks, that would cause not insignificant problems. In fact take €30bn of liquidity out of Irish banks right now and we probably wouldn’t have a banking system.
So yes the ECB could conceivably be making its wishes known to NAMA.
It just seems that this acceleration of the repayment of bonds and the disposals (if Mr Emmets reported comments are indeed NAMA’s stance) that it must be politically motivated. And if not a directive from the Minister than the only other source for such pressure is the ECB who have made it very clear they want to wean all banks off ECB funding. So what else could the reason be?
It seems that their is nervousness all around in the European banking system. Why did Dexia dump US real estate CDOs for a 3.6 billion loss? My guess is that the ECB is not all that sanguine about real estate pricing and certainly scared out of their wits by what is happening in Greece and Spain.
“With assets of over EUR 50 billion being managed in Dublin alone, Dexia has put in place a strong team of financial market specialists to control the portfolios, not just for the Dublin office, but on behalf of Dexia on a worldwide basis. Investment centres in New York, Singapore and Berlin are coordinated and managed through the Portfolio Management Group, PMG in the Dublin office.”
http://www.dexia-investments.ie/
Could this be a “Galway Races Tent” deal? Those characters are no longer seeking high profiles but they have not gone away.
I greatly enjoy reading your comments, as I am sure, do many others. I am also sure that there quite a few who do not.
Regards,
Dan Stephens
Funny that they should announce this, as I noticed that in the last couple of weeks, commercial estate agents in the city have all but “clammed up” on their “Paddy” clients. No information or chatter is coming from them in relation to current values and in the words of one London City planner, “The vultures are circling over the London assets of NAMA”.
These will be carved up between the old school tie brigade, the barrow boys, obvious ethnic cartels and the local masonic lodges.
You can forget transparent sales. Watch the city vultures in a feeding frenzy.
Another little glitch in the NAMA disposal programme, that may give the agents excuses for the lower than expected levels that NAMA will be offered, relates to the “flatlining” of office rental demand in the city over the past two months.
Agents have been forecasting increased demand causing increased rental levels and therefore increased values, because of a dearth of new space coming onto the market. However, there has been a falloff in tenant demand and the expected increases have not occurred.
All in all, a less than benign environment for NAMA to sell into.
The Fitzpatrick Tapes page 47
“Irish property investors planted a big flag in the London property market,and Anglo was instrumental in this. Property consultants DTZ estimated that,in the mid 1990s, the level of Irish investments in European property markets was less than ioo million euro. In 2002 Irish investors put £1.2 billion into UK commercial property alone. In the first three quarters of that year, Irish investors were the most active players on the UK commercial property scene.
By 2006 the Irish investment in UK commercial property had ballooned ,according to estate agents CBRE, to 5.5 billion euro”
It was the UK lease law. You could not these leases in any other european country. The Irish banks lent tens of billions against these leases not against the properties. It was Sean Fitzpatrick`s core philosophy.
page 123
“our exposure is not to the property, it’s to the money that comes from the leasing of it. he said. “If the value of the property goes down it dosn’t matter. We still get our loan repaid.”
@ Houdini is that you John? This is an article about disposal strategy of NAMA you have plenty of other forums on this site to bang the lease ‘law’ drum. NAMA have been quick to tone down Emmets comments as reported in the Times and the Indo this morning. Both papers also make some inaccurate comments about NAMAs disposals so far but we must live with shoddy journalists in the mainstream.
@WSTT indeed as a participant in the London market I was always sceptical of the ‘recovery’ here. It has been off very very shallow transaction levels and the prices or rents achieved for certain buildings does not mean that all similar property will achieve the same. As I said previously any buyer of NAMA stock in London will a) know it is NAMA i.e. Distressed in their view b) know what NAMA paid for the loan and will match their bid accordingly.
If NAMA is hoping that London will save it’s bacon because London is a more liquid market it is either not capable of doing its own research or its advisors are not offering the best information. The proof of the liquidity is in the volume of transactions and because of the lack of finance in the UK that volume simply is not there.
Having said that this new objective of paying down the bonds as soon as possible should see some portfolio and whole business platform sales in the not too distant future.
@BR, any views on the reported 4.4% yield implied by the reported third sale by the Cosgraves of a property on London’s Oxford Street (full details in the update at the bottom of this – https://namawinelake.wordpress.com/2011/05/21/play-the-asset-management-game-and-see-how-your-score-compares-with-nama/). The GBP £165m sale is quite a significant sale of prime West End property. The going rate in the West End at present is 4% as evidenced by a number of reports at that linked post. It is not established that the latest property sold by the Cosgraves is subject to a NAMA loan. And of course there could be many factors that affect the yield, leases, planning issues etc etc. But on the face of it, the property has been disposed of below market value.
@Banana Republic
During the celtic tiger era the UK estate agencies bought many of the Irish estate agencies. Many thought this was because of the booming Irish property market but it had nothing to do with the Irish domestic property market. The reason was the Irish wheeler dealers were investing billions in London/UK commercial property and the UK estate agencies were targeting this lucrative business.
The Irish wheeler dealers were chasing the UK commercial leases. They could not get these leases in any third world country or certainly not any other european country.
@houdini/john Yes and many estate agencies in London had very profitable ‘Irish desks’ during this time of cheap and easy credit. I would argue that the Irish were attracted to London for historical reasons (similar language and legal system etc.) But your comments do not add to the current debate which is what is NAMAs disposal strategy.
@NWL Seems like the obvious buyer and there would seem obvious potential for asset improvement. Oxford Street probably trades at a slight discount to Bond Street so the blended yield of 4.3% seems about right. But as I have said these sorts of assets are in the minority of NAMA’s portfolio in the UK. More of it is made up of sites with/without planning that need development capital to recover the land value.
There is currently no appetite to lend development finance so really these sites can only be sold at very low levels to offer the necessary returns to investors. This is the crux of my NAMA UK argument.
I have mentioned this here previously, but it needs to be reiterated when NAMA announces that it intends to “speed up” the disposal process.
Over the past year, the NAMA banks have rushed to dispose of property in London. They have done this in order to achieve a better price than they could extract from NAMA. But in so doing they have disposed of these properties at an undervalue. They have not obtained the best price in the market for the Irish taxpayer. NAMA has colluded in these disposals by rubber stamping the sales when asked for approval. The London estate agents and their cohorts (like the bondholders) can’t believe their luck and the naiveté of the Irish. Bargains have been obtained and there needs to be an independent investigation into these sales.
NAMA’s answer to this criticism is to announce its intention to sell in a transparent manner by ensuring that two agents are employed and that the properties are advertised prior to sale. NAMA’s strategy has the agents “rolling in the aisles” with laughter again. They have “clammed up” as far as discussing or valuing any Irish held property is concerned and are drooling at the mouth at the thought of receiving a further opportunity to shaft the “thick Paddies” who once again are more interested in selling quickly than maximising value.
NAMA’s borrowers are aware that the last thing NAMA wants to do is work with them to extract the maximum return for the Irish taxpayer. God forbid that those borrowers might make a penny from the asset. Best to sell to the Brits at whatever price they will pay, even if it doesn’t match up with the business plans.
It is actually a disgraceful attitude, because there are development situations in London where the borrower has access to bank funding that would take NAMA out of most of its borrowings on particular loans and leave them with profit shares above that would enable NAMA to recoup most or all of the par value. These proposals have been rejected to the detriment of the taxpayer in favour of expedited sales by the smooth talking, plummy voiced London estate agents.
The vultures are truly in control and it is an not looking good for the success of NAMA. If it cannot succeed in maximising returns from its London book there is no hope for it at all.
An urgent oversight and investigation is needed ASAP.
Breakfast with Anglo page 131
Simon Kelly writes;
“London is a difficult market to compete in for the large deals because of the number of players. The Irish had had a strong run with the number of deals funded by Irish banks, but to get those you’d had to pay the “Paddy premium”. All the london agents were happy to sell to the Irish once you’d paid the premium. I was not happy to pay it so I had never bought any development property in London”
Perhaps Nama should insist on receiving the “Paddy premium” when selling their/our properties.