The word on the street last month was that KPMG International was close to agreeing a deal whereby Treasury Holdings loans would be bought from NAMA, but it seems that for the time being at least Treasury is continuing to negotiate with NAMA. One of Treasury’s main corporate vehicles which it majority owns, Real Estate Opportunities (REO) PLC today reported its preliminary results for the year ended 28th February 2011, in which it confirms that it has signed a Memorandum of Understanding with NAMA but that negotiations are ongoing, presumably before the famed Heads of Terms and Final Agreement are concluded (“famed”, because last year before Ireland’s Committee for Public Accounts in the Dail, the NAMA CEO referred to three documents which comprise a full agreement with the Memorandum of Understanding being the first).
Treasury Holdings is reportedly one of NAMA’s Top 10 developers and REO’s main asset, the Battersea Power Station site in London is likely to be one of NAMA’s most valuable properties (the Dundrum Shopping Centre might just about be the most valuable on paper today but that will change as Battersea is developed, having secured full planning permission at national government level earlier this year).
With respect to the actual accounts, REO reported a GBP 77m loss after taxation which is a considerable improvement on GBP 828m loss in the previous year. Of course both years are buffeted by the effects of revaluations to the immense REO portfolio which looks like this in overview.
REO is heavily indebted with borrowings of GBP 1.7bn of which GBP 1bn is bank debt, a large amount of which is now with NAMA. The company has negative shareholder funds of GBP 0.8bn. For all of that the company believes it will reach agreement with its creditors and will go on to develop Battersea. Subsequent to year end REO sold – world exclusive on here last January – the Montevetro office building in Dublin to Google for GBP 85m. REO’s landmark building inIreland is Central Park in Leopardstown, Dublin where it has a blue-chip list of tenants and subsequent to year end, Irish gas and oil exploration and production company Tullow agreed to rent 48,000 sq ft.
Treasury is controlled by the colorful Johnny Ronan and Richard Barrett and would appear to be one of the NAMA Top 10 developers which might secure full (including Heads of Terms and Final Agreement) NAMA backing to its business plan.
NAMA Wine Lake 
Your indulgence if I may.
Command and Conquer Red Alert was a watershed game in the C&C series as well as for real time stragegy games in general. It used iconic imagery from the World War 2 and interwar eras to create an innovative setting for an imagined conflict between the Soviets and the Allies, based on the exisiting C&C game engine. It was an enormous success, selling three million copies across multiple formats, and becoming one of the first video games to achieve a wider recognition beyond the then considered bounds of the game market. If you were young in 1998, you knew what Command and Conquer was.
Why do I mention all this? Because the game featured a notable homage to the Battersea Power Station in the form of the essential “power plants” which players depended on, with the basic and advanced version featuring two and four stacks respectively, reflecting the development of the plant.
And I note this point because I can fathom no other reason for so much money being spent on a dilapidated 80 year old brick coal plant other than young men with too much money and far too little sense being eager to purchase their very own power plant from Command and Conquer!
In short I cannot for the life of me see why this power station is anything other than a kind of Super Glass Bottle Site; a site bought for far too much money which will never be able to recoup the money paid for it.
Since Treasury Holdings is effectively in receivership, the only place the money to develop this site is going to come from is from NAMA, i.e. from the Irish State. And having the Irish State paying for property development in London itself strikes me as an endeavour which will not fly on multiple levels, if not dimensions. For example, as the site is only a mile or so from their houses of parliament, the British government will probably notice and will tend to apply THE RULES, which will certainly put the brakes on any Irish development.
I’m being very skeptical of this, but I object to the idea of Irish public money being sunk into companies and projects which we really can’t afford. I think these properties should simply be sold on at the earliest opportunity. Let the some other C&C fans make their bids and let NAMA do what it was meant to do: Sell its properties for a profit, not risk more money developing them.
@OMF, thanks for the reference to Command and Conquer., not that I have ever personally played it. You correctly say that the site is a mile or so from the British houses of parliament. That’s true and it is just across the river from the Candy and Candy Chelsea Barracks development, next door to the new US embassy (due to be opened in 2017, it’s moving from Grosvenor Square) and of course next to the river. It is likely to be one of the biggest developments in London over the next decade, though it will have its competitors eg in Earls Court. Even now in 2011, and with preservation works part of the planning permission, it is a hot piece of real estate. It will be interesting to see what NAMA does because on this one I think it has options : sell or develop?
I’m not sure if development is a serious option. Is the British government really going to allow a state financed company to construct its (apparently) première development? Won’t that break some sort of competition law?
Apparently there is even going to be a London Underground extension as part of this development. This is a Big League Project and frankly I don’t think that NAMA should be getting involved in projects of this size–it’s not what the agency was set up to do(My opinion is that both NAMA and Treasury are out of their depth on this one, but that’s another matter). I think they should sell the site with its planning permissions and move on.
@OMF, sure a GBP4-5bn development is significant but there will be a few on a similar scale in London in the next decade. Must say I think the Brit/Paddy history gets overplayed – tribes exist everywhere and modern Britain is relatively open, perhaps more so than Ireland in many ways. .
As for NAMA, the decision might be between getting 50c in the euro on the nominal value of its loans at present with 100% certainty or 100c in the euro with 70% probability in 4-7 years. The components of the decision are just illustrative but it mightn’t be as financially cut-and-dry as you suggest.
I didn’t mean that the British government might not allow the project because it was Irish. I meant they might block it because it was being funded by a state, in possible contravention of their competition laws. A whole can of worm may be opened during this project, and those like in other countries, about whether NAMA backed developments and companies are even entitled to operate in other jurisdictions.
Companies with loans in NAMA are effectively insolvent in all but name, as their loans would not be in NAMA unless they were having trouble paying them. If NAMA gets involved in overseas development, and if either itself or companies in its remit fall into difficulty there, the problems which arise could have a domino effect on NAMA development worldwide.
So I think the agency to stay away from development–for properties abroad at least.
@OMF, “Companies with loans in NAMA are effectively insolvent in all but name, as their loans would not be in NAMA unless they were having trouble paying them”
You need to be careful about that because on NAMA’s reporting, some 20-30% of loans are being repaid according to their loan agreements, that is they are performing. Plainly many loans are not performing and many companies are in financial trouble but you need to be clear that not all NAMA developers are in trouble or have missed a single payment on their loans.
@OMF: Oh to be back in 1998 again for us that are no longer young:
@NWL:
That is a very interesting chart re REO properties. Allow me to make a few points.
1. It demonstrates the sheer stupidity from a national point of view on of not finishing partially developed projects. The construction industry is now reported to as low as 2.5% of the toal economy. Instead of NAMA using funds to loan to purchasers., it should advance those funds to finish properties. There would be a significant employment boost in this approach at little cost.
2. It also demonstrates the sheer stupidity from a national point of view of selling finished properties into a sautrated market. NAMA should forget about selling finishing properties (at least in Ireland). It should rent or lease those properties.
3. The funds generated from sales of property outside Ireland could be used to provide working caital to finish projects within Ireland.
4. NAMA policies should not be set as that of a property winddown company but as part of a broader economic jobs program.
5 The overconcentration of any “losses” that NAMA might make because of falls etc in very cyclical property prices in misplaced.
NAMA objectives should be clear.
A. Rent/Lease all finished properties.
B. Develop all partially completed projects.
In fact the completion should be contracted out to one of the better and more honourable developers. That person would have a far better chance of competing the projects that all of the NAMA staff put together and multiplied 10 times.
@NWL. ‘It is likely to be one of the biggest developments in London over the next decade’. yup and the last one, and the one before that, and if I remember correctly the one before that again. Still, it was a great place to go go-karting – the dogs are still barking.
Yet another Treasury Holdings press release/puff piece promising phantom investors. They are just playing for time. This development will never happen, NAMA should pull the plug on this before we lose even more money. Treasury are described as one of the top ten developers in NAMA. Is this a good thing? It just means that they owe an awful lot of money. Time Gentlemen Please! – Morocco is nice this time of year.
Haven’t seen this reported here yet (this is the latest Battersea post I could find) – I assume you’re aware of it:
REO seeks to sell 50pc stake in Battersea Power Station
http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/8712155/REO-seeks-to-sell-50pc-stake-in-Battersea-Power-Station.html
@WGU, thanks for that. Was aware of the KPMG involvement in the review of imminent expiring lending (Lloyds and NAMA) but not the 50% (or 100% with profit-share) sale of the project that the Telegraph is reporting.
http://www.independent.ie/business/irish/reo-in-race-against-time-over-euro260m-loan-on-battersea-site-2853422.html (the original report is in Property Week here – http://www.propertyweek.com/news/battersea-power-shifts/5023285.article)
Treasury Holdings which has control of REO were reckoned to be one of NAMA’s pets but there was a pretty aloof statement from REO a few months ago emphasising the fact that Treasury had not yet signed a final agreement with NAMA. With doubts over the value of Battersea (€300m was cited by Property Week, €500m is REO’s valuation), the next week might be an interesting one for Treasury,