[UPDATE: 2nd November, 2011. The transcript of the hearing is now available here ]
Here’s a question for you – say you were going to buy a car and a house. And you had a budget of €20k for the car and €300k for the house. Wouldn’t you expect to spend proportionately more time considering the house purchase? And although the colour and make of the car might be of intense interest, when it finally comes down to it, the outlay on the house is far more significant. That’s how a logical person might approach the purchases. But there is good reason to suspect that the approach by the members of the Oireachtas Committee of Public Accounts would be reversed and they’d spend more time considering the car. Why? Because for five hours today they grilled NAMA on its operations and devoted 90%+ of the time to costs and activities that represent a tiny proportion of NAMA’s finances. NAMA will generate some €30bn of sales in its lifetime (hopefully), even including developer salaries it will cost some €2bn, and yet it was the latter that occupied most of the time of the Committee today. Here are the highlights:
(1) NAMA has approved €4.6bn of sales to date. 80% are overseas, 20% inIreland. The overseas disposals have earned NAMA a profit of 12-15% above what NAMA paid for the loans. Some of the Irish disposals have been at a loss, put at 5-25%, compared with the loan acquisition value.
(2) NAMA expects to have disposed of €9bn of assets by December 2013, 70% of which are expected to be overseas. Besides theUSand theUK, NAMA has significant assets in Germany, France and Portugal (and only about €120m of assets in other European countries –Malta, Poland, Czech Rep were mentioned).
(3) NAMA has approved advances of €900m to 70-80 developers with €500m of that being handed over in cash.
(4) NAMA is directly managing 188 of the 850 debtors controlled by the Agency. The rest are managed by the banks directly, with NAMA having overall control. To date 143 business plans have been “assessed” and 30% have been subject to full or partial foreclosure action. By the end of the year, it is expected that all of the 188 plans will have been “assessed” plus some 200 of the smaller business plans for the borrowers managed directly by the banks.
(5) Developer salaries; by the end of 2011, between 110-120 developers will be paid salaries of €70-100,000 per annum each, plus there are 2 who will be paid €200,000 per annum. NAMA stresses that these are cheaper than employing receivers or generic property management or asset management companies. NAMA says that the two €200,000 salaries relate to developers managing €2bn portfolios, and that a professional asset manager would typically charge 1% per annum or €20m. So NAMA says it is getting value for money, despite the public perception of a bailout.
(6) In terms of transparency of disposals, which is the meat of what NAMA does, the NAMA chairman said he was “minded” to seek approval from the NAMA board for better transparency but he wouldn’t make a commitment.
(7) In terms of the disposal of no1 King William Street, NAMA claims that the property was “extensively marketed” but only gave advertising in Property Week in support of that claim, there were 30 viewings of the building and 7 parties submitted bids which ranged from GBP 65m to GBP 67.5m. NAMA was not asked why a better yielding price wasn’t offered. Again from a personal perspective, I could not find the property on the receiver’s [GVA Grimley’s website]. There may well be reasons why the price achieved was some GBP 6m less than might have been suggested by the “going rate” yield but we didn’t find out what the reason was, today.
(8) Montevetro was apparently on the market before it was sold to Google earlier this year. It was advertised for sale or rent by the developer, a Treasury Holdings company. That might come as a surprise to some people. NAMA claimed that the only party that would have had an interest in the 210,000 sq ft building “then” was Google. Times have obviously changed because the Central Bank of Irelandand Bank of New York Mellon are both reportedly chasing the 230,000 sq ft Liam Carroll building designated for the Anglo HQ.
(9) The Anglo HQ may be sold by the end of November 2011. Negotiations are at a sensitive stage, but NAMA agree that the site is an eyesore and emblem of what went wrong and they genuinely seem to want to see the project completed.
(10) NAMA claims that the maximum it could have earned on the Maybourne loans was GBP 660m (which equates to the €800m widely reported in the Irish media) which was the par value of the loans. Whilst that would normally be logical there seems to be some suggestion by Paddy McKillen that NAMA might have earned more, and there are also suggestions that the loans represented a stepping stone to acquiring equity in the Maybourne group and thereby getting control over valuable assets. Let’s see what Paddy McKillen has to say.
(11) NAMA is in a crowded market-place in Ireland and is competing with ACC and its €2bn portfolio, Danske/National Irish Bank and its €2bn portfolio, Bank of Scotland (Ireland) and its €30bn portfolio written down to €15bn and RBS and its €15bn portfolio written down to €7.5bn. “We’re watching them and they’re watching us” said the NAMA CEO.
(12) NAMA has a full year, internal cost of €45m which comprises salaries of €20m (representing an average of €100,000 for 200 staff) and other costs. Maybe it’s the cynic in me but I have a feeling a large part of the other €25m will comprise headcount related rewards and benefits, pensions for example.
(13) NAMA apparently tendered for the auctioneer contract to sell Derek Quinlan’s art collection. There was a tender document, even if it wasn’t published on the NAMA website. Christie’s is not charging a fee to sell the art, and apparently Irish auctioneers were also willing to sell the art without charging a fee. The thing is that Christie’s will charge buyers 15%+ and that is expected to yield €400,000+ for the auction house. I have seen suggestions that NAMA should have formally tendered for this service because the concessionary value was more than €250,000, but regardless I think some auction houses might now ask why there was no public tender. And on the subject of art, NAMA is apparently poised to take control of a second art collection.
(14) The overall cost of the NAMA operation in 2011 will be an estimated €150m, comprising €45, for NAMA’s internal costs (see above), €75m for the banks who are administering the loans day-to-day and managing the 662 smaller loans and €20-30m for legal and professional services bought by NAMA.
(15) NAMA has made an operating profit of €400m for the first nine months of 2011 and still expects a full year operating profit of €500m. NAMA will need deduct impairments and NAMA has confirmed there will be impairments in 2011. The NAMA CEO would not be drawn on the quantum of impairments in 2011 and said it would only be calculated at the end of the year, but he did not reject a suggestion from Deputy Fleming that it might be €1bn, which if correct might see NAMA needing a small amount of new capital.
(16) Worryingly the NAMA CEO says that central London’s yields are at 4% which is an historical record, and that apparently is the justification for selling there now. Not only have there been sales below 4% (the 3% yield sale of a Rolex store in Knightsbridge recently being a case in point) but I would have thought that NAMA would have learned its lessons with yields. Remember September 2009 when then Minister for Finance, the late Brian Lenihan said that yields in Irelandwere at an historic high meaning we were close to the bottom? And prices have quite nicely fallen 25% since then? Yields are a factor in determining prices and projections, but just one factor. Central London has a severe shortage of prime property and inflation is likely to be 4% for the next couple of years with the new round of Quantitative Easing in the UK – if NAMA is relying solely on yields to inform its timing of London sales, then we should be worried.
(17) With respect to the recent Michael Geoghegan review of NAMA, it seems to be the NAMA view that the Agency initiated the review, the findings are confidential and weren’t written down apparently, but the NAMA chairman does not consider the recommendations to be tantamount to creating a watershed in NAMA’s evolution, nor does he see there being significant change.
(18) NAMA has acquired €74bn of loans for €32bn and that’s likely to be the end of the acquisitions following the recent completion of €2bn of acquisitions. The average haircut is 58%. Interestingly NAMA said that because of the way in which it valued loans, it is likely that the acquisition price equalled the value of the property at 30th November 2009, with the Long Term Economic Value premium being offset by discounts that the EU allowed NAMA to make to the loans. That may well be true.
(19) The Comptroller and Auditor General said that he would give consideration to publishing par values of loans in the accounts alongside the NAMA valuation. That would be welcomed in many quarters, so that we can see the scale of write-downs and write-offs.
(20) To finish on a lighter note, you would have to wonder if Brendan McDonagh was being sponsored today to say the word “effectively”. When the transcript becomes available next week it will be posted here but he seemed to use the word every half minute, particularly when he was on shaky ground.
With respect to the Committee’s oversight of NAMA, it is to be hoped that it will be able to acquire better information on NAMA’s disposals in order that it can meaningfully examine NAMA’s performance in disposing of €32bn of loans. It would be a shame if future hearings were to concentrate on the bonus of the NAMA CEO (max of €260,000, waived by him last year) to the exclusion of examining whether or not NAMA achieved good prices on €4.6bn of disposals.
UPDATE: 27th October, 2011. Further to point (13) above, it seems that the 2nd developer to see his art collection succumb to NAMA is Alburn’s Noel Smyth. The Irish Independent reports that NAMA has “taken possession” of nearly 400 works which included paintings that had previously been displayed at the Tate Gallery (London). The Independent claims Noel Smyth has said that he is “happy” to work with NAMA on “the transaction”, presumably the recovery and sale of the collection. There doesn’t appear to have been any public reporting of efforts by Noel to re-finance his Real Estate Capital portfolio in the UK since April 2011, but he was facing challenges to re-financing proposals, which were set out in a detailed note by CBRE here.
NAMA Wine Lake 
*cough* Tres-ry ‘oldins*cough*. ‘M surprised at this being news, because it was known already to my knowledge.
Nama is a state agency. The FOI must be applied to it or all we’ll get only polite two-fingers letters from the agency forever more.
You missed the point about how Nama said they have no intention to pursue or enforce debts if there is no “economic sense to do so”, and how the Dail committee chairman(FF) strongly supported this point. Nama’s comments suggested they will not pursue debtors, even if they owe money and are not yet bankrupt.
Importantly related to this was Nama’s planned “incentivisation scheme” to “encourage” debtors to actually pay back what they owe. If the debtor manages to pay back only what Nama paid for the loan plus ~10% then a scheme allowing write-downs on the rest of the debt might be applied.
It is clear that Nama is in the process of institutionalising debt forgiveness for developers. The kid gloves with which these ultra-debtors are being treated is especially galling when contrasted with ruthless treatment of hundreds of thousands of distressed mortgage owners by the banks, and indeed by Nama in some cases.
This is a the two-tier debt-forgiveness system in action.
@OMF,
(1) Can you give an example of one useful piece of information you think can be accessed under Freedom of Information from NAMA, remembering that NAMA is legally obliged to maintain some confidentiality and will want to maintain commercial confidentiality
(2) NAMA’s position on debts is old news and there is nothing new here. NAMA will chase the debtor to the maximum extent feasible.
(1)
i) A complete list of any and all “ghost” estates and developments which Nama loans cover, and more importantly what Nama’s current plans are (if any) to finish development in the short and medium term in each individual case. In addition, what is Nama’s policy and strategy with regard to finishing abandoned construction projects in general.
ii) A complete list of developers who are on the Nama payroll (along with descriptions of any of their staff also on payroll), and a list of the developments which each is managing. In addition, what procedures does Nama currently have for assessing the performance of developers being so employed to manage loans?
iii) A complete and total description of Nama’s “mortgage enhancement plan”, along with a list of what loans have been enhanced, amalgamated by category of property and income/profession of mortgage holder.
I don’t think that any of the above should give any trouble with confidentiality, commercial or otherwise, and would give the public an appropriate degree of information about the (expensive) operation of this state agency.
(2) You are technically correct, but my point is that Nama is in the process of re-defining what “maximium extent feasible” means. Specifically defining it to mean “‘Ara sure, we’ll leave it off so…” and “Sure aren’t you broke anyway!”, and even “Well you didn’t do too bad now, so here’s a bit you keep you warm on the road home.” “Good night and Safe journey sir!”
“Wide” I call it.
@OMF,
(i) this would involve NAMA confirming a developer was a borrower with a NAMA loan. That would break NAMA’s obligation on confidentiality in the NAMA Act. NAMA already provides a list of foreclosed property including ghost estates. We know that NAMA has an interest in 20 of the worst ghost estates estates.
(ii) that would be covered by NAMA’s confidentiality obligation to developers contained in the NAMA Act
(iii) what is the “mortgage enhancement plan”?
“(2) NAMA’s position on debts is old news and there is nothing new here. NAMA will chase the debtor to the maximum extent feasible.”
Not so sure on this. Repeated suggestions by the Minister for Finance and Nama that it will pursue debts to the “greatest possible extent” must be taken with a pinch of salt as they don’t even appear in Nama’s balance sheet or form part of Nama’s core objective*. For the avoidance of doubt and to make matters crystal clear, the Government should be requested to amend the Nama legislation to indicate that maximising the recovery of original debts, over and above the actual cost of acquiring loans and recovering expenses, is an explicit objective under Section 10 Subsection (2) (c).
* The Chairman of Nama, when speaking at the CPA’s Annual Conference on 4th June 2010, sought to clarify Nama’s objective in the following terms:
“NAMA’s core commercial objective will be to recover for the taxpayer whatever it has paid for the loans in addition to whatever it has invested to enhance property assets underlying those loans. This objective has not been determined by NAMA; it has, in fact, been set for us by the legislature under Section 10 of the NAMA Act. There has been some comment that the consequence of this objective is that NAMA, having recovered its outlay, will then absolve borrowers of their further obligations. This is absolutely not the case. Borrowers, as both I and NAMA’s CEO Brendan McDonagh have already said on a number of occasions, will continue to be liable for the debts that they have incurred.”
@Brian, NAMA says that it will pursue debts to the maximum extent feasible. So that enables NAMA to say it will go after every red cent, but it also enables the like of Harry Crosbie to say that NAMA will go after what the Agency paid for his loans IF Harry doesn’t have any other assets and he has co-operated with the Agency (reversing transfers, agreeing to keep a low profile, ditch the Ferrari type of thing). Because NAMA can’t get blood from a stone, it wouldn’t make sense to pursue Harry if he didn’t have any assets which he could bring into play to make up for the shortfall between the original value of the loan and what NAMA paid.
@NWL
Agree that you cannot get blood from a stone (and should not even bother trying).
In law, Nama is only required to to recover for the taxpayer whatever it has paid for the loans in addition to whatever it has invested to enhance property assets underlying those loans. IMHO, this objective should be extended to embrace maximising the recovery of original debts (where feasible and as far as practicable and cost effective).
OK, I’ve looked up what appears to be the releant section in the Nama Act pertaining to confidential information.
Many things appear to be treated as confidential information, but the important part appears to be this
It appears that the stumbling block to disclosing information such as that suggested is not the act itself, but rather internal Nama policy. Interestingly, the act also seems to allow information to be disclosed where obliged by law, so I don’t see why Freedom of Information requests don’t apply to Nama already.
By the way, the actual _names_ of the developers in Nama are not actually considered to be confidential information under the act. Only the “commercial or business interests” of people and institutions is consider to be confidential information.
Of course, given how even Attorneys General can completely misread proposed amendments, I suspect that logical readings of the bill wouldn’t get very far with Irish lawyers.
@OMF, the relationship between the developer and NAMA is primarily governed by the loan agreement at the original bank which has now been assigned by the bank to NAMA. NAMA has said it will provide developers with the same level of confidentiality that they would have enjoyed with the original banks. And I think developers might have issues themselves if they were “outed” by NAMA. Remember Paddy McKillen’s case at the High Court last October and the claims of the damage that association with the “toxic bank” NAMA could have on the reputation and prospects of a developer.
I don’t think Freedom of Infomation will even get you a basic confirmation of the names of developers in NAMA.
“(19) The Comptroller and Auditor General said that he would give consideration to publishing par values of loans in the accounts alongside the NAMA valuation. That would be welcomed in many quarters, so that we can see the scale of write-downs and write-offs.”
I will certainly welcome that – see http://www.planware.org/briansblog/2010/11/nama-and-creative-accounting.html
I trust that he will take account of rolled-up unpaid interest which could amount to €10 bn on top of the €42 bn scalping.
“(18) NAMA has acquired €74bn of loans….”
Given the growing time since acquisition it’s probably reasonable to add in rolled-up (/unpaid) interest.
“(3) NAMA has approved advances of €900m to 70-80 developers with €500m of that being handed over in cash.”
Are these to developments in Ireland? It would be nice to see the details. If the NAMA CEO is saying “We’re watching them and they’re watching us” in relation to Ireland, you’d like to see evidence the 900m is being lent wisely.
@Ahura, I think the geographical split of the €900m would be very interesting, indeed and will see if a PQ can be submitted.
@Brian, yes I thought you would be happy with that. Deputy Sean Fleming was particularly interested in how NAMA was calculating interest due and whether or not it was due on the par value of the loan at the original bank or the written down value which NAMA paid. Apparently it is the Department of Finance which sets the format of NAMA’s accounts but John Buckley the C&AG seemed to understand the significance of the information, and I would be hopeful he will pursue it,
@NWL
Yes. I’ll write directly to the C&AG (and copy Sean Fleming) with copies of my various submissions to Nama and EU.
You may recall my interest was triggered at the very outset by that famous cashflow table in Nama’s original business plan. This begged questions as to how Nama was handling rolled up interest and loan write downs/offs. In my day job I sell Excel-based tools for generating proforma projections so I have a professional (and nerdy) interest in financial projections containing integrated P&Ls, cashflows and balance sheets. The latter was missing from Nama’s published biz plan which got me wondering …..
Completly confused by 5 is this on top of property management and leasing fees if so then it was disingenuous to compare it to third party asset management fees.
@John, here’s what Frank Daly had to say – NAMA could engage a third party asset manager to manage a €2bn portfolio and the going rate would be 1% (per annum presumably) which would be €20m – in other words, NAMA would need pay a third party asset manager to manage a €2bn portfolio. If NAMA pays a developer €200,000 instead, then that represents a huge saving for NAMA.
Thinking about the example, it seems Frank was being a little bit misleading – was he really suggesting an asset managemnt company charging €20m a year would only provide the same service as a €200,000-salaried developer?
You need to tweak your example somewhat to reflect the true nature of the Faustian pact required of Joe Taxpayer.
The deal Joe Taxpayer is being asked to accept is that the car and house they’ve been legislatively contracted to buy is first-and-foremost valued at €50K and €700K respectively.
They are now expected to write off €30K and €400K of this because some genius got his figures wrong.
They are still expected to go through with both these purchases at the original price and along the way accept that the genius who got his figures wrong in the first place and valued the car and house at such ludicrous values is now the most competent, and best value, to ensure the best price is achieved at the new level.
Oh – and by the way – there’s no point in going back to him to try and get any of the €430K back – because it’s gone.
Oh – and also – you’re going to pay him for the privilege.
Paying him for the privilege may only be a small percentage of the new budget – but forgiving him the balance makes him one expensive advisor.
Having NAMA appear before the PAC and state that the €430K is gone, and the best hope of getting the remaining deal done for €320K is the guy who cost you €430K smacks of capitulation to me.
The twisted logic of NAMA is laid bare:
– The CEO of NAMA states that there’s no hope of getting anything more than what NAMA paid for the loans (if that) back.
– These guys are the ones to help achieve it because otherwise they could simply walk away and frustrate a more expensive receiver.
– But he admits that the reason there is no way of getting more back is because the developers are bust because they never saw the crash coming.
So they were too stupid to walk away when they were winning but too important to let go now.
Their “wages” may be only a fraction of the new costs – but their debt forgiveness cost is the real issue.
People will say that the €40-odd Billion NAMA haircut is gone, forget about it. All that is important now is trying to get the job done in the least expensive way possible.
Well that’s like letting a grossly incompetent surgeon, who’s killed a patient, do the autopsy to determine cause of death, because he’s cheaper than a competent one.
Some bargain!
@WGU, NAMA has indeed acquired €74bn of loans and paid €32bn, so the banks are nursing a loss of €42bn. But that’s not NAMA’s fault. NAMA valued the loans on an armslength basis and it is not NAMA’s fault that loans fell in value by so much that NAMA only paid 42c in the euro for them. But you are right that NAMA should keep the €74bn in mind in terms of its target recoveries, it’s just with property down 65% (commercial) 45% (residential) 75-90% (development land), NAMA is never going to make back the original sum unless the developer has other assets to bring into play, and compared with the €100s of million of loans, there seems to be very little that developers can bring into play. There’s “no crock of gold” according to Brendan McDonagh.
Aye – I accept there’s “no crock of gold” – I tend to see NAMA more as a crock of shit – but I don’t think that’s what Brendan means!
I also accept that the €32Bn is the new game in town – but the developers made their deals at €74Bn with the banks – so it’s only polite to reminds them of their “irrational exuberance”.
NAMA is saying these guys who’ve overpaid by €42Bn for “assets” are uniquely qualified to work them out.
Again, I would agree – but my understanding of “uniquely qualified” and theirs may differ!
re 5… they are paying two ‘asset managers’ 200,000 a year each and can not answer where they RESIDE for tax purposes hmmmmmmmm sorry the Irish taxpayer is.
@John, these won’t be employees of NAMA, they won’t be on the payroll. The usual procedure would be for them to issue invoices with details of a bank account. NAMA wouldn’t be expected to know if they are tax resident in Ireland, or China or Gilbraltar or Monaco or wherever.
Would it be fair to say that with recent disposals of assets by NAMA at discounts to the November 2009 NAMA valuation, that the NWL index should be lower than 20%? Now that losses have been crystalised on existing sales, the burden of breaking even now lies on the (reduced) remaining portfolio. eg if NAMA sells 50% of it’s portfolio at a 10% loss, and the NAMA portfolio is now seen to have dropped by 20% in value, NAMA would need a rise of 37.5% from current values to break even.
If NAMA is only selling assets that attract bids of up to 10% below the 2009 valuation, then it is likely that the unsold elements of the portfolio may well have fallen below the ‘minus 10%’ threshold, eg attractive properties are being sold, and NAMA is left holding the dross. This ‘dross’ is even less likely to allow NAMA to break even than the NLW index might suggest.
Also does the NWL index account for the disproportionate weighting of apartments on NAMA’s books, when compared with the weighting in CSO figures? If not, then the NWL index could be reduced to reflect the fact that apartment values have fallen significantly more than the general housing stock.
This may also bear out in the commercial segment of the NAMA portfolio, which has an 80% weighting in the NWL index. In 2009, optimistic values may have been attributed to ‘commercial land’ which is now seen as worthless other than as agricultural land. With banks shifting the worst performing asset classes from their books to NAMA, it would not surprise me if they have fallen further in value than the general CSO assessment.
Finally, for NAMA to break even, property values need to rise above the 2009 valuation, in order to cover the not-insignificant operating costs incurred by NAMA.
@Ciaran, the NWL index is an index which tracks changes to property prices since 30th November 2009 which is the NAMA valuation date, and takes account of the fact that NAMA paid a 10% Long Term Economic Value premium and the fact that NAMA doesn’t need honour the subordinated bonds which comprise 5% of the consideration paid for loans. The index uses an estimated split of the assets between the UK and Ireland (which together comprise more than 90% of NAMA’s assets) and the estimated split of property type (between residential and commercial). For many reasons it is a simplistic index which aims to give an overall estimate of how much properties will need increase in price by, in order for NAMA to break even at a gross profit level (that is the sales price less the loan acquisition price).
Yes, as NAMA disposes of assets the profit or loss on the sales should be considered and also the composition of the remainder of the assets. But since NAMA doesn’t provide enough information that’s not possible and overall even if NAMA has disposed of €4.6bn of assets, there is still €25bn remaining. NAMA has made a profit on most of the sales (by reference to what it paid).
ahh ok they pass these details over in a envelope then !!!
Just because there’s no crock of gold, doesn’t mean we shouldn’t shake the leprechaun a little bit and see what drops out of his pocket.
NAMA seems to accept that the best place for the few gold coins we’ve extracted is in the pocket of the leprechaun until he turns it into more gold coins for us whereupon we’ll split the difference.
Either the loans are valued at close to market value, in which case any half competent development company can realise them (doesn’t need to be Irish) or they are not and this fudging with the existing developers is just that – fudging.
Fools gold indeed.
the most offensive aspect was how low the ‘bar’ is.. incompetent developers who could not navigate ONE full RE cycle get 40 to 50% forgiven and forgotten then come back for MORE with a 10% kicker on a reduced basis talk about MORAL HAZARD.
It’s not hard to flog off the tasty overseas assets, while leaving the Irish stuff to mature. As long as there are lots of nice items to unload, the liquidation of the portfolio will look impressive. Lots of opportunities for advisers of all kinds.
Ciaran Wallace has rightly identified the insidious portfolio deterioration which follows from the current strategy. The Irish dross will pile up steadily, and the longer the process goes on, the lower will be the prospects for new lending into Irish commercial property.
Property will stop at the bottom as it was always going to, but NAMA will have slowed things down enough to let the insiders regroup in time for the capitulation.
Does the Developers Pay Reflect those being paid to Developers who are not Reporting to NAMA directly??
Or is this only dealing with the Main Players So to speak
Being involved in NAMA type work myself for a non NAMA institution, and having been so in the UK in the past I would agree with NAMA strategy on not pursuing borrowers where there is likely little benefit.
IMO it is the greatest impediement to maximizing asset values as every trasnaction becomes mired in legal action, he said she said, all the while willing purchasers sit by and watch the asset values deteriorate. There is a huge value in obtaining consensual control of an asset in both legal fees saved and time saved.
Where the cleints do not co operate, kick them hard and kick them often. Unfortunately the bankruptcy regime here does not lend itself to it being an effective weapon and thus is rarely used by secured creditors.
@DG, interesting. NAMA did say yesterday that it was not seeking judgment orders, as would be the case with an “ordinary person” with say, a mortgage in default. NAMA said there was no point spending €1m in getting a judgment and there was just one presently before the courts (presumably the Capel directors, but not specified).
€1m to get a judgment order in Ireland.? Sounds high, but I suppose if there is the he-said,she-said debate in court, it can get expensive.
@NWL, could get it done for 15k if no contest but these are few and far between. If a contested case that needs 1/2 week hearing 1 m might be light. When you have the judgment then you need to spend more to actually enforce it by attaching it to unencumbered assets, garnisheeing payments etc. Of course if you make a mess of your case you could get stuck with client costs, in most cases client will have to pay yours, but Id say youd be whistling a long time for most of them.
You would need to be very very sure there was something there before you go down that road.
DG One would also need to bear in mind the slip-shod security taking that was prevelant in all banks. I.e. I have personally come across cases where the paperwork was apalling and as such would have resulted in cases being thrown out of Court. This gives a whole new basis for avoiding Court proceeding whenever possible!
The case for working with ‘broke’ developers is flawed. I have my doubts as to how broke they actually are, though I do accept a proportion are penniless. When NAMA was being set up, there was a lot of speculation on haircuts and what the LTVs were. IIRC it turned out that many were 100% loans. Some developers must have siphoned off money. Journalist Kathleen Barrington wrote some interesting stories about Seannie Fitzpatrick selling off Anglo’s Austrian private bank as Anglo was going down the tubes (http://www.sbpost.ie/themarket/lenihan-silent-on-issue-of-anglos-austrian-depositors-54050.html). It’s very possible that assets may have been forgotten.
Oops, before I wandered off I was saying that the case for working with ‘broke’ developers is weak and morally wrong. Daly seems to be suggesting NAMA will write off huge amounts of debts, pay them a salary and a free option to win a big wedge. What risk is the developer taking borrowing from NAMA? ZERO. What risk is NAMA taking lending to ‘broke’ developers? ALL – they’re lending to someone with no resources. It’s sub-subprime lending. Not only are the exposing themselves to all the credit risk, they’re taking on a good deal of fraud risk.
It’s not clear what the skill set of these developers are. How hands-on are they? Is that not the project manager/site manager role? If they’re skills are making deals and general speculation, it’s not going to add value.
It should be possible to find replacement developers. It’s an attractive opportunity given the state of the market. They would get a good salary; and most importantly they are not taking any risk and get a free profit share option.
@Ahura
“Anglo’s Austrian private bank”
Better write up here http://www.thepost.ie/story/text/ojkfojidoj/
Back-to-back loans/deposits??
@ Brian,
Well the timing is either unfortunate or extremely dodgy. I don’t like the look of it.
It should be investigated. As a starting point I’d look through board minutes. It should have been brought before the board a few times.
> “Are you worried that you’ll lose your house” asked Brendan. “No” said Harry resolutely “I’m absolutely confident that this will turn, the platform for recovery is actually there at the moment, it’s just that we can’t just see it yet”
> https://namawinelake.wordpress.com/2011/10/03/%E2%80%9Cin-four-years-time-%E2%80%A6-we%E2%80%99ll-have-paid-back-everyone-and-we%E2%80%99ll-be-laughing%E2%80%9D-%E2%80%93-harry-crosbie-and-nama/
I know that the “principal private residence” is legally protected, but my understanding is that NAMA had put a threshold on the value of the ‘familiy home’:
> Sources say the agency has told developers that they must sell all but one of their houses, including possibly their principle private residence, as part of the work-out of their loans with Nama.
>
> Property sources said last week that Nama was demanding that, even when the house did not have a mortgage or was in the name of a developer’s wife, the home will have to be sold. Several sources also said that the family home the developers end up in must be worth less than €700,000, or €500,000 in some cases. The only exception will be in the case of a separation, where a wife will be allowed retain a residence.
>
> “The attitude is ‘get off the fence’,” said a source familiar with Nama’s thinking.
>
> “They can’t enforce it legally on the principle private residence, but the attitude is if you’re staying in the game and you want Nama to be your partners they’re going to have to be sold.”
> http://www.independent.ie/business/irish/rivals-fret-as-nama-moves-on-quinlan-2621788.html
If the above is true, then it’s hard to see how Harry Crosbie can keep this:
http://binged.it/uOAxDj
If it is untrue, then Kathleen Barrington is right in her assessment:
> This raises the spectre of defaulting property developers continuing to live in palatial splendour,even as the family in the three-bed semi is forced to pick up the tab for bailing out the banks who so recklessly lent those same developers billions of euro in the first place.
> http://kathleenbarrington.blogspot.com/2009/09/yes-minister-nama-bill-is-flawed.html
If Ms Barrington’s characterisation is correct, it is an outrage and should be politically unacceptable – particularly given the attitude the government parties had to NAMA prior to their election. Although monetarily, it is small beer in the grand scheme, for those speculators who brought Ireland down, exposure to the new reality would be welcomed.
‘NAMA did say yesterday that it was not seeking judgment orders, as would be the case with an “ordinary person” with say, a mortgage in default’
In other words, NAMA is dealing with people who can make it very tough for NAMA or anyone else to get tough with them. To say that they are ‘officially broke’ is simply to say that they have personally accessible assets which are held at some remove, and so are hard to get at. That same stockpile provides the carrot for the lawyers who will jump in resist a judgement application.
It follows that these folk are, in practice, not subject to law in the ordinary way. Everyone, especially NAMA, knows that they get ‘special’ treatment. Their debts are different, you see, and they don’t really owe it. It was all a system failure. So no silly stuff about judgements, or God forbid, bankruptcy please.
@paul quigley: “law on the ordinary way” gives every citizen rights. The law does not allow extortion, which is the removal of the rights of the wife (and family) and is a criminal offense as well as a civil one. It is also personal to the executive forcing it. A point those working for NAMA would do well to remember.
What a terrible, terrible country; what a shameful ruling class, what a passive populace… To paraphrase Michael Lewis (referring to repaying anglo bonds “…the peasant mentality of a potato people…”
BTW, there is so much uninformed comment above that it is almost risible. In the generic developers’ MOU, NAMA now require a charge over ALL the borrowers unencumbered assets and a charge over ALL the equity in the Personal Dwellings of the borrowers. (note – not termed Principal Private Residences). One assumes that the term “ALL” captures the spouses’s interest.
At the end of the day it’s just ‘business’
Awful lot time resources energy is being wasted chasing deadbeat developers.
What difference will it make if the market continues in freefall ?
In terms of the Salaries being paid/Approved. To Developers are these being paid to the top 140 or so who are under central Control by NAMA?Does these figures include salaries being paid to Developers who are controlled locally by their Banks on behalf of NAMA?
@patrick. “Yes” to both questions.
@patrick. I should perhaps expand on that. Not every developer gets €70,000 per annum. A lot depends on the size of the portfolio and how much management is involved. A small development or investment portfolio would be paying a small management fee. As a yardstick, it would be normal in the industry that management fees would run at an average 5% of the rental income. Those fees however would cover all office overheads, not just the principal’s salary.
@wstt it’s 3% state side of total collected no salaries etc.
@nwl fame a fortune to follow FOT in IT this morning well deserved long overdue.