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Archive for January 17th, 2012

Although Senator Mark Daly’s credibility might have been diminished in some eyes when he refused to provide details last year to substantiate his allegations about NAMA disposing of property below market value to associates of borrowers, that may be set to change with the Senator’s bid to have NAMA publish details of all property for sale and completed sale details on a public website and if the details of a NAMA sale reported in today’s Irish Examiner turn out to be correct.

This transaction really takes the biscuit for lack of transparency – the Irish Examiner today reports that NAMA has sold 125-acres of farmland “off the N25/ Ballincollig Bypass” in county Cork to University College Cork (UCC) and the Munster Agricultural Society. The price has not been disclosed though the Examiner reckons it was €3-4m, or €20-30,000 per acre. So here we have one State agency, NAMA (nominally independent, but who are they kidding) selling property to the State-owned University College Cork and what claims to be a “farmers society”, the Munster Agricultural Society (MAS). And the price is not publicly available. That’s not the real issue though.

The Examiner goes on to say that “the land, while not advertised for sale, was on the market and had appropriate signage on the arterial, western route into the city” So a property supposedly worth €3-4m which might have been expected to garner national and indeed international interest had a few “for sale” signs stuck up on  it!

Agricultural land is generally selling for about €7-14,000 in the State so this price goes beyond purely agricultural use. The Examiner says “the land will have amenity and community use. It will address MAS’s need for a new home and will open up space for a Science and Innovation Park for UCC at an adjoining site at Curraheen. This land is zoned for a Science Park and the new lands will allow the university to relocate their facilities westward.”

The Examiner says that the land wasn’t advertised for sale, save it seems, for the signage along the road into Cork city. Elsewhere the report says that the land was previously owned by NAMA developer, John Fleming but that it had been sold by NAMA. John Fleming recently emerged from bankruptcy in the UK and all of his property had been foreclosed, to the best of my knowledge. So the first thing I did when I read the claim that the property was “on the market” was to check NAMA’s latest enforcement list for November 2011. This list is sorted by country, by county and by town/district. So I expected to see something for Ballincollig. Nothing, though that doesn’t necessarily mean it hasn’t been geographically classified elsewhere. NAMA was then contacted and it said the land was classified as “Curraheen, Bishopstown” and indeed there is an entry on the November foreclosure list for “Development-uncommenced” at that address showing PwC as the receiver and DTZ Sherry FitzGerald as the estate agent. NAMA has not commented on the marketing of the property.

NAMA came in for some criticism in November 2011 in the Dail when deputy Mary Mitchell O’Connor said in relation to a property supposedly for sale in Booterstown, Dublin “I understand the sensitivity of sales under NAMA but I am concerned that in giving misleading addresses or limited information on properties for sale NAMA is constraining ordinary people from knowing what is for sale and bidding on these properties”. It seems as if Deputy Mitchell O’Connor’s concerns apply as much to Cork as they do to Dublin.

UPDATE: 17th January, 2012. The property sales material from DTZ Sherry FitzGerald –available here  – shows the property address as Curraheen, Bishopstown. This appears to be the location of the property, marked with a red outline below.


UPDATE: 18th January, 2012. Locals confirm the correct address of the land as Curraheen, Bishopstown which is what is shown on the DTZ sales material and the NAMA enforcement list, so in this case, unlike the Mary Mitchell O’Connor case in Booterstown, addressing does not appear to be an issue. The more important issue however is the marketing of the property. DTZ has been asked to comment on the report in the Examiner that its marketing was limited to erecting roadside signage.

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NAMA’s old nemesis, senator Mark Daly is back. Just before Christmas, he introduced a bill to the Seanad aimed at improving the transparency of sales by both NAMA and IBRC (the Irish Bank Resolution Corporation which is the new name for the merger of Anglo and Irish Nationwide Building Society). According to the senator’s website, he was given permission to introduce the bill as a private members bill.

The bill is called “NAMA and Irish Bank Resolution Corporation Transparency Bill 2011” and is just four pages in length and here’s the meat of it.

You might recall that Senator Daly made headlines in January 2011 when he levelled serious allegations at NAMA, claiming that the Agency was selling assets below market value to persons associated with the borrower. The senator who is an auctioneer (equivalent to estate agent in other jurisdictions) repeated the claims on several occasions. However when challenged and asked to provide details that might be independently verified, the senator demurred even in the Seanad where he would enjoy privilege. This lead to interest in the senator’s claims to wane, until An Taoiseach Enda Kenny spoke at the British Irish Parliamentary Assembly in June 2011 to express concerns along the lines of Senator Daly’s claims, only to withdraw his concerns a couple of days later and pronounce himself satisfied with NAMA’s conduct in the disposal of assets.

You might also recall that Fine Gael had promised in its General Election manifesto in February 2011 to ““The details of all non-performing loans acquired by NAMA will be available for scrutiny on a Public Register”

I don’t think there will be many in the country that would take issue with the senator’s proposed bill, though I can see legal issues with NAMA disclosing details of property which has not been foreclosed – borrowers normally enjoy confidentiality provided for in lending agreements, and as long as the loans are being serviced in accordance with the loan agreement, they might consider themselves entitled to a continuation of that confidentiality. On the other hand, according to the latest NAMA accounts for Q2,2011, the percentage of non-performing loans (which doesn’t exactly equate to loans that have broken loan agreements because some loan agreements provided for capitalisation of interest costs) was 77%.

What now for the bill? Given that Fine Gael had made promises of greater transparency at NAMA in its general election manifesto and given the senator is a Fianna Fail member, you might think the chances for the bill progressing would be quite good. You can see its latest progress in the Oireachtas here. NAMA had no comment on the proposed legislation, which is consistent with the Agency’s general stance in distancing itself from the political process.

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Yesterday saw the publication of the December 2011 IPD Monthly Property Index for the UK. 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 fell by 0.1% in December 2011, following several months of almost flat performance. Prices reached a peak in June 2007 and fell steadily until August 2009 when the current rally started. Prices then increased by 15% in the year to August 2010 but since then prices are up a measly 1.9% and in six of the last 12 months the monthly increase had only been 0.1%. Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 11.4%. Commercial prices in the UK are now 34.2% off their peak in June 2007. On an annual basis prices are up by 1.2%. The NWL index  remains at 828 which means that NAMA needs to see a blended increase of 20.7% 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).

The table below 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.

The decline in December 2011 is not surprising, and comes on the back of dimmer economic prospects for the UKas a whole, with some economists now saying that the UK has re-entered recessionary territory. NAMA is understood to have about €11bn of assets in the UK (at NAMA acquisition prices) of which about half is in London. The Agency has confirmed that the majority of its disposals to date have been in the UK where access to finance and a relatively buoyant – relative to Ireland, that is – market have tempted the Agency to initiating disposals there rather than in Ireland where property prices – both residential and commercial – continue to come under pressure.

The outlook for commercial property in the UK is unclear with the economy on shaky ground, amidst a EuroZone that continues to lurch from one crisis to the next, even after four years. This month, I am going to defer to the good folks at property group and NAMA valuation panel member, and indeed NAMA loans sales advisory panel member, Jones Lang LaSalle (JLL) and their 2012 predictions for the UK property market. It predicts the UK economy will be worse in 2012 than in 2011, though it hopes that by mid-2012 and assuming some resolution to the EZ crisis, an upturn can be expected. It remains upbeat about London in leading any recovery due to “its international links and its attractions as a safe haven in a crisis”. Commercial rents are set to moderate in their rate of increase, but they are still expected to increase – that’s for 2012, a bounce is expected in 2013. The gulf between prime London and the rest is seen as widening. Shortages of grade A accommodation in London will act to support prices.

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