[UPDATE: 11th February, 2012. The transcript of the speech is now available online here. It has some doozies eg “next time you hear some typically anonymous comment about NAMA being slow and lumbering, you can assume that in the background is probably some debtor or indeed low balling investor who is pushing his own financial agenda but is happy to camouflage it in terms of the national interest”]
NAMA’s chairman Frank Daly gave a speech at the Dublin Chamber of Commerce AGM dinner this evening. There was no major theme, just an update on some aspects of the Agency’s activities. The transcript of the speech isn’t available but here’s what we learned:
(1) From March 2010 to date, NAMA has made 6,000 credit decisions. That’s an average of 60 per week or 12 per working day. And each decision is made within an average of six days. Sounds impressive!
(2) NAMA has “agreed” more than 600 developer business plans representing 95% of the Agency’s total loans, by value. NAMA has previously said that an agreement with debtors comprises three documents – a memorandum of association, heads of terms and a final agreement – and that the documents need be signed by NAMA and the debtor and, in some instances, the debtor’s wife. Frank didn’t say today what he meant by “agreed” but I’d wager it means a verbally agreed memorandum of understanding and no more. By the way it’s not clear if “600 developer business plans” means “600 developers” because of the possibility one developer might have more than one business plan. You have eyes in the back of your heads with these people!
(3) With respect to NAMA’s Qualified Investment Fund (QIF), Frank said that the QIF will be “aimed at major institutional investors”
(4) Now this next bit might confuse you. If you were asked how many properties NAMA has foreclosed on, you might point to the monthly foreclosure list and answer “over 1,000”. But in truth NAMA itself has not foreclosed on a single property to date; it has appointed receivers who legally manage a company or an asset to the benefit of creditors including NAMA, but NAMA itself has not taken ownership in a legal sense of a single property. That is set to change and Frank said that the Agency “plans to acquire property assets, on an arm’s length basis, from receivers (or from debtors who cede secured property directly to NAMA) and will package them in various combinations which can then be monetised through sale to investors. NAMA proposes to assemble sub-portfolios based on asset types (office, residential, retail etc) or geographical region (Ireland,Dublin,UK etc) which will be aligned to particular investor preferences.”
(5) NAMA expects to start flogging portfolios of loans “shortly” following the appointment of panels of advisors last month
(6) NAMA has approved advances to developers of nearly €1bn. Now this isn’t news but separately NAMA says that developers are expected to grant charges over €500m of unencumbered assets, and to date developers have granted charges over €221m of unencumbered assets. NAMA is not saying if these two facts are connected. An “unencumbered asset” is something which NAMA as a lender can’t get its hands on if a developer defaults on a loan; examples might include an asset held in a separate limited company or an asset owned by the wife. So what is happening is that developers are putting these “unencumbered assets” into the pot; NAMA isn’t saying if the developers are getting anything in return, but developers as a cohort tend not to be Jainist eejits. Separately NAMA says that it has reversed €160m of spousal transfers.
UPDATE (1): 10th February, 2012. The Irish Times today reports on comments made by Frank on the fringes of the speech last night. The NAMA negative equity product is now expected to be launched in April 2012 and is still awaiting EU approval. Frank expects NAMA to widen the eligibility for staple financing, but no further details are given. Separately Reuters reports that Frank said “there is strong reason to expect that commercial prices will stabilise this year”. For the very little if anything that it’s worth, that is also the view on here though it must be said that property companies are generally not that confident and it was surprising that the host of market-support measures announced in Budget 2012 – cutting commercial stamp duty from 6% to 2%, abandoning plans to change Upward Only Rent Review terms and offering capital gains tax sweeteners to buyers -led to commercial property prices rising by just 0.2% in Q4, 2011 according to the SCSI/IPD.
UPDATE (2): 10th February 2012. RTE’s Morning Ireland managed to speak with Frank for nearly 20 minutes last night and the interview is available here; the highlights,
(1) Frank expects EU approval of the NAMA negative equity mortgage product in “the next two to three weeks” and the scheme to be launched “late March, early April 2012” and will be piloted with 150 properties
(2) The Qualified Investment Fund will be launched “shortly” and Frank said that the NAMA board had reached a “major milestone” with the initiative yesterday [Thursday, 9th February 2012]
(3) NAMA will be off on a junket to theMiddle Eastshortly to market its wares. NAMA is now happy that international investors are engaging with the Agency and that the initial derisory offers have now been replaced with a more realistic approach
(4) A “handful” of NAMA staff is paid more than €200,000 a year and the average salary for the Agency is less than €100,000.
(5) Frank has apparently criticised the “corrosive cynicism” towards NAMA in this country
(6) Frank has apparently ruled out the possibility of NAMA needing a bailout. You’ll remember that NAMA made a loss of €1.1bn in 2010 and if it makes a similar loss in 2011 then the Agency’s capital – strictly only €100m but NAMA classifies the c€1.5bn subordinated bonds it used to pay 5% of the consideration for the loans it acquired as capital, hmmm – is likely to be wiped out leaving NAMA in need of more capital. I think this is going to be touch and go. NAMA’s accounting year ended on 31st December 2011, and I was surprised that commercial property did not have more of a rebound in values after the Budget 2012 announcements. According to SCSI/IPD, commercial prices rose a measly 0.2% in Q4,2011 which means that they fell 10%+ over 2011 as a whole. Residential prices fell in Ireland by nearly 20% in 2011. And even in theUK, residential and commercial prices ground to a halt over the year, and in fact property outsideLondon and the English South-East actually fell in value. On the other hand, NAMA is on course to make a €600m operating profit in 2011 (up from €400m in 2010) so even with a €1bn impairment loss for dropping property values, NAMA is probably going to escape needing new capital in 2011. Just.
Ah…. Frank never mentioned the talk and tittle-tattle on the street that he was asked to go, but said “No – he was not budging”?
With the DoF preparing legislation for the introduction of REITs and the new QIFs on the way, the property industry in Ireland is about to change. Gone are the accounts in the boot of the car, and in come the civil servants.
The Brits (Wimpey, Wates,Crouch etc) tried this type of organisational structure unsuccessfully over the years and went home with their tails between their legs. They discovered to their cost that Dublin and Cork were not UK provincial cities and the outposts there could not be managed as though they were. The essence of their problem was that they could not compete with the small contractors and family builders in Ireland.
It will be very interesting to see how this latest attempt will pan out, but other than purchasing the better income producing assets at high cap rates, I still can’t see institutional QIFs or REITs buying the rubbish that constitutes most of NAMA’s Irish loan book. Just more sales to the institutional pals – this time of the Irish low hanging fruit.
BTW, talk with any inmate of the Treasury Building and they freely admit that there is not a hope of them making a profit or even recovering NAMA’s purchase price.
@WSTT
I have been arguing for a long time that the NAMA policy of sellingl (in Ireland) is nuts, sheer nuts.
NAMA should lease or rent all properties (including residential) and finish all properties in order to lease or rent them.
It will of course bring rents down but that is good for the country.
When they have income producing property for a while (no matter how low the rent), selling can be done in ones own time.
We should not concern ourselves whether NAMA makes a profit or a loss. NAMA’s whole focus should be on building an income stream from rents.
But if you populate the board with tax collectors, receivers and legal people you are unlikely to get much business savvy in the mix.
Hopefully,NAMA maintains first mover advantage,awful,lot of product waiting to hit the streets.
Stamp duty,capital gains tax changes,U turn on UORR have failed to stop the decline in the Irish market.Hopefully,some of the above will be more successful.
Once the Supreme Court struck down the rent provisions in the 70’s as being repugnant to the Constitution. Why then are those provisions inserted within the contracts to circumvent the pre Supreme Court climate not struck out also.
I cannot help but feel a dexterous brain could do a rather neat dance on these clauses given a shove in the correct direction. People forget we’ve only one system of Laws here, and it’s not the Common Law. That’s just handy, lazy and probably more. It all a bit like France using the Italian legal system to administer the laws.
Frank is still rolling out the line about debtors not having acclimatised to the new reality…
Give me a break…I know of no debtor who hasn’t acclimatised.
If anything they’ve become fatalists and just want Frank et al to pull the trigger so they can move on with their lives.
Rumours on the ground are that Treasury’s case will be strong, and that even the denizens of NAMA are worried about what might surface.
If any other State agency was losing legal cases with the potential of massive costs being awarded, would there not by now be an enquiry?
Push them, it’s time for Frank to pass the torch, you cannot treat people that badly and not have some reaction.
The realities are:
Most debtors are broke, both financially and psychologically.
NAMA has decided that there is no place for them in the future ownership of their old assets.
NAMA has also decided that the debtors will not keep any profits that they may make in the time ahead – so there is no future for them in Ireland.
Finally, In view of Frank’s previous occupation, it surprising to see that NAMA is taking full “sweeps” of rental income and being dismissive of its tax obligations. I would suggest to Frank that he reads section 96(3) of the Taxes Consolidation Act 1997 which provides that “where a mortgagee is in receipt of rent from a premises or the rents are being received by a receiver appointed by the mortgagee, that the mortgagee is chargeable to the same tax as would have been the case if the lessor was still in possession.”
In other words, guys – you pay the tax like everyone else!
With the influx of Irish politicians here in NY,can only assume they have been badly influenced by popular culture.Here,is the summary of the various speeches,pleas to various media outlets,and it’s Friday.
Apoligies to NWL,completly off topic,second bailout,nah you just need to believe……l..
@John, the audience might be interested in An Taoiseach’s 15-minute interview with Bloomberg on Wednesday in New York where he talked about Ireland’s prospects.
http://t.co/EY2LEYhQ
It’s a decent performance and he hits the main talking points and doesn’t slip on any bananas. When asked about a second bailout he sticks with he “doesn’t see the failure of the first bailout” and doesn’t “anticipate” a second bailout at the end of 2013, despite this week’s contribution by former CEO of the NTMA Michael Somers.
Enda Kenny has had precious few interviews since becoming Taoiseach in March last year. Last Sunday’s RTE This Week was the first domestic interview I can recall for some time. But he will be pleased with his performance on Bloomberg.
@NWL it just annoys me to hear him saying with pride how adaptable the Irish people are,and,with childlike “glee” hence the above link that Ireland pays its “dues” in full and on time.Which is/was exactly the wrong message to send,he made no distinction despite the opening to separate Anglo debt.
The cliches were cringe inducing.It was hardly the Vinny B show now was it.
@WSTT,Frank in today’s IT.
“There is a real value from keeping the debtor on board,” he said. “He’s the person who accumulated the portfolio, he’s the person who knows the assets, and he’s the person at the end of the day has a personal vested interest in working this out.”
Note,the consistent use of derogatory term ‘debtor’!
Regarding “David’s” visit,in contrast to the Irish media,no mention in WSJ,The Post and very limited coverage in NYT.Front page of business section has delightful picture of graffiti covered abandoned property in Dublin.
“But that stance is not so popular with citizens. Enda Kenny, the Irish prime minister, said this week that, unlike the Greeks, he had no plans to press losses on banks holding Irish sovereign debt. Such talk has inflamed many Irish taxpayers, who have had to shoulder the banks’ bad debts.”
At least the NYT gets it,just keep believing, that’s all you need!
http://www.nytimes.com/2012/02/10/business/global/after-accord-in-athens-uncertainties-loom-for-europe.html?ref=business
3 examples of this from the Morning Ireland extended interview that need more ventilation =
(1) “The €500m we secured in transfers and unencumbered assets will cover the operating costs of NAMA over its lifetime” What planet is Frank on? His own budget for 2012 in the Annual Operating Statement published recently says the budget for 2012 alone is €242m.
(2) “Average salaries in NAMA are well below €100,000”. Brendan McDonagh said in the PAC on Oct 26th 2011 that salary cost for 200 people was €20m. It appears that this is before additional costs (PRSI, benefits) because NAMA will pay NTMA over €44m in 2012, the majority of which is staff cost. Saying the average is “well below” €100,000 is something that should be tested.
(3) “Nama doesn’t need recapitalization” – patently untrue in the medium term. They are relying on a strong economic upturn which is highly suspect. Why not publish the figures if NAMA is that confident? This is a significant public issue.
@Capoliman, thanks for that. The first point was dealt with, and dismissed, on here a month ago, so that’s why it wasn’t even mentioned here today, your point is well made.
https://namawinelake.wordpress.com/2011/12/28/post-christmas-spinning-classes-start-early-for-nama/
@nwl I’m with JG somewhat on this.
If you believe Ireland is on the road to nowhere ( default / second bailout) then Enda’s performance can only be a sham.
It will be that way until until it is clear Ireland has a bright future.
Any old fool can go to America and sing “come on ye boys in green”, they’ll even cheer you on.
A good performance is like AG of Ca put in getting 18 billion for Ca to write down principle on distressed loans.
See, she didn’t go there as a cheerleader ( a la Enda), that’s the point. She went there to kick ass, and apparently did
http://oag.ca.gov/
Why can’t someone go to Brussels and do the same?
….(no that’s not it, because she doesn’t have any either)
@sf ca
To paraphrase Henry Kissinger, ‘whose ass do I kick’?
@SF ca as a proud paddy living in NY,it was atrocious.
Looked like Mick Wallace dressed him,all sound bites,cliches,stay on message.
The message should have been that any dirtbag firm profiting from current malaise,will be treated accordingly down the road.Somers was out and about providing cover,Ireland will absolutely,require additional bailout.
Specifically,now that almost every politician is determined to pay their “dues”.So much for creating a bit of doubt or negotiating room.Whats the plan again……eh believe…..in what!
@JR please insert lick instead of kick.
@ JR and JG
Career politicians, their own ass comes first.
It will take a hired hand or a revolution for some kicking to occur.
Clint (Eastwood that is)?
@sf ca congrats on IT,read the poems enjoyed,the sandle one.
R a bit of “grease”,they looking at 70% principle forgiven/forgotten.Fair,play to them,obviously the social unrest is unwelcome.Perhaps,some support from other sovereigns may have been appropriate.After all,the bond/debt holders appear very united.Investors,who purchased distressed debts will negotiate,especially when facing default.There basis is way below par.
Frank has a right to be paranoid. Fianna Fail appointee, a new Noonan oversight Troika in on top of him… won’t go when he’s asked… non-commercial ex Revenue… running the place like the CAB and now sneaky politically inspired digs in the Sunday papers. There’s no point in whinging, Frank. If there is more of it this Sunday…..they are out to get you. Toast?
@WSTT,little anecdote for you.At meetings all day,with high net worth Aisan investors.
Mentioned and tried pitching Ireland,despite the translator and language barrier,it’s a NO.
I scare myself sometimes!
http://www.independent.ie/opinion/analysis/its-an-easy-life-for-frank-and-his-dear-family-3016988.html
It gets worse! No question… Frank’s right to be paranoid.
http://www.independent.ie/national-news/daly-uses-his-trusty-hymn-sheet-to-preach-to-the-choir-of-commerce-3017104.html