Surprise at omission of CBRE from NAMA Top 10 valuation service providers; raised eyebrows that company in which NAMA director has shareholding is No 1

It’s not new news that John Mulcahy – NAMA’s most senior property man from the start in 2009, he was an adviser before NAMA came into being and appointed the Head of Portfolio Management in February 2010 – has a €2.3m shareholding in his former company, Jones Lang LaSalle. This was reported in 2010 and addressed by NAMA at its first outing at an Oireachtas committee hearing in April 2010 when the following exchange occurred

“Deputy Joan Burton –  At our last meeting, I raised with Mr. McDonagh the issue of conflicts of interest between NAMA employees and either the banks which are having their loans taken or some of the individual loans. Mr. McDonagh went to great lengths to assure me that he and other people involved in NAMA had made extensive declarations in regard to their own interests and so on, and that these were published. There was a report in a Sunday newspaper that Mr. Mulcahy, who attended the last meeting as the valuation expert for NAMA, retained shares to the value of €2.3 million in Jones Lang LaSalle, his former employer. That company is providing key professional advice to NAMA. Can Mr. McDonagh comment on this? On the face of it, there seems to be a conflict of interest.”

“NAMA CEO, Brendan McDonagh – Deputy Burton raised issues about NAMA’s employees and conflicts of interest. Under section 42 of the NAMA Act, every person who works in NAMA must complete a statement of his or her interests, assets and liabilities. This is also true of everybody — myself included — employed by the NTMA who will be assigned as NAMA officers. I will not comment on newspaper speculation about a particular individual because it would be unfair to do so in the public domain. All I can state is that there was full disclosure by all employees who joined NAMA. We ensured full disclosure”

“Deputy Burton – A statement was made — whether true or not — in a major Sunday newspaper about what by most people’s standards was a significant investment of a couple of million euro by NAMA’s chief valuer. I am not sure what is his official title, but that is what he seemed to be when he appeared before the committee on a previous occasion; he was the person advising on valuations. He has a major shareholding in one of the key providers of professional services for NAMA. It is very reasonable for the Oireachtas committee to ask Mr. McDonagh whether this is correct and, if so, what measures have been taken to ensure there will be no conflict of interest where there is a crossover in the provision of services and where someone is a significant stakeholder in one of the service providers. That is what conflict of interest is all about.”

“Brendan McDonagh –  I can answer that question for the Deputy. The individual in question worked as managing director and chairman of that organisation inIreland and would have built up shares in it prior to joining NAMA. He would not be permitted to take part in any allocation of work to his former company — this applies to anyone who joins the NTMA or NAMA. This is a house rule and how we manage conflicts of interest. Effectively, there would not be any inference of favouritism towards a former employer. We had to recruit people with experience from the market. Many people would have potential conflicts of interest and the question is how we manage them. We have an internal procedure to manage them”

“Deputy Burton – It is obviously true that he has a significant shareholding in a business providing significant services for NAMA for, presumably, reasonable amounts of money. Mr. McDonagh has stated the individual in question is not allowed to allocate work to the company in which he has shares and that is fine, but what about his shareholding? Is he allowed to be an active shareholder in that company with regard to the management of his holding and interest in it?”

“Brendan McDonagh – No, he is not allowed to be an active shareholder in that company. To be realistic, it is a publicly quoted company and once a senior employee declares he or she has a shareholding, that is what is required under the NAMA Act. All employees are required to make a full disclosure of their assets, liabilities and interests. It does not mean to say the conflict is not managed. It is. That is all I can say to the Deputy.”

It is not clear if John Mulcahy still has that shareholding, but we do know that John’s star is in the ascendant at NAMA where he was recently appointed to the board as Director of Asset Management.

What is news is the response from Minister for Finance, Michael Noonan yesterday to a question from Sinn Fein’s Gerry Adams in which Minister Noonan set out the fees paid by NAMA to companies providing valuation services to the Agency. In total NAMA has spent  €13.3m to date – €4m in 2010 and €9m in 2011. The Top 10 recipients of NAMA’s largesse are:

So JLL is top beneficiary, and NAMA’s most senior property man is John Mulcahy who holds or held a substantial personal shareholding in JLL. Take NAMA’s assurances at face value and conflicts of interest were avoided by NAMA having an internal procedure to avoid them.

On the other hand, there will be surprise at the fact that JLL’s bigger and assumed main competitor in Ireland, CB Richard Ellis (CBRE) doesn’t even make it onto the list at all!  CBRE was one of the five valuation companies which were appointed for national valuations inIreland in December 2009 – the other four were JLL, Lisney, Savills and DTZ Sherry Fitzgerald.

UPDATE: 14th March, 2012. Industry sources have suggested the reason for CBRE’s surprising absence from the Top 10 might be because of that company’s disproportionate success in winning contracts to value property for the banks, and that when the loans were transferred from the banks to NAMA, CBRE might consequently have been compromised in its position,