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Archive for March 15th, 2012

Despite all the clamouring to bring NAMA within the scope of our Freedom of Information legislation, I am really at a loss to understand what benefits will be conferred by such a move. After all, NAMA will still be able to suppress the revelation of details relating to individual developers or properties or sales in the same way existing public bodies can claim commercial confidentiality when responding to FoI requests. Furthermore NAMA has enshrined in its governing legislation – mainly the NAMA Act – the duty to maintain the confidentiality of its dealings with developers.

On the other hand, An Taoiseach Enda Kenny has promised to bring NAMA under the umbrella of FoI legislation by the end of 2012 and that is further to a Fine Gael election manifesto commitment in 2011; he said on 8th February, 2012 “the Bill relating to freedom of information will be introduced later this year. A number of areas require discussion and analysis before the Minister can move on it” and against that background in the Dail yesterday the Sinn Fein finance spokesperson Pearse Doherty introduced his “Freedom of Information (Amendment) Bill 2012” – it’s probably not even worth clicking on the link because the only clause of any consequence in the 3-page document is “the First Schedule to the Principal Act is hereby amended by 15 inserting the following subparagraph after subparagraph (4): “(4A) The National Asset Management Agency as established by the National Asset Management Agency Act 2009” No bells or whistles – the Bill simply proposes that NAMA be a named organization under the Freedom of Information Act 1997.

The introduction of the Bill has a political aspect because it is an Opposition party which is seemingly moving on the issue a year after the Government gave a commitment. And given An Taoiseach’s commitment to widening the FoI legislation to NAMA by the end of the year, it is difficult to see how it can be justifiably opposed by Fine Gael or indeed Labour.

NAMA appears to regard the FoI legislation with mild hostility, and possibly sees any invasive interference in the operation of NAMA as unhelpful and possibly compromising the Agency in terms of its workload in dealing with requests or undermining negotiations or providing competitors with an advantage. That said, NAMA doesn’t take a political stance, so will presumably accept whatever is enacted without lobbying politicians beforehand.

It should be said that there is another freedom of information-type matter before the courts at present in respect of NAMA. The Agency is disputing in Dublin’s High Court, a decision by the Information Commissioner last year which declared NAMA to be a public authority for the purposes of being subject to environmental information requests. “Internet blogger” – according to the Oireachtas committee hearing with NAMA yesterday – but also journalist, founder of thestory.ie and Innovation Director at storyful.com, Gavin Sheridan is responsible for getting NAMA declared a public authority but it is not clear what useful information might be extracted from NAMA under the environmental information heading. You can read more about the court case here which is scheduled to be heard on 17th May 2012 (case ref: 2011 357 MCA)

The Sinn Fein announcement of the Bill is here together with that party’s 12-point justification for the need for this Bill. A more useful Bill, though legislatively more problematic is Senator Mark Daly’s Bill introduced in December 2011 which would require NAMA to list details of all properties and sales within the purlieu of the Agency, that Bill however has not progressed so far.

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This morning Ireland’s Central Statistics Office (CSO) has released its inflation figures for February 2012. The monthly headline Consumer Price Index (CPI) was up 0.9% compared to January 2012, and up 2.1% year-on-year (down from 2.2% in January and 2.5% in December 2011). Housing has stopped being the biggest driver of annual inflation mostly because mortgage costs have been declining – by 3.2% in the month of February following a monthly fall of 5.6% in January and are now just 4.6% up on a year ago. Of course 4.6% is still substantial, but back in October 2011 the annual inflation rate on mortgages was running at nearly 20%! Mortgage interest comprises nearly 6% of the CPI “basket” so the effect is significant.

Energy costs in homes have risen by 11% in the past 12 months.

 

Elsewhere private rents rose by 1.4% in the month of February 2012 and over the past year, such rents are up by 3.2% (there seems to be a 0.1% rounding difference with the CSO numbers). It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 5% increase (mostly recorded in February and October 2011). At the start of January 2012, the Department of Social Protection reduced its rent assistance payments by up to 29% (an average of 13%) and the Department says that some 40% of the rented market in the State is affected by rent assistance payments, which at the end of 2011, was paid to 98,603 households.  The Department’s 40% is derived from information provided to it by the Private Residential Tenancies Board. The Department is projecting it will save €55m in 2012 from its €500m budget for rent assistance, the saving comprising €33m to changes to the minimum contribution and €22m in relation to the new maximum limits. It may take a few months for these reductions to feed through to the market.

Private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants. The betting on here is that private rents will come under pressure in the short term but it might take a couple of months for the changes to feed through as most renters will have a couple of months to renegotiate their rents or move.

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Thanks to a snippet of data divulged by the NAMA chairman at an Oireachtas committee hearing last week, we are now able to approximate and compare NAMA’s enforcement activity in the Republic of Ireland and Northern Ireland. Frank Daly told the Oireachtas joint committee for the Implementation of the Good Friday Agreement on 8th March 2012 that NAMA had enforced against 15 developers in Northern Ireland (though one is apparently connected with the Republic), and we know from yesterday’s Oireachtas hearing that NAMA has taken enforcement action against 180 developers overall. And we know from last week’s hearing that NAMA has 180 – give or take – developers inNorthern Ireland whose loans have transferred to the Agency and we also know that NAMA is managing 790 developers in total. There’s a lot of detail there! Here’s a summary:

The figures clearly show that developers in Northern Ireland are escaping relatively unscathed by NAMA’s approach to recovering loans.

These figures come after it was revealed on here that NAMA developers on the other side of the Border were being paid €300,000 salaries whilst their companies were deeply insolvent, and Northern Ireland developers also seem to be holding onto the keys of the country estate and helicopter, not to mention the reins of racehorses. Whilst on this side of the Border, developers are facing futures in modest semi detached housing and an old jalopy to drive around in!

Now it should be said that a possible explanation for the stark contrast shown above is that the Northern Ireland developers have smaller loan exposures and were acquired later in the NAMA acquisition phase, and it might be that NAMA has only recently been “assessing” these Northern Ireland business plans, and that when decisions are eventually made, the enforcement balance between Ireland, Republic and Northern, might be restored. And indeed insolvency industry sources in Northern Ireland have suggested that there is an avalanche of enforcement action coming down the mountain from Dublin. Who can say, but as the figures stand today, there is the perception that NAMA is taking a more softly-softly approach to our friends and neighbours across the Border, than the approach taken here.

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“We are not influenced by this commentary but we are sometimes surprised at the readiness of some commentators to accept baseless and sceptical stories about NAMA without themselves showing any semblance of scepticism about the vested interests peddling the stories in the first place.” NAMA chairman Frank Daly at the 8th March 2012 Oireachtas hearing, having another pop at the Sunday Independent’s Ronald Quinlan and John Drennan

“I am concerned about the fact that some commentators are accepting baseless and questionable stories regarding NAMA. This is also the case in respect of politics. Most commentators, local newspapers and, on occasion, local radio stations will accept any story. A large number of these stories are unfounded. There is a form of race to the bottom because media sources are accepting such stories from anyone who contacts them. For example, people contact Joe Duffy’s “Liveline” programme to make complaints and what they say appears to be taken as gospel. Politicians are sometimes required to verify stories before they go on the record about them.” Deputy Frank Feighan chiming in at the same committee hearing.

This is week-old news – last Thursday the NAMA chairman Frank Daly and some of his colleagues from NAMA appeared before the Oireachtas joint committee on the Implementation of the Good Friday Agreement in Northern Ireland, to discuss the impact of NAMA on the relatively small Northern Ireland economy – €40bn GDP compared with €160bn GDP in the Republic. The transcript of the hearing has now been published and is available here. These were the highlights:

(1) The committee itself wrote to the Minister of Finance following the North-South Ministerial Council in November 2011 to ask that Minister Noonan consider appointing a Northern Ireland representative to the board of NAMA. This echoes calls by Northern Ireland’s Minister for Finance and Personnel, Sammy Wilson’s calls last August for the NAMA board to have a “full” Northern Ireland representative, which was a little confusing at the time because Peter Stewart, who resigned from the NAMA board in October 2011, was widely seen as the Northern Ireland representative and Peter also chaired an internal NAMA committee, beneath the NAMA board, which included two of the great and good from Northern Irish business and public life, Frank Cushnahan and Brian Rowntree. After John Mulcahy’s elevation last week to the NAMA board, there is now just one vacancy as limited by the NAMA Act. Chances are it will go to someone of a Northern Ireland persuasion! Frank Daly has been chairing the Northern Ireland committee since the departure of Peter Stewart which Frank says demonstrates the importance of the committee!

(2) There have been 15 enforcement cases in Northern Ireland, out of 180 overall enforcements, and one of the 15 relates to a Republic of Ireland developer [possibly the Grehans]. NAMA says this is proportionate. Indeed given the claims that there were 180 Northern Ireland developers, it would seem that NAMA has only enforced loans on 8% of developers in Northern Ireland compared with 27% ((180-15)/790) on this side of the Border.

(3) In Northern Ireland, NAMA decided not to acquire three debtors loans because the debtors had other non-property businesses. I wonder what would have been the fate of the Vita Cortex workers in Cork if NAMA had applied the same sensitivities on this side of the Border.

(4) NAMA has acquired GBP 3bn (€3.5bn) of loans from Northern Ireland by reference to original par values and paid GBP 1.26bn (€1.5bn) meaning it applied an average discount of nearly 57%, practically identical to the overall NAMA discount (also 57%). The acquired portfolio is split by reference to original par values – 60% of the portfolio is secured by land not under development, a further 10% is secured by land under development, 29% of the portfolio is secured by commercial investments and just 1% relates to residential investment. And by reference to NAMA acquisition values – 22% of the portfolio secured by land not under development, a further 5% secured by land under development, 62% secured by commercial and 11% relates to residential investment. Two thirds of the portfolio is in the eastern counties of Antrim, Down and Armagh with one third in the western counties of Tyrone, Fermanagh andDerry.

(5) NAMA says that it has “already advanced €35 million, or sterling £29 million, in new working and development capital for projects in Northern Ireland” which is substantially different to what NAMA told the Dail just three weeks ago when it said that it had “approved” €10m of advances for Northern Ireland and paid over €7m in cash.

(6) NAMA will try to make initiatives for selling property that are expected to apply in the Republic – vendor financing, negative equity mortgages and QIFs – available to Northern Ireland.

(7) Frank elaborated in more detail than usual the sort of behaviour that leads the Agency to take enforcement action against developers “a category with which we have difficulty are debtors whose businesses have a viable commercial prospect of continuing who spend a good deal of time promising to do this, that and the other but they never meet deadlines or live up to expectations and just when we think we might have an agreement made with them on the way forward, they start to throw in other conditions or refuse to agree to items to which they have already agreed”

(8) With respect to property prices inNorthern Ireland declines from peak, NAMA says “any benchmarks that exist are based on very few transactions. Indications are that, in the residential market, the drop is of at least 50% and more in some areas. The figure for the commercial market is of a similar order. These estimates are based on very thin data and, therefore, it is difficult to rely on them. The market is illiquid and that is a key issue.”

(9) Only 29, 12% of the 243 most problematic “ghost estates” in the Republic are in NAMA. Northern Ireland doesn’t have “ghost estates”. There is a need for 40,000 housing units to deal with Northern Ireland’s housing waiting lists in Northern Ireland compared with 98,000 families in the Republic.

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