NAMA before the Oireachtas committee on Northern Ireland

“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.