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Archive for May 26th, 2012

This has been a busy week with the announcement of results, reports and initiatives that affect NAMA. In the Dail on Wednesday, Minister for Finance was quizzed on NAMA’s announcement that morning of €2bn to be invested in its property with the prospect of generating a total of 35,000 jobs. I think the jury is out on the precise quantum of new jobs that €2bn will create over four years, but the initiative was broadly welcomed in the Dail, and there Minister Noonan gave a flavour of the types of project that will attract funding, one of which was eye-catching. The Minister said (my emphasis)

“NAMA invested in refitting the cinemas in The Square in Tallaght. They are now open and employing 80 people. Previously it was a piece of dereliction in The Square in Tallaght. It invested approximately €15 million into finishing a partially constructed shopping centre somewhere on the north side of Dublin- I do not have the centre’s exact name. There is sufficient interest for all the units to be let. When those units are let, 280 people will be employed there…. NAMA is in negotiations with a particular developer on the quayside adjacent to the Irish Financial Services Centre to build one of those office blocks… Houses near the golf club in Dún Laoghaire have been completed with NAMA money and have been put on the market. As nearly all of them have been sold, permission has been given for more of them, which NAMA is also financing. Its mandate is to take over the impaired loans of banks and use the property portfolio in the best interests of the taxpayer. It can maintain, upgrade or dispose of assets.”

The part of Minister Noonan’s statement that led to the pricking up of some ears was the development of a HQ-sized, that is 100,000 sq ft-plus, office block “adjacent” to the IFSC. It seems unlikely Minister Noonan was referring to the development of the former Anglo HQ shell which the Central Bank of Irelandbought and which was announced here on 24th March, 2012.

The IDA and others have drawn attention to the fact that there is an imminent shortage of 100,000 sq ft-plus modern office space in central Dublin, and indeed the IDA says it will hinder investment from 2015 onwards. Starting a development today will probably mean it will be 2014 at least before a new office block is ready for occupation.

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The sale of a 450-acre landbank in Cork- first reported by the Irish Examiner and examined on here – is not going away. It seems to go to the heart of concerns at the transparency and efficacy at NAMA, and it has already been raised in the Seanad by Senator Mark Daly. During the week, the Fianna Fail finance spokesperson Michael McGrath tackled the Minister for Finance, Michael Noonan about the sale in Cork specifically and NAMA’s protocols for sales generally. Some answers emerged, but I don’t think we have heard the last of this sale.

In the Dail, the Minister trotted out the standard NAMA line that “NAMA insists on independent valuations of all assets… Sale instruction and contracts with agents and brokers require prior approval by NAMA or the participating institutions” though the Dail record was later altered with the following additional information “In certain limited circumstances, NAMA and the participating institutions may agree an alternative form of disposal with the debtor or insolvency office holder with, for example, more limited marketing or reporting requirements. However, decisions on alternative forms of disposal are subject to review by the board of NAMA.”

Here is the best estimation of the facts that are now in the public domain : the 450-acre landbank on the outskirts of the State’s second city was assembled at a cost of €100m by developer Castlelands Construction. It was sold on behalf of Castlelands by Savills for €7m without ever “coming onto the open market” which seems to mean it was never advertised for sale in mass media, and instead the estate agents contacted what they believed would be interested parties. There are presently very few development land transactions in the State by which to gauge value. NAMA has reports from two valuers which say the achieved purchase price was 40% more than the actual sale price of €7m, indicating the valuers valued at €5m. Neither NAMA nor the estate agent Savills has commented on the sale process in any degree of detail.

Deputy McGrath’s concerns included

(1) “the sale was completed without the property being put on the open market”

(2) “With the greatest of respect to selling agents, they cannot know what property is worth until it is put up for sale on the open market”

(3) “Where NAMA is selling assets through debtors or receivers, the assets should be put up for sale on the open market”

Now NAMA may huff and puff and claim any criticism of this specific sale is motivated by disgruntlement on the part of unsuccessful buyers and there might be some truth to that. Equally NAMA might be accused of paranoia that it is constantly under siege from vested interests seeking to delimit its activities and maybe there’s some truth to that also. But what impartial measure could NAMA adopt to independently show that it is getting the best price for the taxpayer?

Independent valuations mean very little where there is no market. NAMA seeking to distance itself from the sale and pass the buck to the developer/receiver and their sales agents is pretty pathetic in cases where the original loan is not fully repaid with the sale, because that means that NAMA is voluntarily accepting a discount on the loan value, or is giving debt forgiveness, so NAMA should be just as responsible for the sale price as the developer.

All this now needs to blow up in NAMA’s face is for a reputable buyer to come forward and set out a credible offer in excess of €7m.

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Table of the Week

 

The special report from the Comptroller and Auditor General which was prepared in February 2012 but only published during the week revealed that NAMA has employed “Asset Searchers” to see if developers have squirreled away undisclosed assets that might be used to pay down outstanding loans. It seems that there is not a gold mine there, based on initial results which have turned up additional assets as shown above, but which involve follow-ups which don’t have certain outcomes and in some instances, NAMA says that the cost of pursuit outweighs any benefit.

Quote of the Week

“You don’t say when you are in an emergency situation, because then you make the situation worse. So I really don’t see the usefulness of being more transparent” Belgian central bank governor, Luc Coene refusing to discuss the €100bn secret Emergency Liquidity Assistance provided to Greek banks.

“As the Deputy is aware one has to read or listen very carefully to what emanates by way of statement from European Authorities. The general tone of such comments has followed the line that Irelandmust honour commitments in relation to the repayment of debt. The Government is also committed to this principle.” Minister for Finance Michael Noonan replying to Deputy Micheal Martin and giving a downbeat assessment after 15 months in office of his Department’s progress with securing a reduction in the burden of the bank debt.

“Greece is the only country, I feel, where we can say ‘it’s a failed state,’ it is a corrupt state, corrupt as far as its political leadership is concerned and obviously other people had to be willing to support this” Incoming Deutsche Bank co-CEO Juergen Fitschen saying what would appear to be on the minds of many in Germany

Chutzpah of the Week

NAMA announced during the week that it intended pumping €2bn into properties associated with its loans over the next four years, something the Agency claimed would create 35,000 jobs including 25,000 construction jobs. In addition, the Agency announced that it expected to make €2bn available in staple or vendor financing, that is where the Agency converts part of the sale price into a loan. And which company should prick up its ears and show its head above the parapet? Step forward NAMA main litigation partner, Treasury Holdings! I’ve lost count of the legal and foreclosure actions taken by both sides in the NAMA versus Treasury conflict – receivers have been appointed to over 35 companies in the Treasury Group, NAMA is suing Treasury and its founders over a €20m share transaction, Treasury is suing NAMA over its decision to appoint administrators at the Battersea Power Station, Treasury sought and received approval for a judicial review of NAMA’s dealings with its loans. But for all of that, Treasury’s Irish managing director John Bruder says “We’ve always said that we want to work with NAMA, not against NAMA”

Irony of the Week

Up to now we have been used to developers fighting to stay OUT of NAMA. But during the week, we witnessed a developer trying to argue in court that he should be allowed IN. Hotelier and developer, Johnny Moran was suing IBRC, formerly Anglo and INBS, in Dublin’s High Court after that bank had receivers appointed to Johnny’s companies last year. It was reported that Johnny was arguing that similar borrowers to Johnny and his companies had seen their loans transferred to NAMA, so why weren’t his! A report in the Independent goes on to say Johnny and his companies “claimed that had their loans been taken over by NAMA, they would have obtained continuing support for their business, the loans would not have been called in and a receiver would not have been appointed” The judge didn’t allow this claim to proceed. It is unclear what has happened to the rest of Johnny’s case against IBRC, the Independent implies it has failed, the Courts Service implies there are further hearings in prospect.

Like your local cemetery some might say, they’re dying to get in!

Media event of the Week

 

There is stiff competition this weekend as Jedward goes head-to-head with the Sinn Fein Ard Fheis – will the twins be hair-up or hair-down and more importantly, what about Gerry Adams? – but the winner is likely to be An Taoiseach Enda Kenny’s address to the nation tomorrow at 6pm on RTE. There is already nail-biting anticipation in advance of the address because as An Taoiseach told the Dail during the week “RTE has invited me, as Taoiseach, to do a broadcast on Sunday following the Ard-Fheis contribution of the leader of Sinn Fein, Deputy Gerry Adams. However, I believe that to be predicated on how much time Deputy Adams devotes to the fiscal stability treaty issue on Saturday evening”, so the amount of time given over to An Taoiseach’s slot will depend on how long Gerry Adams entertains us with talk this evening specifically about the Fiscal Compact referendum and even more specifically how much time he spends advocating a “no” vote; will it be 15 minutes, 5 minutes , 30 seconds? Tomorrow’s address to the nation is unusual because of the timing of the Sinn Fein Ard Fheis being held on the weekend before a referendum. Sinn Fein seemingly booked the Ard Fheis in January 2012 before the decision to hold a referendum was announced, and remember it was only at the end of April 2012 that a date for the referendum was decided. But RTE’s rules, and it is good to see the national broadcaster has some rules, say that in the run-up to a referendum, there be balance between the two sides of the debate.

Of course the real media curiosity in this referendum is the decision of An Taoiseach not to debate the issues on live television or radio. And his opponents have leapt on this curiosity calling An Taoiseach a coward and a “Yellow Shirt”. In September 2010, the TV3 veteran broadcaster and journalist Vincent Browne concluded one of his nightly shows with a jibe at Enda Kenny suggesting he might go into a dark room with a gun and bottle of whiskey, this after some poor poll results and an attempted heave in 2010. The programme is no longer available online, so it seems not to be possible to get the exact words used by Vincent Browne but Enda Kenny reacted to them by taking deep umbrage at such suggestions in a country where suicide is regarded as a major issue – which of course it is and every death is a tragedy but contrary to perception, Ireland is no-where near the top of the global suicide tables. Taoiseach Kenny has subsequently refused to appear on a programme hosted by Vincent Browne citing this incident as the reason.Now Vincent Browne’s jibe had overtones of the aristocratic stereotype of taking one’s life in the library with the two props of gun and whiskey usually after bringing some disgrace to the family name. I am willing to be proved wrong on this but I cannot recall a single incidence in Ireland of whiskey, dark room and gun being the method of choice for a suicide. Taoiseach Kenny told the Dail this week “However, I turned down the invitation to appear on a particular programme for good reasons” Some might say that Enda Kenny is shamefully hiding behind the skirt-tails of the tragedy of suicide so as to avoid live debate.

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