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.
NAMA Wine Lake 
Hmm,NAMA has a duty to act in the best interests of its borrowers too!
“Inappropriate Collateral Sales
Lenders can also run into trouble by inappropriately selling collateral after a loan defaults. The Uniform Commercial Code requires that the method, manner, time, place and terms of the sale be “commercially reasonable.” Courts have found sales to be commercially unreasonable where the lender relied on an appraisal that it knew or should have known was too low, or provided insufficient publicity for the sale to generate a sufficient number of bids.”
http://library.findlaw.com/1999/Oct/1/131214.html
@JG, Hi John. We are not yet as sophisticated here in the “lender liability,” area as they are in the States, but I would guess that there are a few brushing up on it. When it happens, lender liability here will be a potpourri of potential accusations. What will trigger tomorrow’s cases in the Four Courts will be failure to perform as promised or implied, breach of contract or breach of good faith and fair dealing.
Banks are not living up to their responsibilities, mainly because of the falling market and they don’t want to lend any more money. So they are pulling the plug on deals that they have no right to pull the plug on.
Our zombie banks face a “damned if you do and damned if you don’t” choice. They have pulled back due to their own portfolio troubles, capital issues, and regulatory orders to reduce credit exposure, concentrations etc. Unlike Treasury, most frustrated borrowers, who feel they have been screwed, haven’t yet got their act together and grabbed their lawyers – but they will.
Contracts may made to be broken. But when a bank does it, they have to be prepared to face the courts and pay the cost of that breach.
Facing NAMA, with its all but impenetrable array of defenses is a much different and more difficult legal issue. It requires a lot more thought. Not impossible, but more complex arguments.
If a distressed asset is being sold cheap, I would have thought the Bank would negotiate the sale (usually with a cash buyer over chicken feet and rice wine) and the distressed owner would be out of the picture, which would protect everybody from corruption to a better extent, while allowing the owner to forget the deal, get on with life and stop paying.(thereby become once again a productive member of the economy not an anglo black hole filler-in’er)
The process as described in the piece above is the reverse and sounds like torture plus an invitation for corruption all round into one.
@WSTT,utilizing the above by way of an example and for illustrative purposes,as details are still emerging from that famously transparent organization,NAMA.
Stateside,it would be a very brave and bold lender, that sold off market a deal once valued or transacted at 100mil. for 7mil,they would want to cover their asses,by fully exposing it to every possible and probable buyer.Unless of course they had the consent of the borrower….now why on earth would that be forthcoming without a quid pro quo?
Looks like more details will emerge,who is the buyer be a good one.
It’s clearly vital to attain best price for the state,NAMA also has a duty to achieve best pricing for the original borrower as they are still liable for the full amount off the loan,right!
A rather odd and strange transaction,considering the state and borrower are taking a 93mil hit,would expect better practices from NAMA.Hiding behind valuers is the refuge of the weak and incompetent,come on NAMA better was and is expected,required from you.
Enjoyed your Treasury reference,some very conciliatory statements recently towards NAMA,the one and only Irish CMBS,OPERA won’t be much fun for them,NAMA picked up for buttons the Anglo B piece,giving them a critical role here too.
[…] of upping the valuation, especially in light of the evidence that it appears to get to sell with no valuation at all? Share and […]