Contrary to common perception, NAMA doesn’t have the overweening dominant position in Ireland’s residential property market that is commonly ascribed to the Agency. Sure, it is associated with 9,200 rented homes which makes it a very significant player in the residential rented market, but has only 4,000 partly completed homes in addition, so in a market with 2m dwellings, with 290,000 vacant dwellings of which 60,000 are holiday homes and where it is estimated there is a national overhang of 80-100,000 dwellings, that is, an excess over long term average vacancies, NAMA’s presence in the residential market is significant but it is not dominant.
Unlike in the Irish commercial market, where NAMA has acquired €9.25bn of loans secured by commercial property – the €9.25bn is the NAMA acquisition price as at November 2009 and it is estimated on here that the underlying commercial property is worth €6-7bn today. In a country which saw less than €0.5bn of commercial property transactions last year, NAMA’s latent influence on the commercial property market is indeed dominant.
And these loans need to be managed and ultimately resolved by 2020 when NAMA has to pay back its bonds and wind down. That’s eight and a half years away but already there is anxiety about the timing of disposals in the Irish market. And unfortunately for NAMA, it is not alone in the market, and other players may pre-emptively pull the rug from underneath NAMA. The latest mega-block of loans to come on the market is the AIB so-called “Project Kildare” reported by the Financial Times yesterday. Seemingly worth €675m at par value, the loans might only be worth less than half that today in Ireland, a market where commercial property has already fallen 65% from the peak in 2007, and despite the stimulus package in the last Budget announced in December 2011, prices still seem to be sliding according to the two commercial property indices from Jones Lang LaSalle and SCSI/IPD..
The sale process for Project Kildare is being run by Morgan Stanley, according to the FT.Elsewhere Lloyds Bank is offloading €360m of commercial property loans under its “Project Prince” scheme and Ulster Bank is making slow progress in the sale of a €1bn portfolio first announced on here in March 2012. Meanwhile IBRC has a €17bn portfolio of loans including commercial real estate loans it needs dispose of within the next six years. Bank of Ireland and AIB have both substantial 2014 deleveraging targets which will see even more commercial property loans come onto the market. So we’re all set on the supply side of the market, the question is who will buy all of these assets? NAMA announced last week that it expects to make €2bn of staple finance available on its commercial assets, and the view on here is that all of this will be offered in Ireland.
NAMA is understandably upbeat about the prospects for a stabilisation or recovery in Irish commercial prices, but with €6bn-plus of commercial property loans under their belt, they would say that wouldn’t they. NAMA has prioritised the disposal of non-Irish property/loans, but sooner or later, it will need confront this elephant on its books.
NAMA Wine Lake 
Reported in today’s Irish Independent that NAMA is selling Fota Island Golf Resort for 20million(Once owned by John Fleming Group)
This article in the FT says it all:
http://www.ft.com/intl/cms/s/0/0d12bfec-a812-11e1-8fbb-00144feabdc0.html#axzz1wCb1w4YW
Seeing the FT Article is restricted:
Foreign investors shun Irish property market
By Ed Hammond in London and Jamie Smyth in Dublin
Passengers arriving at Dublin’s international airport are left in no doubt about what the country needs.
A towering billboard for Allied Irish Banks’ foreign direct investment division dominates the low-slung terminal building. Above the image of grinning investment bankers, bold white letters read: “Sharing your vision for Ireland”.
With the country’s mostly state-owned banks still labouring with vast debts and limited in their ability to lend, attracting overseas money is becoming an ever more crucial ingredient for reigniting the country’s sluggish economic growth.
Nowhere is this felt more than in the property market. Once the backbone of the Celtic Tiger economy, Irish real estate is now the most significant impediment to its economic recovery.
The difficulty for any prospective overseas investor is trying to pick the bottom of the market.
Commercial property values, which fell for 15 consecutive quarters before a slight rebound at the start of this year, are 65 per cent below the peak of the market in September 2007. Meanwhile, a vacancy rate of 23 per cent in Dublin – one of the highest in Europe – will temper any rental growth in the near term.
The unpredictability of the market and overhang of empty office buildings has also crushed development in Ireland. There is not a single square foot of speculative commercial property under construction in the country and bank finance for new building work is non-existent.
“There is no shortage of people turning up in Ireland and saying they would like to invest in the property market,” says Guy Hollis, managing director of CBRE, the property services group, in Ireland.
“The problem is they are only focused on really prime stuff, which is very limited, or the big loan books the banks are trying to sell. That leaves a lot of unwanted stock in the middle,” Mr Hollis adds.
The Irish government has tried to create a regulatory environment to attract overseas investment in the property market. As well as cutting stamp duty from 6 to 2 per cent, Dublin reversed its controversial plan for legislation to allow commercial tenants to remove upward-only rent review clauses from their leases.
The National Asset Management Agency, a vehicle set created by the government to purge Irish banks of €74bn of bad property debt, is also stepping up its programme of sales. The agency plans to sell its portfolio, a legacy of profligate borrowing and speculation that led to the country’s financial crisis, by 2020.
However, Frank Daly, Nama’s chairman, believes the uncertainty created by the eurozone debt crisis is making it more difficult to attract overseas investors.
“It reminds me of the dead market that existed when there was a debate over ending upward-only rent reviews in Ireland. Then you couldn’t price an offer,” he says.
Nama faces a major challenge to recoup the €32bn in taxpayers’ money it paid to acquire the loans from the banks. A report published by Ireland’s budget watchdog last week warned the 57 per cent haircut applied to loans by Nama was not high enough and that the agency had subsidised banks to the tune of €6bn. It forecast the agency would struggle to recover the €32bn for taxpayers by 2020.
“We are at the stage now where we are ready for new investors and it is unfortunate that right now which could be a pivotal point for Nama there is uncertainty. But . . . one thing about investors is they bounce back very quickly. The day they decide it is the right time they don’t hang about,” Mr Daly adds.
Many in the property sector believe, though, that there are huge opportunities for those overseas investors willing to take the risk.
Income return, or yield, on Irish commercial property is among the highest in the world. According to data from IPD, the property research group, income return in Ireland stands at 10 per cent, compared with a global average of 5.9 per cent and higher than Spain (5.6 per cent) and Portugal (5.7 per cent).
“The government is doing everything in its power to attract overseas investment and, if you can find a good tenant, there is a once in a generation opportunity on yields,” says Phil Tily, managing director of IPD in the UK and Ireland.
So far, however, the majority of interest in the Irish market has come from US and European vulture funds looking to buy single assets, or portfolios of impaired loans at rock-bottom prices.
Noonan owes Daly after the Anglo bond deal,why not use some of that political capital to fast track REIT legislation.If Tresaury unwinds,which I fully expect it too,not only will the REO and Tresuary assets hit the market but OPERA and Ronan’s portfolio also,the math is too compelling they can’t survive.
If REIT legislation is in place,after all it’s completely non controversial,perhaps some of the funds would be willing to accumulate portfolios and use that as an exit strategy,having it as an option helps.
Has NAMA clarified if the vendor financing is assuamable and runs with the RE,none of the funds will want to write paper,w/o a functioning liquid financing market how do they get out ?Might,be a good idea to leave a few locals standing too,lots of the inmates are going AWOL in the UK,unlikely they return any time soon.Any sign of QIF’s or maybe NAMA is contemplating extending its 80:20 resi deal to commercial,the RICS would certainly welcome the work!
The issues/problems for NAMA are common to all owners who overpaid,selling any of the assets at less than the carrying cost triggers falls in values of the remainder of the portfolio,so hunker down sit it out and hope for the best !
Alternatively,fire whoever was/is in charge of valuations and was responsible for this latest fiasco,issue a mea culpa,and start flogging some property like you are supposed to.
Don’t underestimate the herd instinct of investors and funds,if Caryle or Blackrock or GE Cap.is perceived seen as making a great deal,lauded in the press etc. the others are more likely to follow,pioneering is often frowned upon,but if everyone is in,that’s ok then!
Moles tell me that that there has been a major change in NAMA’s strategic thinking. And that is confirmed by Frank’s Galway speech. The sales strategy is largely gone. The visits from Private Equity Funds (AKA vulture capital) have dwindled to a trickle and NAMA, tired of low ball offers (in its opinion) has decided to just collect the income and sit it out. The portfolio managers are canvassing the debtors to see if anyone wants a piece of the €2 billion largesse for development. Welcome to the new horror movie – NAMA the Developer!
Frank et al. have decided that it’s the only way to get their money back. What do they say about chasing losses?
@WSTT,
“The portfolio managers are canvassing the debtors to see if anyone wants a piece of the €2 billion largesse for development.”
You almost make it sound like AIB circa 2006 ringing around to see if anyone wants a mortgage or a top-up or a loan of any description…
@WSTT if NAMA had any competent RE professionals or principals in senior positions,perhaps they would have a chance.A few old past their prime career civil servants,some NTMA folks and a x agent/broker who’s primary role in life was to grease the transaction,after all no foal no fee!
Any,senior RE principal would have seen through the facade of the Anglo note,it was all smoke and mirrors,discussed on other thread.
Asset Management is NOT clipping coupons on stabilized deals,it’s fixing the gnarly unwanted unwashed ones,creative thinking,alternative uses,demolition,expansion,outside the box solutions.Funding a prelet movie theatre in Pat Rabbitte constituency hardly qualifies as asset management!
“The €6 million complex was opened by the Minister for Communications Par Rabbitte yesterday”
http://businessetc.thejournal.ie/mc-tallaght-cinema-opens-with-the-creation-of-85-jobs-430517-Apr2012/