In the previous blogpost preview of this Thursday’s scheduled publication of the NAMA 2011 Annual Report, we looked at 10 areas which will be deserving of attention, and noted that “misdirection” – the distraction from something NAMA would prefer to remain unchallenged, with something else which NAMA would prefer you to focus on – was likely to feature in this Annual Report as much as in the NTMA and NPRF reports which were published last week.
Here are 10 things which NAMA might want you to focus on the good news and ignore the risks, concerns and facts.
NAMA has apparently approved the sale of more than one quarter of its assets (more than €9bn) and most of that has been realised in cash. On the other hand, NAMA had repaid one tenth of its bonds (€3.25bn). So it must be obvious that NAMA should be sitting on a mountain of cash. But you can’t deduce from that alone that NAMA is doing well. If you borrow €30,000 from the bank and then buy a variety of Lots at an auction, and then sell Lots for €9,000 and repay the bank €3,000 then of course you will be cash rich, but that doesn’t tell us how well you’re doing.
(2) Approval of acquisition of loans
NAMA has received European Commission approval for the acquisition of €27bn out of €74bn of its loans. Where is the approval for the remaining 60%? The last EC approval was given in August 2010 – two years ago – so why are there delays?
(3) Approval of developer business plans
NAMA has abandoned its intention to put in place memoranda of understanding, heads of terms and full agreements, and it now seems to be the case that most developers are operating with 3-month letters of support. Why has NAMA not been able to enter agreements, and as with the approval of the acquisition of loans by the European Commission, does this reflect on poor management at NAMA?
(4) Additional security pledged by developers
NAMA will tell you that it expects to get developers to bring €500m of assets to the table as collateral against loans. What NAMA won’t tell you is how much is associated with new lending. Remember NAMA has approved more than €1bn in new advances.
(5) Developer salaries
NAMA will tell you its payments to developers and their companies to manage their assets is a fraction of what it would pay receivers. What NAMA doesn’t want to tell you is how much in overheads it is paying, nor how much developers can earn in profit shares if their assets sell for a price in excess of an agreed target.
(6) NAMA advances
NAMA wants to tell you about the €2bn that it will spend on its assets in Ireland in the next four years. What NAMA isn’t keen to talk about is the €5bn originally expected in the NAMA Act. NAMA will also prefer to talk about approved advances rather than advances handed over in cash. And NAMA really doesn’t like it when you point out that most of its advances have gone outside Ireland and have been creating jobs in the north of England for example.
NAMA wants to tell you about how some developments may need to be bulldozed. What NAMA would prefer to avoid, is talk of its efforts to secure and maintain its property, its efforts to sell its property either by private tender or auction and the cost of demolitions.
(8) State aid
NAMA really doesn’t like it when you zero in on the €5.6bn of state aid it paid to banks when acquiring €74bn of loans, for which it paid €32bn. And NAMA reaalllly doesn’t like it if you suggest that NAMA overpaid for the loans it acquired. So the pretty lady and the left hand are right in saying that NAMA didn’t overpay in the sense that NAMA complied with the valuation methodology agreed with the European Commission, but in the left hand is the fact that the agreed methodology provided for over-payment and that the loans NAMA acquired for €32bn were in fact only worth €26bn on the open market. The long term economic value premium that NAMA paid the banks accounts for most of the €5.6bn of total state aid.
(9) Social housing
NAMA would like you to believe that it is offering about 3,000 homes for social housing in Ireland. Remember the hoopla last December 2011, when Minister for the Environment, Community and Local Government Phil Hogan trumpeted the then-2000 homes that NAMA was making available? And seven months on, NAMA has to date sold 58 homes for social housing and these are understood to be the 58 it sold last July 2011 at the Beacon South Quarter to the Cluaid Housing Association. Now the blame for this tardiness doesn’t necessarily sit with NAMA – it takes two to tango and it might be that Minister Hogan’s department is at fault – but one of the tango partners is NAMA and it should be able to describe its efforts to sell these properties for much-needed social housing.
(10) NAMA headcount and salaries
We know that NAMA now employs 214 people – remember the Good Auld Days when it was planned to have 75 employees? And NAMA would like you to believe that the average salary is less than €100,000. What NAMA doesn’t like to talk about is the full cost of employment including pension costs – and because NAMA has a finite lifetime, we understand that the pension costs are significant. The belief on here is the average full cost of a NAMA employee, and by average is meant “mean” rather than mode or median, is about €175,000 and considerably more if bonuses are paid, which we understand they haven’t been for 2011 but they might be in 2012 or future years.