With calls from the usually even-tempered Fianna Fail finance spokesperson Michael McGrath for the Gardai to investigate the revelations in yesterday’s Sunday Times that a property secured on a NAMA loan was sold to an employee of the Agency, without first coming on to the open market, and with NAMA flailing around with an investigation by its internal auditors Deloitte, now might be a good time to remind ourselves of the scandal-in-waiting that is NAMA’s practice of allowing the off-market sale of property secured by its loans.
NAMA is overseeing the sale of nearly €500m of property a month EVERY SINGLE MONTH between Jan 2011 to December 2013. We know that because NAMA has a disposal target of €7.5bn of its assets to the end of 2013 – the €7.5bn is NAMA’s valuation and we know that NAMA paid an average of 43c in the euro for the loans it acquired, so the original book value of disposals by the end of 2013 is an average of €17.44bn. So for each of the 36 months between January 2011 and December 2013, NAMA, or more accurately, its receivers and developers, are flogging an average of €484m of property a month.
And yet we know practically nothing about these sales. There is a wretchedly inadequate attempt on here to track NAMA’s sales as they are reported in the media or other sources, but it is a drop in the ocean of NAMA’s actual sales.
Fianna Fail has been particularly vocal in calling for NAMA to ensure all property for sale under the Agency’s auspices is publicly available, and that sales details are published after sales are concluded. Deputy McGrath has already tackled Minister for Finance Michael Noonan about a previous off-market sale in Cork. Having said that, Sinn Fein has also introduced a Bill which, like Senator Mark Daly’s, seems destined to gather dust or fail. Fine Gael was vocal in criticising NAMA as a “secretive organisation”, whilst in Opposition and in the General Election campaign but have since gone on to defend NAMA’s secrecy, for example at the recent reading of Senator Daly’s Bill in the Seanad.
NAMA says it must comply with the NAMA Act, terms of loan contracts and must act to protect its commercial freedoms. However what NAMA conveniently ignores is that the public is not concerned with sales of property which mean the original loans and indebtedness of developers is 100% discharged. What we are concerned about are those sales which leave a shortfall in the original loan, a shortfall which we are all picking up through the bank bailout. As for NAMA’s whinging about commercial concerns, in the UK there is transparency of pricing and contracts for property sales which doesn’t seem to undermine that market.
Although it remains to be seen if there was any malfeasance in this present case – and NAMA is saying that “at this stage” it seems the sale was carried out “with probity” – the case helpfully serves to illustrate the scandal-in-waiting from NAMA’s secretive and opaque operations.
Seven questions the Agency must now answer
Having regard to the report in today’s Independent which says “he [Enda Farrell] denied yesterday using insider information to target the house owned by Mr Dowd, saying it was public knowledge that the property was in NAMA. He added that the house was unoccupied and in bad condition, so it was reasonable to assume it was for sale. He then approached Mr Dowd directly”
(1) How did Enda Farrell know that Thomas Dowd was a NAMA borrower. There is a listing on here of people and companies which have been associated with NAMA, and although Thomas Dowd appears on that list as an associate of Derek Quinlan, I do not believe it has ever come into the public domain that he [Thomas Dowd] is himself in NAMA.
(2) How did Enda Farrell know that the property, identified as a 5-bedroom house with development potential, in Lucan in west Dublin, was for sale. It is not listed on the NAMA foreclosure list – extract below showing the two properties in Lucan – for January 2012.
(3) How does NAMA know that the price achieved – reportedly €410,000 – was the market price? It is reported that the property was acquired by Thomas Dowd “around 10 years ago” for €1.2m. Its value would presumably have risen between 2002-2007 when property in Ireland generally peaked. The property had development potential which can be a nightmare for valuers to pin down. And we all know that there is a paucity of transactions in Ireland at present, evidenced by weak mortgage lending.
(4) Why did this property not come onto the open market? On the face of it, at €410,000 it is not particularly valuable and it is merely a residence, albeit one with apparent development potential. This was seemingly not some extraordinarily unusual property that is used by NAMA to justify selling property off-market.
(5) Did Enda Farrell require a mortgage for the €410,000 purchase, and if so, was there communication between the mortgage provider and Enda Farrell’s employer, NAMA, to confirm salary and contract information. And if there was, why did NAMA – or the NTMA who in fact employ NAMA staff and “rent” them out to NAMA – realise that one of its employees was buying one of its properties.
(6) NAMA must publish its procedures for monitoring the potential for its employees to benefit from confidential information obtained in the Agency. Deputy McGrath is demanding that NAMA seek to establish if there any offence has been committed under the NAMA Act, but the Act appears to be silent on employees unless they happen to be members of the NAMA board. It seems from some reports yesterday, that NAMA has terms inserted in employment contracts to help it avoid employees benefiting from confidential information, but it is unclear whether these terms were relevant in this case, and if they were, if they were complied with.
(7) How many other properties subject to NAMA loans have been acquired by NAMA employees or their close family or associates? From private messages received on here in the last 24 hours, the answer would seem to be more than zero!