Now that the property price register is here, what does it all mean?

Today, which happens to be the four year anniversary of the bank guarantee, also happens to be a fantastic day for transparency in Ireland as finally we have real residential property prices and transactions. Not asking prices, not just mortgage transactions, but real prices for real property. This blogpost examines what the information tells us and how we can use it.

1. Its use. Most people will seek the transaction data for their immediate locality to see what property comparable to theirs might be worth or what a prospective property to purchase might be worth. There will also be natural curiosity as to what a property fetched, particularly compared with asking prices. So alongside the data on the property register, you might be interested in the history of asking prices which you can find on a website like Collapso.net. No doubt in coming days some website, probably DAFT.ie  will link the transaction price with the original listing so that you can get a better idea of the specification. Some recent buyers might conclude that they overpaid for their property and they might have some robust questioning – at the very least! – for their valuer. Because the data only goes back 33 months, it will be some time before there are sufficient multiple sales of the same property to create a true index and even then there might be deterioration or improvement between two dates, but with some clever matching with estate agent details, we might see an index emerging more quickly.

2. Effect on prices. I would expect the register to have a negative effect on prices generally, because we generally have what would be characterised as a buyers’ market with mortgage credit restrictions, a general oversupply of property and a shaky outlook for the economy, not to mention the imminent introduction of a property tax and water charges. In some areas and for some property there might exceptionally be a sellers’ market, but across the board I would expect prices to decline to below the lowest recent transaction level and for there to be a 5-10% decline in October 2012 alone and a 10%-plus decline in the next three months. After that, who knows, the concensus amongst economists and ratings agencies seems to be that a 60% decline from peak is in prospect and that would indicate a further 20% decline from today as measured by the CSO. But who knows – ultimately property will reach a price where buyers and sellers strike deals. And you should take forecasts from whatever quarter – including from on here – with a pinch of salt and remember that forecasts are for the market generally and individual properties with individual buyers, sellers and circumstances may deviate from “the market”

3. Effect on sales transactions. I would expect the register to have a positive effect on generating transactions because both buyer and seller can see what comparables actually fetch in the market, and although each property will be different as will the buyer and seller and the circumstances of the sale and purchase, the gap between both sides should be narrowed to allow realistic bargains to be struck more quickly. In that sense, the register should boost a recovery in transaction volumes.

4. Trends from the data published today. There were 53,000 residential property transactions in the past 33 months, so the market has not been exactly moribund in the sense of volumes being transacted. Unfortunately the data only goes back to January 2010 so unless the same property has been sold more than once in the past 33 months then it is difficult to establish price pattern. Overall the volumes of sales declined in 2011 by 13% compared with 2010 but volumes nationally look set to increase by 6% in 2012 if you assume the 2012 data published relates to nine months and then gross that up to 12 months. The value of transactions on the other hand declined by 27% in 2011 compared to 2010 and it looks as if there will be a 5% decline in 2012.  The first table below shows the volume of transactions by county by year, the second shows the values.

5. Errors. The data has errors, and with 53,000 individual records, that shouldn’t come as a surprise. Some addresses lack sufficient detail to identify the property. Some amounts are wrong with a house on an estate in Limerick showing a sale price of €125m! These should be corrected in due course and I know that moves are afoot to better specify some addresses.

6. Cash and the accuracy of the CSO index. It would appear that by comparing the transactions for the first six months of 2012 with the number of mortgage approvals as reported by the Irish Bank Federation, that around 40% of the market by volume is cash. Are properties sold to cash buyers showing greater declines than the CSO mortgage-only transaction index? Difficult to know, because the register doesn’t tell us if a transaction was cash- or mortgage-based. The view on here is that there shouldn’t be a huge difference between the two, otherwise valuers acting for mortgage companies would block mortgages on property where the agreed sale price was significantly higher than cash-only transactions would suggest.

All in all, it is a great day for transparency and we should thank the IMF for frogmarching this Government into finally delivering the price register, though it should be said that government parties of all hues have failed in this regard over the last four decades. Three cheers for Ajai!

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At last, the Irish residential property register is live NOW!

[UPDATE: 30th September 2012. The complete register of 53,000-odd sales from January 2010 to September 2012 is here with dates, addresses and prices. The information is obtained from the Property Services Regulatory Authority.]

[The register is NOW available here and there’ll be a prize for anyone who reads the blogpost below, with a runner-up prize for anyone who finishes this sentence, before clicking on the link!]

On days like today, you might even feel like being forgiving of the former Fianna Fail housing minister Michael Finneran who repeatedly* parroted the same excuse in 2010 for not delivering a House Price Database when he used the Data Protection Act as a defence though he assured us the matter was being progressed by his Department and it was in the coalition Fianna Fail/Greens Programme For Government.

But junior minister Michael Finneran was just the latest in a long line of government politicians of every colour to promise to introduce a transparent price register and then fail to deliver once they were in power. Even this current government’s Minister for Justice Equality and Defence Alan Shatter has taken 19 months to get to the stage that today, we have at last the register that was recommended by Judge Kenny at the start of the 1970s.

Thank you IMF.

* Unfortunately as a result of recent IT changes on the Oireachtas website, links to Minister Finneran’s responses to parliamentary questions no longer work on the HPD blogpost which has tracked government progress in implementing the register. But this response in May 2010 is nearly identical to what were probably scores of similar questions in 2010 “The Department has held meetings with a broad range of interested parties to gather views on the shape that such a register might take. This range of interested parties includes the Department of Justice, Equality and Law Reform, Central Statistics Office, Institute of Auctioneers and Valuers of Ireland, Property Registration Authority, National Property Regulatory Services Authority and the Department of F nance. Once the work of this group has concluded, recommendations will be made to Government. The timing of the establishment of the register will be determined by a range of factors including the possible need to amend the Data Protection Acts to allow for achieved sales prices to be published”

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Major Dublin office complex sells at 67% off peak values with 9.6% yield

Jack Fagan has a rare weekend outing in today’s Irish Times where he reveals that a consortium of European investors has bought the four main office blocks of AIB’s Bankcentre in Ballsbridge opposite the RDS. The seller, Aviva is said to have accepted “just over €70m” for the sprawling 154,000 sq ft complex set over four buildings. The property was originally bought in April 2006, a year before the general peak in Irish commercial property, for €177m. Commercial property generally increased by just over 21% between Q1 2006 and Q1 2007 which would have indicated a notional peak valuation of €214m. A €70m price tag today represents a 67.3% decline which is in keeping with the general market as tracked by Ireland’s two commercial property indices from Jones Lang LaSalle and SCSI/IPD.

The tenant in the offices is the 99.8% state-owned AIB which has thus far cost us at least €20.7bn bailout and additional state-aid injected via the NAMA acquisition of loans. There is a lease which expires in 2026 yielding an annual rent of €7m or €41 psf on an upwards only rent review. The yield quoted by Jack Fagan today is 9.6%. Jones Lang LaSalle was the selling agent and the unnamed investors are reported to have been assemble by Davy.

So there you have it, a landmark office block in central Dublin yielding 9.6% per annum until 2026 from a government-backed bank with evidence of a 67% decline from peak.

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Private sector deposits at covered banks continued to stabilise in August 2012

Yesterday, the Central Bank of Ireland (CBI) released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 31st August 2012 and shows that during the month of August 2012, deposits by ordinary households and businesses decreased slightly at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. The decrease of €0.2bn from €105.0bn in July 2012 to €104.8bn in August 2012 continues a trend of stabilising private sector deposits at the covered banks, and over the past year such deposits have increased by €2.6bn. Deposits are now back at May/June 2011 levels though are still €20bn lower than in October 2010 on the eve of the IMF/EU bailout. The CBI monthly commentary on the financial statements is here.

The CBI doesn’t provide an analysis of private sector deposits at the covered banks – about the only analysis it doesn’t provide – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits rose by €239m in August, which brings such deposits to €92.2bn. Total deposits from all sources in all Irish banks fell by  €12.4bn in August with the main cause being a €13bn decline in deposits from Euro area and rest of world.

The Department of Finance on 20th September published its “Deposits Trends” series for August 2012 which showed, according to the Department “deposits at the Covered Banks fell by rose by €0.3bn (-0.2%) month-on-month to €154.1bn. This still represents an increase of €14.0bn to €154.4bn since reaching a low-point of c. €140bn in July 2011. This demonstrates depositor confidence in the strength of the banking system following its successful recapitalisation last year” These deposits include deposits at overseas branches, in particular at the Bank of Ireland/British Post Office, so they are of limited use, but the trend indicates positive news. The small decrease in the month was due to the strengthening of the euro and on a constant currency basis, deposits actually increased by €0.3bn.

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks based in the IFSC which do not service the domestic economy.

Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.

And lastly the six State-guaranteed or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank ofIreland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outside Europe)

NOTE: THE CBI SOMETIMES MAKES MINOR ADJUSTMENTS TO PREVIOUS MONTH’S INFORMATION, THE DATA PRESENTED ABOVE SHOWS THE FIGURES WHEN THE ORIGINAL FINANCIAL STATEMENTS WERE PUBLISHED

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Of the Week…

Website of the Week

Right now, practically none of you has heard of propertypriceregister.ie but by the end of tomorrow it is set to become one of the most visited websites in Ireland. Tom Lynch, the CEO of the Property Services Regulatory Authority says that the new register of residential property sales prices, which will include sales as far back as January 2010, is set to go live tomorrow, 30th September 2012. The above is what the website looks like on Saturday morning. It might be worth pausing for a moment to consider how it was back in 1973/74 that Judge Kenny in his Kenny Report, recommended the introduction of a public property price register, something which was warmly embraced in public by all political parties – Fianna Fail, Fine Gael, Labour, Democratic Left, Greens, Progressive Democrats – and yet, somehow, when they got into power it never happened. You can thank the IMF that it is happening tomorrow, and I have no doubt were it not for the IMF, this Government would have created some excuse to delay the introduction of a tool which will immeasurably improve transparency in this country. Along with a fiscal council, bankruptcy reform, a central credit register, reform of the medical and legal sectors, it’s another innovation brought to us by the IMF.

Bad but it could be worse of the week

 

With the spate of six killings in the past eight days, you could be forgiven for thinking that we are truly on our way to Hell in a handcart with a breakdown in law and order, but annual recorded crime statistics from the CSO this week revealed that in most categories of crime, including killings or homicide, the numbers for the year ended June 2012 are down on the previous year. Homicides were down by 19 to 62 in the year. Burglary was one of the few categories to show an increase of 10% to 28,623 incidences in the most recent statistics. Still though, the perception of deteriorating law and order is there, but those perceptions of society being better in the old days, though common, aren’t always borne out by the facts.

Table of the Week

 

The Comptroller and Auditor General published its annual report this week where it set out the work undertaken on the nation’s finances. Jaw-dropping errors were uncovered and the 300-page report is worth a read, but its overview of the national debt is particularly enlightening and the above very simple table shows just how much our finances have deteriorated since the onset of the financial crisis in 2007/8.

This was the week we learned that 87,100 were estimated to have emigrated in the 12 months to April 2012, a daily average of 240 putting our emigration rate at an absolute record since 1987 and just behind 1989 in terms of rate of emigration per 1,000.

Foreign News story of the Week

The Wall Street Journal reported on Thursday, see above, that a country in financial distress is set to have its state owned bank – 99.8% state-owned AIB, which has thus far received at least €20.7bn of a bailout – pay €1bn to bondholders on Monday next 1st October. The world-renowned WSJ seems to be in wonderment at such generous behaviour, considering how the country in question is verging on being an economic basket case (14.8% unemployment, debt:GDP set to rise to 120% in 2013 or 150% of GNP, €13bn or 8.4% deficit with difficult budget adjustments ahead, close to zero economic growth, 87,000 emigrants per year, subject to an IMF bailout)

Domestic News story of the Week

Oddly enough, there doesn’t seem to be any mention of the above country and its €1bn bond payment in the domestic media. Mind you, when AIB paid out €1.5bn to senior unsecured unguaranteed bondholders in April 2012, there was nary a mention of the matter in our national broadcaster, save to report an incident when an AIB branch in Dublin was briefly occupied by protesters. Some people claim that RTE is a government mouthpiece trying to stultify us into thinking it will all be good and we have turned the corner. That seems to be unfair on the organisation and the individuals working there, and a more realistic reason might be that they’re just not very good at reporting, or basic arithmetic judging by their percentage calculations below

Parade of the Week

There are 48 parades taking place in Northern Ireland today, many commemorating the signing of the Ulster Covenant 100 years ago when over 400,000 men and women signed petitions seeking to promote the union with Britain. About two hours ago, the main parade in Belfast got underway with 209 bands and over 20,000 parade participants plus an unknown number of spectators. As with a small number of parades each year in Northern Ireland, there will be a protest in the Carrick Hill area of Belfast, a protest limited to 150 participants – this particular area has been the scene of serious public order disturbances this year with a band filmed playing sectarian music outside a church, Orange Order parades breaking the terms under which licence to march had been granted and rioting which left scores of policemen and women wounded. The parade today and the protest have been the subjects of determinations by the Parades Commission with which all parades – be they a Maxda MX5 rally or a charitable demonstration – must be approved. An extract from the determination for today’s main march in Belfast is shown above and is here. The terms governing the protest are here. People on this side of the Border may be bewildered at this state of affairs – tomorrow at 11.30am, the Ballyhea bondholder protesters will meet at the Garden of Remembrance at the top of O’Connell Street in Dublin at 11.30am from whence they will march at noon to Croke Park. There will be a march at 11.30am in Charleville also. They’re protesting the payment of bonds in state-owned banks – which are in receipt of €64bn of our cash/promissory notes so far plus €6bn of state-aid from NAMA – repaying 100% of sums owed to bondholders. There is less than €190m of the most contentious bonds left at IBRC but there are still billions in AIB, PTSB and Bank of Ireland – AIB is 99.8% state-owned, PTSB is 99% state-owned, BofI is 15% state-owned though given the state-ownership of preference shares, arguably BofI is de facto state-owned also. Details of the march and of the €1bn bond being paid on Monday 1^st October are here.

Stoke the Rage of the Week

Yesterday the Department of Finance published its own accounts for 2011 and gave us detailed information on pension payments made to former (and current) politicians. You probably won’t be pleased at the sums paid to former politicians given some of their records in office…

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Stop press! NAMA adds more property to its foreclosure list

You would think that after the month NAMA has had, with criticism over its sales processes and transparency, that NAMA would at least let us know what new properties have been added to its list of foreclosed property but no, you will need trawl through each of the 1,328 properties now on its website to identify the new ones. The total of 1,328 properties which represents the foreclosure position at the end of August 2012 is up from the 1,281 at the end of July but you can’t deduce from this that 47 new properties have been added.

You can’t even sort NAMA’s foreclosure list by “date added”

So yet again, despite being NAMA’s most sought-after piece of public information – the first list in July 2011 attracted over 100,000 hits on the NAMA.ie website –  we must go through the 1,328 properties line-by-line to identify the changes. NAMA doesn’t even issue a press release any more to indicate when its website has been updated. And NAMA wonders why it is the butt of so much public and professional criticism.

Update here soon….

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NAMA boss at CIF conference beats the drum to build confidence in property market

“NAMA, of course, is not a spectator; nor is it the hurler on the ditch who has the luxury of deriding the players on the pitch.” NAMA CEO Brendan McDonagh addressing the Construction Industry Federation conference in Dublin this morning

The NAMA CEO Brendan McDonagh delivered a speech to the Construction Industry Federation (CIF) this morning, the transcript of which is available here. There is nothing really new in the nine pages and Brendan continues to beat the drum as best he can to instill a sense of confidence in the Irish residential and commercial property markets. As he says, it is easy for those on the sidelines to comment (!) but NAMA has the responsibility of delivering.

What’s new? The regular audience here might be interested to see that Brendan is now using the yields on Irish sovereign bonds to emphasise the attractiveness of Irish commercial property. With the 5-year bond at 3% and yields in commercial property in the 8% zone, sure you’d be mad not to buy Irish property. It’s as good a contribution as any I suppose, but having this morning re-examined the crapola spewed forth in 2009 about historically high yields presaging the imminent bottom of the commercial property market, you might remain cynical. A yield is simplistically rent divided by value, and when both rents and values are unstable, then yield analysis is little better than scrying tealeaves.

A few other snippets,

(1) the launch of NAMA’s Qualified Investment Funds will be “shortly” and speaking of which, the Sinn Fein finance spokesperson this week asked the Minister for Finance Michael Noonan about progress with introducing the QIFs – the parliamentary questions are at the bottom of this blogpost.

(2) NAMA’s provision of €2bn of staple financing is, coincidentally, over the same period as its €2bn investment in Irish developments – four years! And NAMA says that “most of” the staple financing will be in Ireland though when Brendan says “NAMA will be investing of the order of €4 billion in the Irish economy over the next few years through our loan and vendor finance.”, you get the impression that most of the €2bn staple financing is earmarked for here. NAMA says the Irish commercial investment market was worth €200m in 2011, so you can see that NAMA’s presence in this market is dominant.

(3) NAMA will “shortly” be rolling out its deferred mortgage initiative to 750 homes on its portfolio.

(4) NAMA is examining commercial development in Dublin’s “central business district” in light of comments from the IDA about imminent shortages of HQ-sized offices in central Dublin.

(5) NAMA says Dublin residential property prices are down 60%, that there is some sort of stability returning to the market evidenced by the CSO’s index, but that there is unlikely to be any short-term recovery. NAMA says most of its portfolio is in and around major population centres and there is evidence of imminent shortages in some places.

(6) NAMA will demolish property on “health and safety” grounds. NAMA seems happy with its demolition of the apartment block in Longford. NAMA is investing €3m in finishing ghost estates and says that NAMA’s involvement in such estates is limited at 10% of the total.

Deputy Pearse Doherty: To ask the Minister for Finance when the National Asset Management Agency expects to make an appointment for the provision of investment management services for its proposed qualified investments funds, the tender for which was issued on 25 January 2012 with a closing date for bids of 6 March 2012.

Deputy Pearse Doherty: To ask the Minister for Finance when the National Asset Management Agency expects to make an appointment for the provision of custodian and fund administration services for its proposed qualified investments funds, the tender for which was issued on 3 February, 2012 with a closing date for bids of 15 March 2012.
Deputy Pearse Doherty: To ask the Minister for Finance when the National Asset Management Agency expects to launch its first qualified investment fund; the anticipated value of the QIF; the nature of the assets that will be managed by the QIF; and how the QIF will be marketed.

Minister for Finance, Michael Noonan :  I intend to take questions 111, 112 and 113 together.

I am advised that NAMA, for and on behalf of the QIF, will make an announcement shortly as to the outcome of the tender competitions for investment manager and for custodian and fund administrator.

I am further advised by NAMA that the Qualifying Investor Fund (QIF) is expected to be launched, subject to regulatory approval, at the end of 2012. NAMA advises that the QIF will publish a prospectus which will set out the subscription process for QIF shares.  Investment in the QIF will be limited to qualifying investors (as defined by the Central Bank rules).

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High time to put an end to NAMA’s “stinking” practice of selling loans and property off-market

“The practice of NAMA engaging in the private sale of assets under its portfolio without putting those properties up for sale in the open market stinks. It needs to come to an end.” Fianna Fail finance spokesperson Michael McGrath excoriating the NAMA practice of off-market selling during Dail debate 25th September 2012

NAMA’s most senior property man is John Mulcahy, the 63-year old who has a lifetime of experience in property, former chairman of property service group, Jones Lang LaSalle (JLL) in Ireland, a millionaire judging by his €2.3m stake he was reported to have had in JLL after his appointment to NAMA. At this stage of life, John has probably forgotten more about the property business than most know. His 30-minute performance on the witness stand at Paddy McKillen’s ill-fated court case in London this year was a high point of the year when he effortlessly flummoxed Paddy McKillen’s formidable legal team with his candour and expertise. John was made a director of NAMA this year though he still retains the job title “Head of Asset Management”.

Back in 2009 it is understood it was John who was advising then-Minister for Finance Brian Lenihan that because yields on commercial property were at historical highs, that meant that we were close to the bottom. Since then, commercial property prices in Ireland have declined by 25% and continue to decline. Despite the life time of experience, John was wrong, and wrong on a grand scale. But that is spilt milk and water under the bridge. And perhaps John might say in his defence that no-one could have foretold how deep and prolonged our Depression would become.

Today, NAMA itself, no doubt acting on the advice of John Mulcahy, is wrong again. It has sold and is selling vast amounts of assets off-market. It sold at least two substantial landbanks around Cork city off-market and of course we learned in August, thanks to John Mooney at the Sunday Times, that the property of a NAMA developer in Lucan had been sold off-market to a former NAMA employee, Enda Farrell. In all of these cases NAMA defends itself by claiming the sales were only effected after an independent valuation.

Earlier this week, the usually even-tempered Fianna Fail finance spokesperson Michael McGrath again criticised NAMA’s disposal of property off-market. Deputy McGrath said the practice “stinks”. Deputy McGrath is an accountant and politician, not what you might call a “property man” but his party colleague in the Seanad, Senator Mark Daly is, or at least is an auctioneer and the selfsame senator has been calling for a year and a half for NAMA to make its sale process transparent. And whilst Deputy McGrath might not be a property man, he’s not short of common sense as evidenced by a previous Dail debate on NAMA’s dubious practice of selling property off-market. He quite rightly pointed out that “independent valuations” are questionable when there is a paucity of transactions.

So how can NAMA justify its position in not putting all property for sale on the open market? Step forward John Mulcahy who will no doubt say that selling on the open market is not appropriate for certain types of property in certain locations. Take the €1bn-plus CitiTower in London’s Docklands which is owned by NAMAed Derek Quinlan and a UK property magnate Glen Maud. John’s former company JLL is offering this property for sale by private tender. JLL will no doubt be familiar with the limited set of buyers with such deep pockets and will concentrate on marketing directly to these rather than expose itself to dealing with every tyre-kicker that comes along. But John was wrong in 2009. Might he also be wrong today?

Next week Allsop Space will be holding the biggest property auction ever in Ireland with 127 Lots with maximum reserves of over €15m up for grabs. We can all attend in person or watch the auction proceedings online. We can bid online or by telephone. We are able to attend viewings and obtain legal packs. If a 5-bedroom property with two acres of land comes up for grabs in Lucan, we can all transparently see what the present market value is, and if a NAMA employee buys it for €410,000 we can wonder if he knows something the rest of us don’t, but at least we can say that the process was transparent. The image above is from an advertisement in last weekend’s Sunday Business Post.

It is high time to put an end to NAMA’s “stinking” practice of selling loans and property off-market

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Should NAMA be allowed to sell assets to defaulting debtors and their associates?

Jim’s company Jim Limited owes NAMA €10m on a property now worth €4m. NAMA forecloses on the loan, has receivers appointed to Jim Limited. Jim himself didn’t give personal guarantees and is in fact quite wealthy, he has €20m in the bank in his own name. Should Jim be able to buy property from the receivers appointed to Jim Limited?

John’s company John Limited owes NAMA €100m on a property now worth €30m. John gave a personal guarantee on the loan and John is not very wealthy as an individual with €100,000 in the bank. However John has been married to Mary for 20 years and during the boom-time, Mary became wealthy in her own right and as a normal lawful precaution, John arranged to have some assets put in his wife’s name during the good years. Mary is worth €20m today in her own right. NAMA forecloses on the loan and after John gives NAMA everything he owns in his own right, should John and Mary together be able to buy property from the receivers appointed to John Limited?

Sean didn’t have a company at all, but he personally owes NAMA €5m on a property worth €1m today.  He has other wealth of €200,000. NAMA forecloses on the loan, has a receiver appointed to the property and takes all of Sean’s other wealth. Can Sean now work as a consultant to a company that can buy property from the receiver appointed to Sean’s property?

In each of the three cases above, the answer is “no”. NAMA is prevented by section 172 of the NAMA Act from selling loans and property to debtors who have defaulted on loans owed to NAMA. The Agency is also stopped from selling assets to associates of such debtors.

Developers are unhappy with the above state of affairs and think that NAMA can get more for its assets if it is released from the proscription in the NAMA Act. And it would appear economically rational for NAMA to seek to get the most for its assets, as long as it has pursued defaulting developers to the full legal extent feasible. However, as economically rational as it might be to amend the NAMA Act, it may just not be politically or societally acceptable for those whose property debts remain unpaid to subsequently benefit from assets acquired from NAMA. But how much might our principles be costing us? Difficult to say but from time to time – for example here where a defaulting debtor was said to have offered €900,000 for a property eventually sold for €300,000 – you hear stories of developers making offers for NAMA assets and despite their offers being higher than the price ultimately realised, the developer’s offer is rejected by NAMA on account of the provisions of the NAMA Act.

In the Dail this week, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan to try to quantify how much our principles are costing us by asking about offers rejected by NAMA because of proscriptions in the NAMA Act. In what must be one of the most gobsmacking displays of bureaucracy ever, Minister Noonan was able to confidently state that NAMA is not losing out because NAMA pre-approves buyers before the buyers can make an offer, and the pre-approval involves buyers declaring they are not proscribed by the NAMA Act!

So we remain ignorant of how much our political and perhaps societal principles are costing us. If the loss was €50m over NAMA’s lifetime, then we might be prepared to stomach that loss. If the loss was €1bn, we mightn’t.

You might ask whether there would be any loss at all because the proscribed buyer would surely only offer the “market rate” This might be correct in some cases but a buyer who has experience of a development would be characterised as a “special purchaser” in the valuation business. Such a “special purchaser” might have unique knowledge or experience with what was their asset and may be prepared to offer a premium over the market rate.

The full exchange is here.

Deputy Pearse Doherty: To ask the Minister for Finance the number of instances in the past 12 months when the National Asset Management Agency has rejected an offer for assets under his control which, firstly, originated from a party the sale to whom the NAMA Act proscribes and secondly. was higher than the price eventually settled on by NAMA; if he will quantify the overall loss to NAMA arising from any such rejections..

Minister for Finance, Michael Noonan: Prospective purchasers of assets controlled by NAMA debtors and receivers are required to sign a  declaration under Section 172 of the Act confirming that they are not a connected party within the meaning of that section and of the NAMA Board’s Guidance Note on the Disposal of Real Estate Assets by NAMA Debtors and Insolvency Office Holders which is published on NAMA’s website. As this declaration precedes the evaluation and possible approval of any potential bids relating to the sale of assets under the control of NAMA debtors and receivers, the issue raised in the Deputy’s question does not arise.

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NAMA says Sunday Independent reporting is wrong (again)

[UPDATE: 28^th September 2012. The following has been received from the Sunday Independent “The Sunday Independent would like to clarify that Nama was contacted in relation to the Greystones Harbour Development story as were the other parties involved. Our reporter stands by her story and notes that neither Nama nor the Sisk Group has sought a clarification from us. We also note that Namawinelake made no attempt to contact us prior to coming to his or her conclusion: “maybe it would be a good idea for the Sindo to seek comment from parties when publishing such stories and if they are “inaccurate” to publish corrections.””

To which, the response on here is: “it was Minister for Finance Michael Noonan who told the Dail via a reply to a Parliamentary Question that the story in the Sunday Independent was “inaccurate”. Presumably the Sunday Independent will now contact the Minister to request that the record be corrected as necessary. The reference on here to the Sunday Independent seeking comment was based on the absence of comment noted in the report of 2nd September 2012 and the fact that NAMA lambasted the Sunday Independent for not contacting it beforehand with respect to the Google story which is the subject of the NAMA press release referred to at the top of this blogpost.]

Earlier this year NAMA was so outraged by the standard of reporting at the Sunday Independent that it took the unprecedented step of issuing a press release rejecting a story and criticising reporting standards at what is still Ireland’s best-selling Sunday newspaper. It emerged that NAMA subsequently referred the Sunday Independent to the Press Ombudsman following the publication of a separate story. Now NAMA says that another story in the Sindo is wrong.

Earlier this week the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan about a report in the 2nd September edition of the Sunday Independent, this was a story by Roisin Burke which claimed that NAMA had agreed a controversial debt write-down. The Sindo reported “NAMA is believed to have written down over €50m of debt attached to the blighted Greystones Harbour Development. The write-down is thought to be part of a secretive deal struck to allow building giant Sisk Group to take over the project, which is a public-private partnership in conjunction with Wicklow County Council.” Following this report in the Sindo, the matter was re-reported on here but expanded to deal with what would have been a controversial aspect of any such debt write-down, namely the sale of a defaulted-on debt to one of the debtors. NAMA was asked by this blog – though seemingly not by the Sindo, or if it did, there is no note in the report of NAMA’s response – for a comment on the matter, and as is normal with “individual cases” NAMA responded to say it didn’t comment on such cases. In the parliamentary question this week, based on the Sindo story, Deputy Doherty challenged NAMA’s reported debt write-down, Minister Noonan said that “the media report which has prompted the Deputy’s question is inaccurate”. The controversial aspect of the report, if it had been accurate, would have been NAMA writing down a loan to a debtor, albeit one of a consortium of two debtors with one understood to be repaying its part of the loan, though if the loan were to be enforced then presumably that debtor would have been severally liable for their partner’s default. At Greystones Harbour and in the case of the Sispar consortium, it is understood that the performing debtor was Sisk, the debtor in default is Michael Cotter’s Park Homes. But given the Sindo story was inaccurate, the question seemingly doesn’t arise. And maybe it would be a good idea for the Sindo to seek comment from parties when publishing such stories and if they are “inaccurate” to publish corrections…

This is the full exchange

Deputy Pearse Doherty: To ask the Minister for Finance further to a report in a Sunday newspaper that the National Asset Management Agency has agreed a substantial debt write-down on a loan that was made to a consortium of two companies developing Greystones Harbour, if the loan in question was in default of any of its covenants including loan-to-value covenants, and if so the basis on which NAMA agreed to any debt write-down arrangement with one party to the consortium and how such arrangement sits with section 172 of the NAMA Act?.

Minister for Finance, Michael Noonan : I am advised that, under Sections 99 and 202 of the NAMA Act 2002 and the normal rules of banking confidentiality, NAMA is precluded from disclosing the details of transactions involving debtors. I am also advised that the media report which has prompted the Deputy’s question is inaccurate.

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