“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