2012 in Pictures

In anticipation of there being sore heads aplenty tomorrow, this is an undemanding review of 2012 in pictures, courtesy of Japlandic who has or have been generous with their time in 2012 in improving the way messages are communicated. Here are 12 of the best which have helped chronicle the year’s events on here, together with Japlandic’s own comments in italics and square brackets about the images they created.

Minister for Finance Michael Noonan predicted that the Irish economy would take off “like a rocket” once the EuroZone crisis had abated and our strong export-orientated businesses recovered. We wait in hope for that recovery, but meanwhile the domestic economy continues to bump along the bottom, and President Clinton characterized the mortgage crisis as the greatest economic challenge facing the country, and as Japlandic’s graphic shows above, mortgage arrears have already taken off like a rocket.

[Michael Noonan, Minister of Finance, in March 2012 said the Irish economy will “take off like a rocket” if the world economy improved. That type of foresight required ignoring the massive leaking of jet fuel evidenced in mortgage arrears being reported by the Central Bank.

Unfortunately for the Minister of Finance, the only numbers heading for the moon, in August of that year, were those in mortgage arrears of 180 days+.]

The Enda Farrell affair was deeply damaging to NAMA, both the sale of property offmarket to a NAMA employee on the basis of what Deloitte called “an an opinion as to the current market value of the Property from a local estate agent” and the alleged unauthorized removal of confidential information from NAMA which was initially emailed by Enda Farrell whilst he was still a NAMA employee, to his wife Alice Kramer (or Alison Kramer) who held a senior position at Ernst and Young in Dublin and who then passed the emails on her husband’s personal email account.  By the time the Sunday Times reported the sale in August, Enda was well-gone from NAMA and was working with a new company, Forum Property Partners but soon after the story broke, he was gone. So also was his wife from her role from E&Y – reporting at the time referred to a “resignation”. As the year ends, the wife is disputing that she was aware of the content of the emails, and by implication, that she had done anything untoward. But for the time being, prospects look bleak for what were a year ago, dream career couple.

[NAMA brings together money, information, human nature and external vested interests. It, thus, runs the risks of repeating the biblical error of creating a Garden of Eden, implanting within it the Tree of Knowledge, denying the residents of this paradise the fruit of the tree and left to have serpents drip poison in their ears.

And when the inevitable happens, who is to blame? Is it the fault of the Creator, aware of the human frailties of the residents, and yet asks of them the impossible? Is it the fault of the residents because they give into the inherent nature? Is it the fault snake that tempts them, when the snake is merely being a snake?

The error may not be of biblical proportions but the tale is.]

The once golden couple of Irish property development, Sean Dunne and his wife, now styled Gayle Killilea-Dunne have had a rocky year with Sean – “the Dunner” or the erstwhile “Baron of Ballsbridge” – hit with a €185m judgment in NAMA’s favour and additional judgments of €164m in favour of non-NAMA banks. The reason for Sean’ financial downfall is brutally obvious – property once worth €100m an acre in central Dublin is no longer worth anything like that, and won’t be for a long, long time to come. Sean is an accomplished developer so he upped sticks with the wife and family and headed west to the United States where properties associated with the couple were flipped with multi million dollar price tags. NAMA then launched what is becoming a bitter court battle in Connecticut and which may not be actually heard until September 2014. Meanwhile the couple who once graced the society pages have firmly departed Ireland – though there is the occasional reported sighting of Sean at the rugby. The image above was based on what an iconic photograph of the couple at their peak in Ireland, in the back seat of a sumptuously upholstered chauffeur-driven car – a new gloss was painted on the picture with the €300m of debts now left behind.

[The ideas for the rest of the graphics were outlined by the blog author.

In this graphic the original concept was played with and a film-type scenario emerged.

The intent here was to give a sense of movement through the scene:

First frame – The dapper duo being  transported, in luxurious comfort, to the nearest airport. A metropolitan backdrop, out of focus, to the rear.

Next frame – As the speed by, the focus shifts to the metropolitan scene they are leaving behind… and all is not as first appeared.

Final frame – The duo disappear and, in their wake, a scene of carnage and destruction.]

I still can’t believe how close the Childrens Referendum came to being defeated in November 2012, and the above poster was only intended as a tongue-in-cheek counterfoil to the angelic ideals of childhood portrayed in the “Yes” vote posters, where the little darlings were portrayed on their best behavior. Who knows, maybe the only “No” poster in the country was more effective than even Japlandic imagined!

[The simple point here was to play with the unanimity of the political consensus on the emotively-named “Children’s Referendum”.

Who could be against a referendum for children’s rights? Only someone like Hitler or the Devil could be so heartless!

Unless, of course, it was the spawn of the devil who was the poster child for the No side. That would work, right?]

Actor Gabriel Byrne firmly stomped on any Paddy-FitzGerald-Leprauchaun image of Ireland as a destination for The Gathering in 2013. Apart from the dollars and sterling that the temporary returnees provide, we really don’t give a shit about them, he said. It was a shakedown he said. And with the Government stonewalling attempts to widen enfranchisement to emigrants so that they can vote in local, general, European and presidential elections, with the ranks of emigrants being swelled in 2012 by awful Government policy and with little attention paid to the plight of Irish with visa issues in the US, there will be many who agree with the Hollywood star, who once graced Irish TV in “Bracken”

[The film poster for Dirty Rotten Scoundrels tweaked to show how an Irish remake would look thanks to the ludicrous    Gathering wheeze.

A country, which has traditionally used exporting its people as a safety valve to maintain it’s petrified cabal, encouraging those exports to return and be exploited for the contents of their wallet is a sick joke.

A country which has a Minister of Finance who dismisses the new wave of exports as merely making a “lifestyle choice” is one which openly mocks its Gathering audience.

And then, as you pan back from the slick image being sold, …]

So, Messrs Kenny and Gilmore embracing the Diaspora and exhorting them to return, temporarily,  in 2013 rings a little hollow.

[The backdrop reveals that the illusion being sold is all fur coat and no knickers.

The politicians, who are some of the most highly paid in Europe, have to borrow Billions of Euros a year to keep the lights on, pour more money into dead banks and, most criminally of all, give to the Central Bank to burn.

Any money filched from the Gathering rubes will be wasted in the debt-servicing model now in situ.

Dirty Rotten Scoundrels indeed.]

The US Senate finally published a report this year on the operation of global banking giant HSBC and concluded that it had enabled money-laundering by bad people as determined by the United States – namely Mexican drug cartels and the State of Iran. The former boss at HSBC, Michael Geoghegan who broke onto the scene here in October 2011 at the Global Irish Forum in Dublin Castle, was engaged to produce a report on NAMA and he was subsequently appointed on a pro-bono basis to the NAMA advisory board and seemed to be best buddies with Minister for Finance, Michael Noonan. It was a bit of an embarrassment then to see Michael mentioned in a poor light by the US Senate. Fellow HSBCer, Brendan McDonagh who was actually in charge of HSBC’s North American operations now occupies a key role in the NTMA – he shares his name with the CEO of NAMA, but they are entirely different people!

[Michael Geoghegan is a man who must have a lucky leprechaun on his shoulder. And ex-HSBC banker, accused of turning a Nelsonian eye to the bank’s money laundering for the Mexican drug cartels, is called on to be on the advisory board of NAMA.

Tony Montoya would be envious.]

With a €3.5bn budget adjustment to be made in December 2012, the betting on here was that the sun would be blocked out in Irish skies when the Dail started its work after the summer recess. After all, that had been the form from the previous year. In the event, there was practically no kite flying at all, apart from Minister for Social Protection providing pretty-clear signposting to PRSI changes.

[The political kite flying game is one which can, not only blot out the colour of the other kites flying, but also obscured the light of life.

A successful kite flying season, for politicians, is one where everyone is sick of the sight of the kites and simply wants someone to come along and make it all go away.

The problem becomes the solution.]

As it turned out, the kite-flying season was a bid of a damp squib with the Cabinet being fully briefed on the Budget only a week before the actual announcements. We may carp at the commitment given in 2011 to open up the Budget process to the full glare of public scrutiny but in truth, the nation’s finances are in such an awful state and we teeter on the brink of unsustainable debt, that a certain degree of suspension of the democratic process is to be expected if the Government coalition was to survive.

[The resurgence of the Afghan tradition of kite flying, banned under the Taliban, is described in this New York Times article – http://www.nytimes.com/2007/12/14/world/asia/14iht-kites.4.8751433.html The kite is seen as a declaration of intent and a challenge to those nearby to “come and have a go if you think you’re hard enough”!

Viewed from afar it looks like a fun, colourful spectacle – but up close and personal – it’s tactics, dirty tricks and a result if you destroy your neighbour.

A fine analogy for parish pump, clientelist  politics.]

One of the most popular blogposts of the year – the detailed expose on the pay and perks of TDs and senators.  We marveled at the spectacle of the €200,000 a year Taoiseach meeting with the €0-a-year prime minister of Italy where the former lobbied the latter for forgiveness on the banking-related national debt. We gasped at the €200,000 a year Taoiseach meeting the €175,000 a year British prime minister who has agreed a €4bn loan to help its neighbour and “friend in need”. We sniggered at the €200,000 a year Taoiseach visiting with the new €170,000 a year French president who presides over the second biggest economy in the EuroZone and which commands a nuclear arsenal on land and at sea. And frankly, we were getting a little upset at the €200,000 a year Taoiseach meeting the €220,000 a year de facto leader of the EuroZone, Angela Merkel, who governs 85m people and who has endured the austerity needed to foot the bill to reunite her country. We weren’t surprised when political pay and perks were left untouched by the December 2012 Budget.

[The piggies on both sides of the house, in both Houses of the Oireachtas, calling for “Austerity” for the horses, goats, sheep and cows.

Not for the piggies though… they’re too important.]

In September 2012, the Irish Times seems to have gotten as close as anyone to the controversial series of letters sent to then-finance minister, the late Brian Lenihan in October and November 2010 as the country was seemingly bounced into an IMF/EU bailout. The letters must be pretty explosive because the ECB has declined to release them to freedom of information campaigners like Gavin Sheridan and the Department of Finance has similarly decline requests from national newspapers. Above is likely to be an accurate distillation of the contents of the ECB letters – the ECB was advancing large sums to Irish banks who were unable to get funding elsewhere and in return the ECB demanded that Irish banks meet all of their obligations, lest there be a negative impact on the European banking system. Fine, but Ireland has shouldered 100% of that cost which now hovers around €70bn. So at the very least, we deserve to see the actual correspondence.

[“The seek it here! They seek it there! Those Frenchies seek it everywhere!”

Just like The Scarlet Pimpernel, the letter from the ECB forcing Ireland into the bailout programme continues to elude.

As we have become an ATM democracy – the greatest threat to the life of the nation, keeping politicians awake at night, appears to be no money in the ATMs – then surely the ECB letter was a simple ranson note threatening this strategic resource.]

There were two referendums in 2012 and the first looked more finely balanced to start with, and given the tradition of suspicion towards handing over more power to a Europe in which we play a small part, it was all to play for as the referendum campaigns kicked off.  The position adopted on here was to promote and support a “no” vote because it seemed to be the only realistic way of forcing a resolution of Ireland’s burden of the legacy from rescuing the banks.  A contrary position was adopted by the “yes” side who argued that a “yes” vote would improve the prospects of a deal on bank debt, and for a moment there, at the end of June when Enda Kenny emerged blinking into the dawn of a Brussels morning, there was a hope that our partners were indeed recognizing a debt burden incurred, in part, to secure the entire European banking system, but the hope was short-lived and Enda appeared more like young Mahon from “the Playboy of the Western World” as the year drew to a close, with Old Mahon in the guise of Angela Merkel turning up to repudiate the claim that An Taoiseach had indeed taught some in Europe that he was not a man to be tangled with too often.

And finally, the tourism and cultural initiative, The Gathering, received some attention on here in November 2012 when actor Gabriel Byrne described it as a shake down and said that Ireland doesn’t give a shit about the Diaspora.  Over Christmas I heard one family say that they hoped there wouldn’t be a Gathering of their particular family in 2013 lest there be a few broken bones, with the settling of old scores and feuds. But for all of that, it is to be hoped that The Gathering is a success, both for tourism and the economy, sure, but also to build genuine relations with the Diaspora – Irish who just happen to live in some other country for now. But just to make sure, there may be a thread on here on rip-offs to shame some less-generously spirited hostelries into offering visitors the same value for money that exists right now in much of Ireland’s hospitality sector. And to conclude this pictorial review of 2012, I leave you with two modified images from Japlandic to remember The Scattering 2012. A Happy New Year to you all!

(All graphics above produced by Japlandic.com, contact here)

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NAMAed loans on Malta’s Phoenicia Hotel sold to third party

Veteran developer Paddy Kelly is back in the news this week, with damaging reports in the Sunday Business Post that NAMA has issued a tender to its panel of five – nine, according to the NAMA panel displayed on the NAMA website – providers of Credit Verification (Investigative) Services to examine Paddy’s statement of affairs and the affairs of his family including the more famous son, Simon. NAMA hasn’t commented on the report, which has an odd aura about it, and we must hope that NAMA has not descended to megaphone communication with its developers, using specific media.

Today, we report that loans underpinning a project in which Paddy Kelly was a lead investor, the Hotel Phoenicia in Malta – website screen grab above – have been sold by NAMA.

The loans on the hotel are understood to have a face value of €21m. The original consortium of investors in the hotel in 2007 was led by Paddy Kelly but is understood to have included Luan Cuffe, Pearse Farrell (of Farrell Grant Sparks fame – often appointed as receivers by NAMA) and Alastair Tidey (son of Don Tidey, famed for being the supermarket executive kidnapped by the IRA in 1983). NAMA acquired the loans from the Irish Nationwide Building Society. It is understood that the investors, or a subset of them, attempted to buy the loans from NAMA but NAMA would not entertain their offer, in part because of proscriptions under the NAMA Act – specifically the proscription on NAMA selling assets back to the original borrower where the borrower is in default.

So, NAMA engaged NAMA’s head of asset management, John Mulcahy’s old firm Jones Lang LaSalle in Dublin to sell the loans which are secured on the upmarket hotel in Malta. There was a public process managed by JLL in London with a fixed closing date and JLL were successful in selling the loans to  Mark Shaw’s Scottish property group, Hazledene and the purchase price understood to be €19m. So, all straightforward so far, NAMA acquired €21m of loans secured on property and sold them on at a 10% discount to their face value, so the taxpayer makes a loss on the deal of €2m-odd.

Claims that Hazeldene has discussed the sale of the loans to any subset of the original consortium were firmly rejected this evening by Mark Shaw, the chief executive of Hazledene.

Neither NAMA, JLL nor Hazledene had any comment on the matter at original time of writing, but Hazeldene has now confirmed that it acquired the loans after an open public competition, but that it has not had any discussions whatsoever with any subset of the original consortium about the sale of the loans.

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2012 on NAMA wine lake

So concludes another year on the NAMA wine lake blog – 920 blogposts, 7,900 blog followers, 7,000 comments and according to the people at WordPress which hosts the blog, it “was viewed about 1,800,000 times in 2012. If it were Liechtenstein, it would take about 33 years for that many people to see it. Your blog had more visits than a small country in Europe!” – the Yanks! Liechtenstein is a very, very small country in Europe, though more pertinently, it was viewed an average of 35,000 times a week and that excludes viewers who rely on emailed blogposts. The overwhelming majority of the audience is based in Ireland, though the UK and the USA also feature in audience statistics.

A far larger number of comments, about 300, were deleted in 2012 than in 2011, with a notable new phenomenon of bogus comments using apparently real names with content which is potentially defamatory, but 2012 again also saw small numbers with excessively bad language or which were just plain nonsensical, but unlike 2011, when five commenters were permanently blocked no commenter was blocked in 2012.

Most of the blogposts in 2012 were straightforward reporting of facts pertinent to NAMA – “monitor journalism” as the professionals would call it. There was a new “Of the Week” feature which brought you some amusing – hopefully! – commentary and opinion on economics and politics and other falderal. There was usually a weekly political slot which, given the constant intrusion of politics into practically all  aspects of the Irish economy, seemed appropriate. Some blogposts required quite a lot of research and as we conclude 2012, these are four extracted from the conveyor belt to be given extra prominence for the year just expired.

One-stop Trough – political pay and perks in the Oireachtas. When researching this blogpost, it was amazing to find that no other media had previously done this work, or if it had, it wasn’t apparently available. The Irish Times did a piece later in 2012, but it was a little sad that it should be a blog that should reveal the workings of the Oireachtas “One Stop Shop” and set out in detail just how much TDs and senators were costing us – in the overall scheme of things, not a significant sum but in current circumstances, emblematically unacceptable. RTE’s political correspondent, David Davin Power tweeted that he was unfollowing the blog mid-way through the three part blogpost because it had become “an anti politics rant” but as the year ends, and in line with keeping political commitments generally, David remains a follower. The research undertaken to produce the blogpost involved ploughing through parliamentary questions, examining the “One Stop Shop” literature, consulting with pension experts, research of the Oireachtas website and examining very limited historical press reporting. As far as I can see, it remains the most comprehensive publicly available record of what we pay politicians.

Bank control of Irish hotels – NAMA and NAMA banks in particular have extended their tentacles deeply into the Irish hotel sector, which is not surprising, given the number of new developments during the 2000s and the leveraging of hotel assets for further development. It emerged that at least  one in six Irish hotel rooms was controlled by a bank, and that most of these were now NAMA loans or loans controlled by NAMA banks. NAMA might tell you that its role in the hotel sector is overplayed and that other banks, Ulster for example, are more dominant, but this research showed the scale of NAMA’s control of the sector, and given that we learned through the Comptroller and Auditor General’s report that it is the NAMA strategy to “hold” hotels until the second half of the decade, this control is set to continue for some years.  The two-part blogpost involved considerable research because there is no one central register of hotels to which receivers have been appointed or which show other evidence of bank control, short of receivership.  It was a potentially dangerous blogpost given the possibility of errors which might damage a business, but in the end, there was just one adjustment where one hotel was unhappy with the interpretation of wording in the annual report and accounts.

NAMA’s finances – the core remit of the blog is to monitor NAMA, Ireland’s biggest state agency and one of the bigger property companies in the world – nowhere near the biggest when you consider asset management companies in which real estate is a main investment area. NAMA’s quarterly reporting, its appearances at Oireachtas committees four times in 2012, relevant parliamentary questions, NAMA statements and other media reporting are all monitored to keep tabs on NAMA’s financial performance.  A recurring theme was the manner in which NAMA muddies the waters with its accounting which may be optimistic as regards interest income but may be restrained in recognizing certain profits on debtor connections which continue after one loan is resolved. When NAMA trumped a quarter billion profit for 2011 when it published its annual report in July 2012, there was an immediate – within 15 minutes – assessment on here that NAMA had used controversial tax credits to boost a pre-tax profit from €12m to €247m. But it was the admission by Minister for Social Protection Joan Burton on RTE radio that NAMA faced losses of up to €15bn that is picked out here as indicative of that close monitoring. Minister Burton used the words – “Not counting, by the way, another €30 billion that we’ve committed on NAMA, at least half of which we will get back”. NAMA immediately contacted the Minister after the blogpost was published and there was a mealy mouthed retraction the following week, but the Minister had let the cat out of the bag – NAMA does indeed face making a substantial loss if any growth in Irish property prices is insufficient to cover the Agency’s operating costs and interest.

Bank debt negotiations – as we conclude 2012, there is a prospect of a small face-saving adjustment to the terms of the Anglo promissory note which will have little or no overall impact on the national debt which was in part run up to a level approaching 125% of GDP, as a result of the banking sector rescue.  We have a weak hand when it comes to these negotiations, we are a bit player in a vast EuroZone which supports our banks still with massive lending, we ourselves adopted the guarantee in September 2008 and the extent of our guarantee rankled with our partners in Europe. But we are in the teeth of historic negotiations and since we have to a large extent paid off the bondholders – though there are still billions outstanding including €2.7bn at PTSB in early 2013 – the Anglo promissory note is really the significant game because we have some scope for unilateral action. The blogpost tried to place the current negotiations in an historical context of our negotiations of the Border in 1920-1925, negotiations in which Ireland utterly failed for a variety of reasons which resonate with the bank debt negotiations in the present day. The blogpost relied on a personal area of interest – Ireland in the second two decades of the last century – and tried to provide a new perspective, and especially one which suggested history was repeating itself and we could learn from our past mistakes.

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Life after bankruptcy for the NAMA developers

“And by the way, being declared bankrupt in the UK does not mean NAMA loses interest in you – far from it” NAMA chairman Frank Daly speaking on a Dublin radio station in April 2012

With Ray Grehan emerging this week from UK bankruptcy – though with some legacy matters to be sorted out – and his brother Danny emerging next week and path-finding Cork developer, John Fleming over a year since he emerged from British bankruptcy, this blogpost examines what lies in store for the NAMA developers who have – to a greater or lesser extent – escaped the grasp of the Agency, by obtaining bankruptcy orders elsewhere.

There was a frisson on here during the past week when a filing was made in the NAMA v the Dunnes case in Connecticut where the filing title referred to “CH 13”. Had the heavily-indebted Sean Dunne obtained a Chapter 13 US bankruptcy? No, the CH 13 turned out to be a reference to the Connecticut legal code, and so, to date, David Drumm, the former CEO of Anglo Irish Bank remains the only publicized Irish national to have obtained a bankruptcy order in the US. The British bankruptcy courts have been busier and this is the record on here of the NAMA bankruptcies so far – Minister Noonan said there were about 20, but because of the archaic British insolvency service, we can’t view bankruptcies where a recent address was in (the Republic of) Ireland, so the following may not be a comprehensive listing.

Whilst Ray will emerge from bankruptcy, his dealings with NAMA aren’t over as the Agency appears to be still contesting the disposal of an apartment in the upmarket One Hyde Park development in Knightsbridge in central London. And whilst John Fleming emerged from bankruptcy in November 2010, NAMA still went on to pursue him for his personal pension, and at time of writing, it seems that this matter is outstanding. The NAMA chairman Frank Daly who was formerly the chairman of the Irish tax authorities, the Revenue Commissioners, has darkly warned that just because a developer obtains a bankruptcy order in the UK and subsequently emerges from bankruptcy, doesn’t mean that NAMA loses interest in that developer – this was interpreted on here to mean that NAMA might continue to monitor developers after emergence from bankruptcy for evidence of undeclared assets or asset transfers.

Unlike Bank of Ireland and Anglo/IBRC, NAMA says that it is neutral on the jurisdiction in which its developers obtain bankruptcy orders – Bank of Ireland fought tooth-and-nail to successfully have the bankruptcy of the O’Donnell couple, Brian and Pat, overturned in the UK and IBRC successfully reversed Sean Quinn’s bankruptcy in Belfast. AIB was unsuccessful – on a technicality – in its bid to bankrupt Ivan Yates in Dublin, but didn’t appear to object when Ivan obtained a bankruptcy order in Wales. Minister for Finance Michael Noonan revealed that NAMA was contesting the release from bankruptcy of one developer in the UK and the betting on here was that it was Sean McWilliams, but in any event, Sean won his freedom in a Belfast court in October 2012.

We do know that Martin Doran’s discharge from bankruptcy has been suspended indefinitely

So, what does bankruptcy hold for NAMA developers? It seems that many have started property consultancies and have been earning some income during their bankruptcy which has presumably been handed over to the trustee for distribution to creditors. Others like Ivan Yates, are contemplating writing a book. Income earned after the discharge is generally secure from former creditors except in the UK, certain court costs and social welfare clawbacks. Most emerge from bankruptcy with a slight blemish on their credit records but if they have wealthy spouses, that is likely to be a short-term problem, Restrictions on directorships can be imposed in some instances, and if creditors are unhappy with disclosures, they can resist a discharge. NAMA will also keep an eye on you.

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Exclusive: NAMA developer’s discharge from bankruptcy “suspended indefinitely”

As Ray Grehan basks in the sunshine after emerging from UK bankruptcy today – though there may still be some strings attached – it can be exclusively revealed on here that fellow NAMA developer and founder of Ellen Construction, Martin Doran, who was supposed to emerge from bankruptcy a fortnight ago has had his discharge “indefinitely suspended”. This is confirmed by the record at the UK Insolvency Service which says there’s an “order suspending bankrupt’s discharge under Section 279(3) of the Insolvency Act 1986 until the fulfillment of conditions as specified in the Order made by the Court and effective from 13 December 2012”

The co-owner of Ellen Construction, Michael Doran seems unaffected by this development and his bankruptcy is due to end on 10th February 2013. We did learn from Minister Noonan earlier this year that NAMA was objecting to the discharge from bankruptcy of one developer, but it was believed on here to refer to Northern Ireland developer, Sean McWilliams. The order referred to on the Insolvency Service is not available, but if there is any development, it will be shown as an update on here.

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NAMA sells Dublin office block for €28m with eye-watering 10% yield

It was Gavin Daly who last week first reported in the Sunday Times the sale of the Forum building on Commons Street in the International Financial Services Centre (IFSC) in Dublin to the New York investor, Atlas Capital which reportedly paid €28m for the 47,000 sq ft office block with 370 car parking spaces. The building is let to colorful German bank, DEFFA which is the Irish-based unit of Hypo Real Estate, the nearest Germany has had to an Anglo (so far!).  The annual rent is €2.7m on a mixed lease with the office space rented on a 25-year lease with seven years until the next break. The car parking spaces are rented to Parkrite, Derek Quinlan’s car park company. The initial yield is indicated at 9.6%. The building was marketed by Knight Frank who gave prominence to the availability of NAMA staple finance.  It is unclear if NAMA’s offer of staple finance was taken up by Atlas, a property investment company with a portfolio focused on Manhattan and the City of London.  The Forum was owned by the Liffey Partnership, a company controlled by former King Midas and tax inspector, Derek Quinlan and property developer David Arnold

This is the Knight Frank brochure for the property.

NAMA is selling €500-750m of loans and property each month EVERY MONTH by reference to original book values of the underlying loans. A tiny fraction of the sales is detailed on here.

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Irish Property in 2013 – the predictions

To quote from last year’s predictions blogpost on here

“There are three caveats that should accompany any forecast of property prices (1) none of us has a crystal ball and there are so many variables in how property prices change that, at best, you are getting an informed opinion and (2) when forecasting a “market”, you are not forecasting individual transactions, and property is not like milk – there will obviously be regional differences but even on the same street there will be individual properties and buyers and sellers, landlords and tenants, so a general price change might not affect a particular property and (3) to quote Upton Sinclair “it is difficult to get a man to understand something, when his salary depends upon his not understanding it” or to put it another way, you should always bear in mind the motivations of those providing forecasts, and given this is an anonymously-authored blog, that makes assessment difficult.”

Welcome to the 2013 predictions where you can cross palms with cyber silver and the tea leaves are scryed to help tell you what the year ahead will mean for property selling prices in Ireland, residential and commercial and for rents, also residential and commercial. You may care to take a look at the predictions here last year before taking any of this too seriously.

Firstly here is the summary of the predictions

And here are the seven areas taken into consideration

The general economy. Unemployment will remain elevated at 14% despite continuing emigration. The domestic economy will bounce along the bottom with the first half of the year stumbling as the effects of Budget 2013 sink in. The overall economy is difficult to predict, Europe including the UK and the US continue to teeter between the Rapture and the Abyss. Retail has had a good quarter four in 2012 by all accounts, both actual retail indices from the CSO and anecdote for December. Exports have not suffered the expected decline in quarter four seemingly, and both services and manufacturing are growing. Construction is still in the doldrums but credit appears to no longer be contracting.

Property taxes. For once the Government has stuck to a commitment and the mortgage relief for first time buyers has in fact been discontinued from the end of 2012. The new property tax kicks in from July 2013 but in 2013, there will be a 50% discount on the annual charge which will be €315 in a full year for a typical home. We will start to hear more about water charges which may kick in as early as 2014, and these are unlikely to be less than €200 per annum on average to make the cost of installation of meters and administration feasible on a cost basis.  Stamp duty may be increased if transactions start flowing again, and remember the Government has to produce a Budget in December 2013 which will adjust the economy by a further €3.1bn in 2014.

Transparency. We already have the Property Price Register which is prone to errors and only extends back to the start of 2010, but it does provide a basis for comparing values. We are set to have the new commercial leases register by the end of March 2013 so there should be far greater transparency on rental levels, but for the time being at least, there won’t be a commercial property price register and of course there are no plans to make available actual residential rents which are already captured by the Private Residential Tenancies Board.

NAMA. Contrary to popular belief, NAMA actually has little control over the residential market with about 12,000 homes remaining under its control with its borrowers and most of these are rented in rentable areas where rental prices are stable and modestly rising. However NAMA is about to unleash a lot of commercial property onto the market, and there will be €2bn-odd of staple finance to sweeten the deal, particularly on better quality properties with good tenants and where investors have a track record. NAMA has given €6m of rent reductions to commercial tenants in 2013 and the same is expected in 2014 as the domestic economy remains shaky. There will also be more evidence of NAMA investing in developments, so the perception there is an ever dwindling supply of property, particularly prime central Dublin office property, may diminish.

The banks. Deleveraging will continue apace and there is still a mountain of loans and property that non-NAMA banks in particular want to offload. Banks are lousy managers of property so there will continue to be an ample supply of property coming onto the market, courtesy of banks. On the other side of the transaction, there has been some recent stabilization in the provision of credit both to households and businesses and this should improve the general background music.

Bankruptcy laws and repossessions. We expect the new Personal Insolvency Bill to be given presidential assent any day now and it should be immediately commenced. Justice minister Alan Shatter has predicted that there will be 3,000 bankruptcies in Ireland in 2013, up from 30 in a typical year.  Banks are expected to enforce buy to let loans and the 600 repossessions per annum in Ireland may rocket, the prediction on here is that there will be 5,000 repossessions in 2013 and that is a considerable stock of what will be depressed property to be offloaded on the market.

Allsop Space. Another four or five Allsop Space auctions are expected in 2013 and there may be mega 200-Lot events. The successful venture between British auctioning giant Allsop and Dublin property company Space seems to have taken a new direction recently with a focus on commercial property. These auction events will provide finger-tip assessments of the market overall. There will be increased efforts to get more private vendors to sell their property at auction, and who knows, maybe NAMA will embrace the transparency of the auction especially after the Enda Farrell affair in 2012 and the constant prodding from Senator Mark Daly to make the selling process clearer.

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Irish Property in 2012 Review

As 2012 draws to a close, this is a review of 2012 Irish property pricing, both residential and commercial, selling prices and rents. There will be a separate blogpost with some gazing into the crystal ball to the year ahead.

First up, this is a summary of the predictions on here a year ago, mid-year and the final outturn. Remember, the annual figures examine the latest property indices, for residential these are Nov 2011-Nov 2012 but commercial indices are published quarterly so these are Sep 2011-Sep 2012, this isn’t cheating, this is basis of the predictions clearly set out in the two previous blogposts.

Residential selling prices

Well, well, well, the 1.1% national rise in residential property prices in November 2011 was unexpected on here, and the publication of the last CSO index for 2012 last Friday has certainly given a fillip to the market. The Independent has declared that “the world’s joint worst ever property crash has finally ended” – the share price for IN&M, the group that publishes the Indo and Sindo closed at 2.9c on Friday valuing the entire group at €15m after a loss of €177m for H1,2012 and a massive debt that needs be resolved in the next quarter, so the Indo probably knows as much about the property business as it does about the media business, but it is still surely just a happy coincidence that rising property prices might give a desperately-needed shot in the arm of property advertising.

But stepping back, and examining the CSO’s index for the past 12 months does seem to indicate a change in the residential property market with prices increasing in four of the past five months, and prices overall down just 5.7% in the past 12 months. Yes, estate agents will tell you there was a stampede by first time buyers to complete by the end of 2012 to qualify for valuable tax reliefs which come to an end on Tuesday next, and the property tax relief in 2013-2016 is paltry by comparison, no-one is going to stampede over saving €157 in 2013 on a €150-200,000 home. There was certainly a major boost to first time buyer lending as revealed in mortgage statistics .

The Property Price Register which was launched on 30^th September 2012 and you would rationally have thought in a buyers’ market, the Register would force prices to decline to the lowest comparable level or even below. Having said that however, if the Register was only available from the start of October 2012, then there is likely to be a time-lag in the work-out of the effect of the Register.

Allsop Space had another terrific year and clearly leads the Irish property auction field by a country mile and until the Register was introduced, these mega auctions were practically the main way of seeing what the national cash market for mostly distressed property looked like.

NAMA has had little effect on the residential market in 2012 despite all the fears beforehand. The Agency has overseen the disposal of about 1,000 of its 13,000 Irish homes and seems generally satisfied that the homes are located in rentable locations and doesn’t seem to be in any rush to sell. The 80:20 deferred mortgage initiative which now applies to 295 homes has apparently been a success but that seems to be more a function of marketing and profile than the mortgage product itself with few buyers apparently taking the new mortgage product.

Interest rates have not been much of a factor in the housing market this year with the ECB maintaining rates at record low of 0.75% with little imminent prospect of major change. Banks however have been lifting variable rates and that shouldn’t be a surprise as they rebuild their once devastated balance sheets – before our generous recapitalization, that is.

Vacancy levels in Ireland remain at about 14% which is about twice international standards and twice the actual level of vacancy in Northern Ireland, but there is wide variation in vacancy levels and indeed in some parts of the country, we may be at levels which would normally prompt new construction.

Residential rents

As with property, residential rents have had a year of two halves, with the first half experiencing mild declines but the second showing signs of robust growth. In January 2012, Joan Burton’s Department of Social Protection slashed rent assistance levels by a simple average of 13% but some rates were really slashed by 29%. This seemed to have an effect in the first half of the year with the CSO reporting monthly declines of up to 0.9% but then from the second half of the year, there has been growth every month with November 2012 rents up 0.6% on a month-on-month basis.

In Ireland, the rent versus value of a home and yields went out the window during the boom years. Who cares about achieving a 7% annual yield when the underlying property is appreciating by a stonking 10-20%. So it is no surprise that in the property collapse that rents have had less of a decline than selling prices. In fact the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 6.1% increase (mostly recorded in February and October 2011 and February and September/October/November  2012).

The results of the Census 2011 showed that there has been a massive increase in renters, with privately renting households increasing by 120% from 145,317 in 2006 to 320,319 in 2011. The ESRI recently opined that this build-up in renters will eventually unwind, though the ESRI failed to consider the growth in the trend of renters. However for the time being, it certainly means that the demand for rented accommodation is elevated, particularly in the better urban and suburban locations.

Commercial selling prices

Estate agents or at least the select few selling major commercial property are a happier bunch at the moment, with 2012 seeing up to €750m of investment transactions, compared to a low of less than €200m in 2011 though we are still off the €3bn record in 2006. There is limited liquidity and buyers in the market, but yields are still all over the place and there have been transactions at close to 15% yields this year.

But 2012 should have been a bumper year and many thought prices would recover. Not so on here where it was predicted there would be a 0-5% decline and in the event, prices have declined 5.2%. Despite the give-away Budget announced in December 2011, where stamp duty was reduced from 6% to 2%, where reform of Upward Only Rent Reviews was abandoned, where capital gains incentives were put in place, despite all this, prices still fell 5.2%. If you assume the long term “normal” vacancy level for commercial property is 5% – and that is disputed in some quarters where it is suggested it should be closer to 15% – then current vacancy levels remain an extreme drag on prices.

But 2012 has seen a rebound in transactions in all sectors, particularly offices and hotels, though it seems on here that industrial continues to lag behind.

Commercial rents

Reflecting the shaky domestic economy and the overhang of vacant property, commercial rents generally continued to decline but at a lower rate than previously. Landlords have some degree of certainty that the Government will not tinker with Upward Only Rent Review clauses, so there is no incentive to negotiate with tenants unless the landlord believes the tenant’s business is jeopardized and that there will be voids in the event of any collapse in the tenant’s business.  NAMA has said that it has approved €6m of rent reductions in 2013 but remember that these rent reductions, or “abatements” , are temporary and provided on a year-to-year basis and as the economy improves, NAMA will be less likely to give its approval.

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NAMA in 2012 – Review of the Year, Part 3 of 3

This is the final part of a 3-part review of NAMA’s activities in 2012. Part 1 which covers January-April 2012 inclusive is here. Part 2 which covers May-August 2012 inclusive is here. And this is Part 3 which covers the last four months of the year.

September 2012 – he wasn’t a NAMA developer but Ivan Yates’s bankruptcy in Wales was a surprise after AIB’s failed bid to bankrupt the former politician in the Irish courts.  There was speculation that the public St James’s Hospital in central Dublin was going to acquire the private Mount Carmel hospital from NAMAed Gerry Conlon, but by year end, there was no progress as the health service scrambles to rein in a €500m overspend. It was reported in the Sunday Independent that NAMA had written off €50m owed for the development of Greystones Harbour, Minister Noonan later told the Dail that the report was wrong though the Independent continued to stand by the report which brought into focus NAMA’s debt writeoff policies in the case of consortia because in Greystones, Michael Cotter’s troubled Park Developments was jointly developing the project with Sisk, and it was understood the NAMA loans were to the Sispar consortium but it is Sisk alone that now appears to control the loans. NAMA opened a campaign against John McCabe with receivers appointed to McCabe companies and a barrage of High Court applications against various individual members of the McCabe family.  Meanwhile reports emerged that Jerry himself had been the victim of an advance-fee type fraud whereby he had paid fees to a Swiss/Dutch/Middle Eastern company to help refinance his companies’ loans. Paddy McKillen is hit with a €25m legal fees bill in the UK after his failed marathon case, a reported €5m was paid but Paddy is now appealing the decision with a hearing scheduled for February 2013; it wasn’t all bad news for Paddy in September with the Northern Ireland environment minister giving the green-light to develop  a major extension to the Ards Shopping Centre in Newtownards, county Down. Treasury Holdings’ woes intensified as KBC’s application to have the property group liquidated was boosted when NAMA supported the application after revelations of the sale of a Far Eastern company to Richard Barrett for a price which was later reported to be on the low-side of valuation estimates.  Ray Grehan might have been declared bankrupt in the opening week of the year, but that hasn’t stopped NAMA pursuing him through the UK courts over the disposal of a Knightsbridge apartment in central London – “the case continues”. We had some light relief when it emerged model Glenda Gilson had been hit with a €73,000 tax bill which prompted the best anacoluthon headline of the year on here – “Model who kicked NAMA developer in testicles is fined by tax authorities”. NAMA dismissed speculation on here that it had moved to offload its US loan portfolio through a US company, DebtX. David Arnold becomes the second NAMA developer to put his art collection under the hammer, with British auction house Bonham’s getting the business; weeks later NAMA says it controls art collections with an overall value of €7.5m.  It went from bad to worse for former NAMA employee Enda Farrell who faces up to five years in prison or up to €5m fine or both for allegedly removing confidential data from NAMA, the Garda investigation which started in September continues. NAMA has receivers appointed to a series of companies in which NCB stockbrokers is involved, apparently as a vehicle for its private clients. NAMA sues a range of the highest profile developers in a series of unrelated applications in Dublin’s High Court with Bernard McNamara, Liam Carroll and wife Roisin, Greg Coughlan and wife Ann and sticks in a few new McCabe applications for good measure. Fianna Fail again attacked NAMA for its “stinking practice” of selling property off-market.

October 2012 – The deputy Labour Party leader Joan Burton let slip on RTE Radio that NAMA faces a loss of up to €15bn but she did a u-turn on that a week later and toed the party line that NAMA would break even. One of the worst – Phil Hogan would be a close competitor – ministers in Government, James Reilly’s woes continue with a NAMA angle emerging in the controversial decision by the Minister to bump up two sites in his own constituency to be developed as primary care centres. The property at Dublin Street in Balbriggan was owned by NAMAed Seamus Murphy who is an associate of Minister Reilly but the Minister tells the Dail that Seamus won’t benefit from the sale, that NAMA will, which begs the question how the Minister would know this information as NAMA doesn’t disclose confidential information and the implication is that the Minister discussed the finances of the site with his associate which muddies the murky waters even further. It emerges the Minister discussed a site in Balbriggan with NAMA in April 2012 but it remains unclear, the Minister denies it, if the specific site was discussed with NAMA; apparently An Tanaiste Eamon Gilmore had an internal investigation into the matter which concluded there was no political interference based on the documents examined.  Michael O’Flynn puts nearly €100m of property on the market in London. It emerges that NAMA is selling an average six properties per day worth a total of €8m.  Treasury Holdings is finally liquidated which puts at a practical end the prospect of an appeal against the judicial review findings over the Summer – NAMA breathes sigh of deep relief, but that judicial review judgment stands ready to be used by other less distressed developers. The newly launched Property Price Register means we can now see what has sold and at what price, and it seems NAMA’s deferred mortgage scheme hasn’t been as successful as the Agency claimed, though the Agency stands by its sales figures and later in October, expands its offering of properties with the product from 115 to 295. NAMA is back in court against its former employee Enda Farrell and his wife Alice Kramer, it emerges that confidential information was initially forwarded by Enda to Alice who worked at Ernst and Young and this bypassed NAMA’s security which didn’t obstruct the sending of information from the Agency to one of the firms regularly used by the Agency. Alice then forwarded the information to a personal email address, and from there, it seems Enda disseminated it far and wide. NAMA  stretches the bounds of credibility by claiming no damage has been done to the Agency by this apparent leak. A nasty year at the troubled Longford estate Gleann Riada is capped with reports of an explosion in which luckily there were no casualties, a local MEP gets involved and as the year draws to a close, it is unclear who exactly is taking responsibility for remedying defects on Alastair Jackson-developed estate. Northern Ireland’s finance minister Sammy Wilson is delighted that NAMA is investing nearly €125m with Northern Ireland developers, though mostly on developments located in other parts of the UK. A High Court judge referred to the Attorney General for consideration of its constitutionality, part of the NAMA Act, section 101 which deals with NAMA’s responsibilities with respect to assurances given by the original lender if NAMA wasn’t aware of such assurances – as the year draws to a close, the Attorney General appears not yet to have issued her view on the section. NAMA obtains judgments of €270m against members of John McCabe’s family. It emerges that NAMA has sold €1.9bn of loans so far, with Maybourne, Cyril Dennis and Donal Mulryan – and possibly David Daly and Bill Durkan – accounting for the bulk of these. It emerges that Walbrook Partners LLP, a recently formed UK company is the buyer of the 17% stake in NAMA formerly owned by Irish Life, Minister Noonan refuses to provide any detail on the transaction. The court case in Connecticut with NAMA and the Dunnes warms up with each side foiling and parrying against the other – Gayle Killilea-Dunne is very unhappy at what she claims is the damage wrecked by NAMA on her reputation and prospects, NAMA maintains that she has improperly benefitted from transfers from her now- deeply indebted husband – the case is scheduled to be heard a remarkable 20 months hence in September 2014. NAMA appears before the finance committee in the Oireachtas and is predictably grilled about the Enda Farrell affair, both the sale of the house in Lucan offmarket and the alleged removal of confidential information; NAMA is defensive but says the sale of the house in Lucan took place after an “independent valuation” and that recipients of confidential loan information don’t have any advantage conferred on them. It emerges NAMA has approved €6m of rent abatements in 2012, Paddy McKillen wins right to appeal his comprehensive London High Court defeat and the battle is set to recommence in February 2013.

November 2012 – attention is drawn by Sinn Fein to the waste of the State operating two property management companies, NAMA and IBRC where disparities in practices, cost discrepancies and internecine competition for customers and resources just mean the State is pouring more resources down its banking bailout than it needs to. Minister Noonan rules out a merger of NAMA and IBRC for the time being however.  NAMA manages to look righteous as all Hell breaks loose on bankers’ salaries and pensions, with sacrifices at the Agency contrasting with refusals to cooperate with Minister Noonan at IBRC. NAMA Top 10 developer Michael O’Flynn finally has his day in court with junior minister Lucinda Creighton over comments she made in 2011. In the course of a brief High Court hearing, a settlement was reached and a statement was read out in court and a contribution, later put at around €50,000 by sources, was made by Minister Creighton to Michael O’Flynn’s legal costs with the contribution apparently passed on to the Crumlin Childrens Hospital. In Northern Ireland, one of NAMA’s most expensive properties, an office block on Bedford Street in Belfast city centre comes onto the market with a price tag equivalent to €50m. A €20m expansion of Gerry Barrett’s Scotch Hall development in Louth is announced, but where and when is the remaining €1.98bn of NAMA’s promised €2bn going to be spent- we had an answer from the IMF to the latter question in December: “it will be back-loaded”. NAMA slashes prices by over €100,000 on some property subject to its deferred mortgage initiative. Tom McFeely’s former residence on upmarket Ailesbury Road in Dublin finally comes onto the market, after the scrappy Priory Hall developer loses his appeal against the repossession amid a firm NAMA denial of his claims that it had offered him alternative accommodation. Broadcaster Pat Kenny’s property dealings came under the spotlight after the Ritz Carlton hotel in Powerscourt was placed in examinership, with Pat standing to lose tax credits if the hotel collapses, his other dealings particularly with Derek Quinlan partnerships remain under wraps but he is likely to be nursing losses. Paddy McKillen faces a severe dilution of his stake in the Maybourne group with the Barclay-backed board announcing a cash call which eventually is met by Paddy paying for his entire allotment of shares and also making it clear he has the finance for Derek Quinlan’s allotment should that become available – seems Paddy does have a pot to piss in, after all.  It emerges that €3bn-turnover, 16,000-employees faces liquidation after it fails to settle a €22m debt owing to a NAMA developer, the doughty Dunnes chief Margaret Heffernan writes strong letters of protest to the NAMA chairman Frank Daly who curiously doesn’t hand them over to the Gardai, though perhaps there are exemptions to such correspondence in NAMA’s lightweight anti-lobbying rules; in the end Dunnes settles the debt within hours of the liquidation hearing and Judge Peter Kelly is not happy with Dunnes Stores attitude to court rulings. Tragedy befalls a NAMA developer, Hugh O’Regan whose life ends on a roadside in Wicklow – there is an outpouring of sympathy from the public and development community; Paddy Kelly said “there is no compassion, it’s as though we don’t care for each other anymore. There is a poison in our country, where did that come from?” NAMA finally publishes a version of the report by Deloitte into the Enda Farrell purchase of property and it seems that all NAMA had when the sale was effected was a valuation “opinion”, Minister Noonan tries to draw a line under the affair by refusing to answer questions in the Dail about the valuation opinion. A constant headscratcher during the year had been the very low spend by NAMA on lawyers and in November, the mystery was solved – NAMA was booking the lionshare of its legal costs to its balance sheet where it expects to recover these costs from the developers’ loans, one particular source of amusement is the €8,000 booked as payable to McCarter and English, the US firm leading the fight against Sean Dunne and wife, with Sean owing €185m to NAMA and €164m to non-NAMA banks, the prospects for NAMA recovering these costs particularly in the US where there seems to be a bar on one side being awarded costs against the other, seems remote.

December 2012 – the Enda Farrell affair has not gone away yet and the question of NAMA’s legal and other costs in the matter need to be settled with the wife Alice Kramer disputing the costs, claiming she was unaware of the content of the emails sent to her by her husband. Two NAMA developers declare €100m losses apiece, in the case of Frank Boyd’s Killultagh Estates the loss is a real annual loss, in the case of Michael O’Flynn’s Tiger Developments, it is claimed the loss is offset by transactions elsewhere. One of NAMA’s senior property people, Kevin Nowlan leaves the Agency to return to the family firm, WK Nowlan but despite this, Kevin has been called to be deposed in the Dunnes case in Connecticut which will entail quizzing by the Dunnes lawyers in January 2013. NAMA redeems a further €1.5bn of its bonds bringing to €3.5bn the total redeemed in 2012 and €4.75bn the total redeemed to date which means that NAMA just needs redeem a further €2.25bn in 2013 to meet the target of €7.5bn that Minister Noonan unilaterally had copperfastened into the bailout agreement with the Troika in May 2012. An IMF staff report on Ireland reveals a couple of snippets which NAMA would probably prefer not be disclosed to the public, that it will be selling €3bn of Irish property in 2013-4 and that it is backloading its €2bn investment towards the end of the four year period which itself ends in 2016. NAMA has receivers appointed to companies in which Goodbody Stockbrokers have an interest, presumably on behalf of private clients.

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NAMA in 2013 – Look Ahead to a Key Year

The final part of the three-part review of NAMA in 2012 will be published on here tomorrow, but in this blogpost, we remove the wraps from the crystal ball and gaze into the year ahead for the Agency. NAMA is now decidedly in its asset management phase having largely completed its acquisition of €74bn of loans from five Irish banks. As NAMA told us previously, asset management of underlying property consists of (1) disposals (2) renting (3) mothballing (4) development (5) demolition – of course if NAMA was a true asset manager, there would be a sixth option of co-development and seeking third party development risk finance.

Here’s a look ahead at ten areas in 2013.

Legal problems for NAMA. We appear to be still waiting for the Attorney General, Maire Whelan to respond to the request from Judge Charleton in the High Court in October 2012 to examine section 101 of the NAMA Act for compatibility with the Constitution. This section 101 allows NAMA to disregard assurances given by the original banks to borrowers if NAMA claims it wasn’t aware of such assurances when it acquired the loans.  Judge Charleton is unhappy with the section, and it reminds us that the NAMA Act 2009 is relatively new and has not been extensively tested in the courts. Separately, but related, was the surprising success of Treasury Holdings in its judicial review proceedings with NAMA, success which was swiped away by a technicality but as the law stands, developers are entitled to be consulted about their loans before NAMA forecloses and NAMA’s procedures and actual behavior must be fair.  In truth, many developers are deeply underwater with their loans because the underlying property is worth a fraction of its original cost, interest charges have mounted and the economy is still in the doldrums, so few developers have the wherewithal or need to challenge NAMA. But there are 15-20% of NAMA loans which are performing and not all developers are in distress. So don’t be surprised if NAMA faces more legal challenges. In the US, NAMA faces an uphill battle with the feisty Gayle Killilea-Dunne and her husband Sean as NAMA tries to show that certain transfers from the heavily-indebted Dunner to his wife took place so as to bilk creditors.

Enda Farrell. NAMA and Minister for Finance Michael Noonan would like to draw a line under the two strands of the Enda Farrell affair, the purchase of a property from a developer whilst employed at the Agency and the alleged removal of confidential data which was then widely disseminated.  The first strand won’t disappear until NAMA shows us the evidence that there was an independent valuation, because since the Sunday Times broke the story in August 2012, the Agency has been downgrading the valuation that was obtained and as it now stands, it was no more than an opinion, and at this rate, it might have been some estate agent asked if €410,000 was in any way defensible and the response was “whatever”. On the second strand, several developers including Sean Dunne are unhappy that their confidential data might be the subject of tittle-tattle by every agent and their receptionist in Dublin, and NAMA’s claim that the Agency hasn’t suffered damage from the alleged leaking just doesn’t stack up. The Garda investigation of the matter is still ongoing apparently, and Enda faces up to five years in prison and a fine of up to €5m or both should he be convicted of offences under the NAMA Act. There is also an investigation by the Data Protection Commissioner ongoing.  And there is the small matter of costs in the High Court  case taken by NAMA against Enda and his wife Alison Kramer (or Alice Kramer) and there is  hearing scheduled for January 2013 where it seems Alison is resisting any liability for costs as she merely passed emails on without knowing their contents, she claims. Stepping back from the individual Enda Farrell affair, you have to be impressed that NAMA with 227 staff and a further 400 approximately working at the Participating Institutions hasn’t suffered more scandal and it seems that the claim Brendan McDonagh spends considerable time interviewing and selecting staff is more than just executive PR. NAMA was coy over its disciplinary actions in 2012, and there has been speculation that Enda Farrell isn’t the only employee in hot water, but NAMA and Minister Noonan refuse to comment on such speculation.

Disposals in Ireland. When Minister for Finance Michael Noonan or NAMA are asked about their plans for disposals, they go all coy and say revealing such information would undermine the Agency’s commercial remit. However, we learn from the IMF in December 2012 that NAMA apparently has €3bn of Irish disposals planned in 2013-4. We previously learned from the Comptroller and Auditor General that NAMA was to hold its hotel assets until after 2015, we know that NAMA had 13,000 of residences in the State of which about 1,000 have been sold and most of the rest are highly rentable in well-located areas. So, it seems that at long last, the floodgates are about to be opened on the disposal of NAMA’s commercial property portfolio which was acquired at a cost of €9.25bn by reference to November 2009 values but is worth about €6bn today. NAMA is also making €2bn of staple finance available, although it did previously say such funding would be available to top quality property with blue-chip tenants and reputable investors. NAMA is a latecomer to the mass disposal of Irish commercial property and Certus, Bank of Scotland/Lloyds, Ulster Bank and even AIB have already been disposing of loans and property.  NAMA says that with effect from October 2011, it is marketing “nearly all” of its properties on the open market. The “nearly all” will come in for scrutiny in 2013 and the Fianna Fail senator, Mark Daly has warned that he will resurrect his NAMA transparency bill.  NAMA can expect to be challenged on its monthly foreclosure list which seems to deliberately obstruct analysis of additions and deletions and which continues to be ridden with errors. Related to disposals is NAMA’s renting strategy and we will soon see if NAMA will roll-over rent abatements granted in 2012 which have cost NAMA and its developers €6m so far.  NAMA demolished its first property in 2012 in Longford but indicated the demolition option would be pursued in a very limited instances. NAMA is taking an obviously more gentle approach in Northern Ireland where it is foreclosing on fewer developers and has now started investing on a larger scale; it previously committed to avoiding fire sales across the Border and the North’s finance minister Sammy Wilson appears to keep close tabs on the activities of the Dublin-based Agency.

Bond redemptions and cash balance. NAMA should meet its bond redemption target of €7.5bn by the end of 2013 with ease, it has already redeemed €4.75bn and the Agency has a healthy cash inflow as you would expect in its earlier years when it still has quality loans and property. That will change but NAMA should only really meet a cash flow challenge in 2017 when the majority of its bonds are repayable according to the internal NAMA schedule, though remember that internal schedule is not copperfastened into the Memorandum of Understanding.  NAMA remains atop a cash mountain for the time being, and don’t be surprised if Minister Noonan directs – actually “Directs” with a capital “D”, which is something the Minister is allowed do under the NAMA Act – NAMA to temporarily fund the €3.1bn Anglo promissory note that falls due at the end of March 2013.

Paddy McKillen and developers generally. Paddy is really no longer in NAMA, but remember that Paddy ultimately failed in his appeal against the British courts’ judgment which practically upheld the manner in which NAMA sold €800m of loans in the Maybourne Hotel group to the Barclay brothers, because the British appeal courts didn’t see the point in spending more time on a matter which was peculiarly foreign – Irish courts might take a different view, and it wouldn’t be a total surprise if Paddy were to take his grievance to the Irish judiciary, it mightn’t affect the sale of the loans as regards the Barclays, but it might land NAMA with a colossal damages bill. Paddy is separately appealing the British judgment which didn’t see anything untoward in the Barclays’ acquisition of influence and control in the Maybourne group – that hearing is scheduled to start in February 2013 and you might expect some sparks to fly. On a general level, NAMA has foreclosed on loans belonging to well over 27% of its developers in the Republic of Ireland and there doesn’t appear to be any let-up in the pace of new receiverships. In 2012, NAMA launched nearly 40 applications in Dublin’s High Court and warned that it was about to refer one developer to the Gardai. On the other hand, Ballymore had some good things to say about NAMA, but as we move in 2013, there is still a generally distrustful and combative relationship between developers and the Agency.  More than 20 Irish NAMA developers have been declared bankrupt in the UK and we can expect to see further bankruptcy bids in 2013, despite recent indications that the UK is tightening its application of bankruptcy jurisdiction rules.

Mergers and acquisitions. There is no long term logic in maintaining a separate NAMA and IBRC. There is also the burning issue of the loss-making mortgages in the Irish banks, particularly Permanent TSB and Irish Nationwide Building Society.  As regards cost control, NAMA appears to be far superior than its state-owned competitors and if you use accounting profit as a measure of performance, it is also a better managed organization delivering better results. So it might make sense for NAMA to merge with IBRC with NAMA taking on the dominant role.  There would be savings in costs and a reduction in harmful competition for customers and resources. Minister Noonan isn’t keen for now, but the writing is on the wall – there won’t be 3-plus state-owned bank asset managers by 2020.

Investment. We learned recently from the IMF that NAMA was backloading its €2bn investment to the latter part of the four year period ending in 2016. When the State is on the floor with 14.6% unemployment and anaemic economic growth, this seems inexcusable. If Minister Noonan can issue a Direction to NAMA to provide a temporary digout to repay the Anglo promissory note then, Minister Noonan can certainly issue a Direction to frontload the investment. Don’t be surprised if NAMA funds a major office block in Spencer Dock, it is certainly spreading investment across the State in shopping centres from Ballincollig to Charlestown. Gerry Barrett seems delighted that NAMA is investing €20m in Scotch Hall in Louth.

Transparency. The ongoing High Court case between NAMA and the Information Commissioner continues and if NAMA is unsuccessful, then it will at last be exposed to environment information requests, but I seriously doubt such requests will yield much information. It is unclear if the Freedom of Information legislation will be extended to NAMA as indicated by An Taoiseach Enda Kenny in February 2012 when he then said “the Bill relating to freedom of information will be introduced later this year. A number of areas require discussion and analysis before the Minister can move on it” NAMA appeared before four Oireachtas committees in 2012 and the betting is that it will be similarly challenged in 2013. In the Dail, Minister Noonan can expect to continue to field parliamentary questions. We can hope that the Comptroller and Auditor General will undertake another specialized report into NAMA’s asset management. There are two requests from here to the European Commission for paperwork and documents associated with the NAMA deferred mortgage initiative and the staple financing scheme, both are still being progressed despite objections from the “Irish authorities” – Department of Finance, I assume.

Political Interference. Remember the conniptions poor old Willie O’Dea was suffering in 2010 when he wondered if he could contact NAMA to discuss a building site in his constituency which had become a hazard and magnet for anti-social behavior. Politicians have since become quite bold in their overtures to NAMA, and it seems the once fearsome NAMA anti-lobbying rules which then-Minister for Finance Brian Lenihan promised would mean only the debtor could lobby NAMA about their loans, have been over time exposed as toothless. NAMA even provides TDs and senators with a dedicated email address and has appointed a relationship manager – sorry, Head of Relationship Management, Martin Whelan seems to be building an empire. In 2012 Minister Reilly met with NAMA over primary care centres, though the Minister insists he did not discuss a specific site on Dublin Road in Balbriggan. Minister Bruton insists he did not lobby NAMA over the lease of part of Burlington Plaza to BSkyB.  Minister Noonan Directed – with a capital “D” – NAMA to temporarily fund the Anglo promissory note payment that fell due in March 2012. A NAMA advisory board was appointed and even though it reports that NAMA is performing effectively, the board is being maintained. In 2013, there is a review of NAMA’s overall operations due as part of the NAMA Act and you can bet your bottom dollar that the review will be an opportunity for further political interference.

Financial performance. NAMA has reported a post-impairment profit of €222m for the first six months of 2012 and it looks as if the Agency is on course to beat its 2011 annual pre- tax profit of €12m. Despite the fact that NAMA’s year comes to an end in two day’s time, we don’t yet have a forecast of outturn for 2012. Given NAMA’s convoluted methodology for accounting for interest, its eight-year remaining lifespan to work out or claw back losses, and the artificiality of its accounting practices – all compliant with international standards, it should be stressed – we are likely to see profits in 2013 also. The crunch will come later if the Irish property market doesn’t stabilize and grow prices at a rate that exceeds the rate at which NAMA runs up interest and costs.

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