The NAMA whitewash of the sale of the Lucan property to Enda Farrell

The regular audience will recall the uproar in August 2012 when the Sunday Times reported that a former NAMA employee, Enda Farrell had, with his wife Alice Kramer (Alison Kramer) bought a house in Lucan that belonged to a NAMA developer Thomas Dowd and paid €410,000 in November 2011 for the house on 2 acres. The first question, the very first question, was whether NAMA had received a fair price for the property. NAMA immediately defended itself by saying that it had obtained independent valuations – that is, more than one valuation, and at the time there was a suggestion of two independent valuations and the purchase price of €410,000 was in line with the valuations – so there was no need for the public to worry, the property had not been sold to a NAMA insider at below cost.

On 24th October, 2012 the NAMA CEO and chairman appeared before the Oireachtas Committee on Finance, Public Expenditure and Reform and predictably were quizzed about the transaction.  During the hearing there was reference to “one independent valuation” and the NAMA chairman Frank Daly was asked to provide details of that valuation, but sidestepped the question by claiming that he didn’t know if he was legally entitled to share the valuation. So the plural “independent valuations” in August 2012 had been downgraded to “one independent valuation”

But given the focus on the price paid, and the valuations obtained by NAMA, we were all a little surprised when two weeks ago, NAMA published its internal report into the matter , which merely said

“The Form A provided details of the sales process to date and an opinion as to the current market value of the Property from a local estate agent which recommended that the  NAMA debtor accept the offer of €410,000.”

So the “two independent valuations” in August 2012 which had been downgraded to “one independent valuation” at the committee hearing had now became one “opinion”.

In the property business, we like to know at least three attributes of any valuation, when the valuation was undertaken, the value (obviously!) and the basis for the valuation. And for property values, you oftentimes get a range of values, so a valuer might say the property is worth “between €50,000 and €65,000” and sometimes when a property is very difficult to value, that range can be quite large. So in the case of the property in Lucan which was a renovation or development project being sold in a market which was very thin with few mortgages, the range could well be €100,000, for example €410,000-510,000 and indeed the range could be even greater. And an “opinion” is not the same as a “valuation”! A “valuation” is a professional piece of work which sets out the basis for the valuation and provides evidence, for example with sales of similar properties. An “opinion” can be “off the top of my head, the property is worth around €400,000”

But what we wanted to know was the price obtained by NAMA really in line with the valuations. Today in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked for details of the valuations and was told by the Minister for Finance Michael Noonan  “I do not intend to go beyond the extensive information that NAMA, based on legal advice, has already made publicly available on this matter” So did NAMA sell the property cheaply to one of its own employees at the lower end of a range and did it really obtain a valuation.

If NAMA did sell at the low end of a range, then the next question would be whether Enda Farrell had knowledge of the valuation ranges which would have given him an advantage over someone who didn’t know the valuation. It seems however that NAMA wants to draw a line under the matter completely.

NAMA sold the property in Lucan without ever putting it on the open market, so the €410,000 price was not tested with independent bids from the market. NAMA now puts most of its property on the open market, though there are exceptions.

But Minister Noonan isn’t allowing the probe of the matter. And remember this is all our money, on the basis that the sale price on the property went to settle a loan owed by the NAMA debtor – it is possible the sale price was more than the loan outstanding but in most cases, that is not true when property generally has decline 60-70% from peak.

The full parliamentary question and response is here.

Deputy Pearse Doherty:  To ask the Minister for Finance further to publication by the National Assets Management Agency of a report into the purchase of a property under its control by a former employee, if he will provide details of the two independent valuations of the property which NAMA previously claimed had been undertaken; specifically the dates of the valuations and the valuation amounts or ranges..

Minister for Finance, Michael Noonan : I do not intend to go beyond the extensive information that NAMA, based on legal advice, has already made publicly available on this matter.

On 27th November, NAMA published, in line with the commitment by the NAMA Chairman at the recent meeting of the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, the detail of a report by its internal auditors, Deloitte, on the transaction. This report outlines the sequence of events relating to the transaction, the disclosure requirements imposed on NAMA staff under the NAMA Act 2009 and associated codes of practice, and the key recommendations made by Deloitte, all of which have been accepted by the NAMA Board and which now have been implemented.

The Deputy will also be aware that the NAMA Chairman provided considerable detail on the transaction at that recent meeting of the Joint Oireachtas Committee on Finance, Public Expenditure and Reform.