This morning, NAMA has issued a statement about the sale of Project Aspen – the statement is here on the Gordon MRM website but get it quick because the “archive” feature on the Gordon MRM website frequently doesn’t work. Project Aspen is the portfolio of loans relating to Dublin property developer, David Courtney and relate to a number of properties in and around Dublin. The loans have a par value of €810m. NAMA doesn’t say this morning how much the loans have fetched – sources here last week credibly claimed it was €180m. I see the old media is today claiming it is €200m. Eastdil marketed the loans from January 2013, and there were 60 interested parties.
Who is the buyer? As expected Starwood Capital is the buyer. Or more accurately, one of the buyers. The NAMA statement says that the buyer is a consortium and “other members of the consortium include Key Capital Real Estate and Catalyst Capital” It is not clear if there are other members.
But there are two major surprises this morning:
(1) The buyers are receiving staple finance from NAMA to purchase the loans. Remember “staple finance” is where NAMA provides the buyer with the funding to buy assets. NAMA says this morning “NAMA will provide a senior secured loan (vendor finance) to the joint venture, with an initial loan to value of less than 60%. The loan will carry a commercial rate of interest, and is expected to be repaid within five years.”
(2) NAMA is entering into a joint venture with the consortium to manage the portfolio! NAMA says this morning “Under the terms of the agreement, NAMA will sell the loan portfolio to the new joint venture entity, which will be 20% owned by NAMA and 80% owned by a consortium led by Starwood.”
So, NAMA is getting €57.6m in cash now on my source’s information on the sale value – being €180m at 80% at 40% – , or €64m based on what the old media says today, so it is getting 7c in the euro on the par value of the loans today and an overall total of less than 25c in five years.
NAMA says this arrangement “enables NAMA to capitalise on the current robust interest from global investors in Irish commercial property assets and at the same time participate in the continuing recovery of the Irish commercial property market”
The “continuing recovery of the Irish commercial property market” is questionable. Figures released last week by Jones Lang LaSalle and IPD/SCSI showed that commercial property declined by 0.6%-1.0% in Q1,2013, this after a 7% decline in the past 12 months. Commercial rents declined by 3.2% in Q1,2013.
Analysis
There will be some head-scratching as to why NAMA is actually disposing of these loans. It is providing most of the funding and retaining a 20% interest. Why doesn’t the National Asset Management Agency act like an agency and manage its own assets. Why should a US investment group be able to generate a better return than NAMA? Of course, it is joined by local asset managers, Key Capital, but is this transaction an admission by NAMA that its asset management skills are inferior to those of a relatively small Dublin asset manager?
There will also be some questioning as to the involvement of David Courtney himself in the sale. Remember, these are David’s loans. The Sunday Independent reported on 31st March 2013 that “David Courtney, a top Nama client, has teamed up with US investment firm Starwood and local finance house Key Capital to bid for the loan book”
I don’t know if this is true or to what extent it is true, but in the Dail last week, Minister Noonan responded to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty which set out in detail the NAMA rules, and it is accepted by NAMA, according to the response, that borrowers may cooperate with potential buyers, as long as it is not “during the sales process”
Based on the experience of the sale of the €250m of Donal Mulryan loans to Morgan Stanley, it seems to be accepted by NAMA that borrowers can work alongside buyers after the sale, but this area appears murky and given NAMA cannot sell property to defaulting debtors, it seems inconsistent that defaulting debtors would otherwise derive benefit from the property.
The parliamentary question and response, referred to above, from last week is here.
Deputy Pearse Doherty: To ask the Minister for Finance following news that the National Asset Management Agency is selling large portfolios of loans which bundle together loans to a single borrower, if he is concerned that the borrower may derive a benefit from providing pre-sale advice to certain bidders.
Minister for Finance, Michael Noonan: I am advised by NAMA that it cannot preclude market participants from approaching debtors to discuss their property assets or to indicate potential interest in acquiring either properties or loans. Nor can NAMA preclude debtors from engaging with such potential purchasers. To do either would be counterproductive and could stifle normal commercial discussions in the property market and in particular could discourage international investors from exploring acquisition possibilities in Ireland. However, NAMA has very clear rules regarding the open marketing of loans or of properties on which it holds security.
As set out in response to recent Parliamentary Questions on the topic of NAMA loan sales [44286/12, 44287/12, 44288/12, 44189/12, 1549/13, 8753/13, 8754/13], NAMA has adopted a very thorough approach in line with accepted international market best practice for the sale of loan portfolios. As part of the formal sales process, potential purchasers are required to provide an undertaking that they will not engage with the debtor or other obligors at any stage during the sales process. Both debtors and potential purchasers are aware that the infringement of agreed protocols or undertakings may have an impact on NAMA’s decisions as to whether and to whom it sells a particularly portfolio. Furthermore, where NAMA approves the sale of any loan or approves the sale of any secured property by a debtor, it requires a confirmation that the purchaser is not connected to the debtor or other obligors.
Having ensured, as far as possible, that the sales process is conducted on the basis of all parties having equal access to the necessary information at the same time and that such primary sales are not made to the relevant debtors or to connected parties, NAMA advises that it has no legal right to intervene in any further future management or sales of the loan or underlying property in question post disposal.
NAMA Wine Lake 
€74 billion of loans sold to NAMA for €31 billion.
Now NAMA are selling some of €31 billion loans at a discount.
And all the while the taxpayer picks up the €43 billion differential (€74 billion minus €31 billion) or 58% differential and the differential between €31 billion and ?.
An Irish solution to an Irish problem.
@Gerhard, to clarify,
NAMA did indeed pay €32bn for €74bn of loans.
We DO NOT know what NAMA paid for the €810m of par value loans in Project Aspen. The €810m is par value, the same as the €74bn. We just don’t know the NAMA acquisition value in the €32bn.
The tax payer did indeed pick up the difference between the €74bn and the €32bn, though so did shareholders, some junior bondholders and in Anglo’s/Irish Nationwide’s case, ordinary depositors and credit unions and Irish pension funds.
I take that point, NWL.
It’s reasonable to apply generally 58% discount to all loans acquired by NAMA.
It could well be possible that NAMA acquired these specific loans at a much lower discount of course.
Is it realistic to assume that NAMA acquired these specific loans at the value assigned to them by the banks with no discount whatsoever?
Let’s assume €810 million of loans were acquired subject to 58% applied generally when loans were acquired by NAMA from the Irish covered banks – and those same loans have now been reportedly sold, by other media, for €200 million – then the Irish taxpayer is picks up both differentials.
Of course I am guessing at the second hit being taken by the taxpayer for the sale of these loans. But that’s what happens in an information vacuum!
@Gerhard, you can’t take the average at all and apply it in this case and hope to get a basis for conclusion. Some development land fell by 99% from peak values, but commercial property generally has declined 67%, and normally borrowers put up some equity themselves. So no, you can’t say €810m was acquired by NAMA for say, €300m and that NAMA is now making a further loss. For all we know, NAMA might have acquired the loans for €150m and is making a profit. Somehow though, I would tend to think it is making a loss because of the 27% decline commercial property prices since November 2009, the date by reference to which NAMA valued its loan acqisitions.
But who knows?
point one above if Courtney and his entourage that he is ahem advising,bought loans secured against assets,WTF security does NAMA have on its “loan to loan” ?
Project Ass:
NAMA buys Coutney’s,crap loans with face value of 810 million.
Fair to asume,said loans are secured against the RE in FIRST position.
NAMA ‘sells’ the LOANS still secured in first position to ….a new JOINT VENTURE or SPV-in other words a bankruptcy remote stand alone entity.
This SPV now owns 810 million of loans/paper secured against Courtney’s dogs breakfast of a portfolio-with a basis of 180 million.
But the paper should still have 810 million outstanding !
NAMA lends this SPV 60% of the fecking cash to buy the paper and takes a 20% position in the SPV-now where is the security for this vendor financed loan to loan ?
NAMA’s new loan of 120 million is behind 810 million and NON SECURED.
In RE circles know as a PROJECT ASS.
heres brenda on it-no seriously do they stil have mandatory drug testing at the NTMA ?
Can i have some off whatever brenada is on or smoking….
“Brendan McDonagh, CEO of NAMA commented: “NAMA is very happy with the successful outcome of the loan sale process and we welcome Starwood to partner with us in resolving the portfolio. The transaction has a number of innovative features, including NAMA vendor financing and equity participation.”
Does that say ‘equity participation’ in a loan potfolio sale by the seller-no it can’t be,say its not…..why do i have a chill running down my spine.
Did brenada just finish the book Fingers…is he following that game plan….my hands are sweaty here,NAMA is ‘very happy’ to lend 60% off the purchase price and take 20% equity to a group that has NEVER owned ONE LOAN in Ireland.
Has NEVER done a work out off a loan,has in fact NEVER lent a penny in this country-its a fecking new group who have never worked together….but most importantly brenda is ‘happy’
Who is ‘happy’ except children……im ‘happy’ for you too brenda-not so sure the irish taxpayer should be.
Have the PAC drag him in and explain what security he got for this 120 million loan.
Calm down John…..sheesh, you’ll get people all worked up
It would appear that NAMA enhanced the price it received by providing staple financing for the deal. It is hardly surprising, seeing that the only semi-functioning bank in the country (BoI) will only provide 50% LTV to the PE funds on draconian terms. So we have a marriage of necessity dressed up nicely by the spin-masters. NAMA gets its extra bonus on the price and Starwood gets a sweet loan that will enhance the return on its equity.
Co-Star writes it up below:
NAMA provides €120m vendor finance on Starwood’s Project Aspen win
By James Wallace – Thursday, May 02, 2013 12:58
NAMA has confirmed the sale of the €810m Project Aspen to a Starwood Capital-led consortium structured with just under 60% vendor finance over five years and in a Project Isobel-esq joint venture structure.
Starwood Capital’s three-strong consortium – which also includes Catalyst Capital and Key Capital Real Estate – has purchased an 80% stake in the special purpose vehicle (SPV) which will house the Aspen loan portfolio, with NAMA retaining the 20% balance.
While the just-issued statement does not include a price, CoStar News understands that Project Aspen was sold for around €200m, which would reflect a 75.3% discount, financed by a 60% loan-to-cost by NAMA, equating to €120m.
CoStar News understands that the Aspen SPV is structured with €64m of equity from Starwood and €16m of equity from NAMA, with the Irish bad bank providing a five-year €120m facility priced at sub 400 basis points over three-month EURIBOR.
Project Aspen is comprised of 16 loans, predominantly extended by Bank of Ireland, secured by David Courtney’s Regeneration Developments.
Courtney is understood to no longer be part of the consortium and has effectively agreed to hand over the keys to Starwood, which will now seek to implement a targeted asset management programme to improve the value of the assets through capital expenditure and lease re-gearing.
NAMA’s retained minority 20% equity ownership in the Aspen SPV will enable the Irish bad bank to share in the upside created through Starwood’s asset management strategy, improving its overall recovery on the underlying loans relative to the discount at which they were originally acquired.
In a statement published this morning, NAMA said the structured sale enables it “to capitalise on the current robust interest from global investors in Irish commercial property assets and at the same time participate in the continuing recovery of the Irish commercial property market”.
Starwood’s majority equity split is the reverse of the structure constructed for the de-leveraging of the Royal Bank of Scotland’s Project Isobel in which Blackstone acquired only a 25% equity stake.
The key difference between Isobel and Aspen is in the NAMA NPL’s relative simplicity, with effectively just one borrower across all 16 loans, and with Courtney understood to have agreed to step aside, the workout strategy will likely be faster than the full five years for the majority of the individual assets.
Credit Suisse sold a controlling equity stake in a similar joint venture SPV in two separate European non-performing loan portfolios (NPL): Lone Star acquired a 51% equity stake in a nominally-valued €2bn portfolio in September 2009 and Apollo Global Management acquired an equally-sized equity stake in a €900m NPL in summer 2010.
NAMA’s minority equity ownership will enable the Irish bad bank to share in the upside through the implementation of the Starwood consortium’s business plan for the underlying 39 secondary offices and retail properties throughout predominantly Dublin.
Project Aspen was brought to market in February in a sales process managed by Eastdil Secured. NAMA confirmed exclusive discussions with Starwood began in early April.
In a statement, Brendan McDonagh, CEO of NAMA said: “NAMA is very happy with the successful outcome of the loan sale process and we welcome Starwood to partner with us in resolving the portfolio. The transaction has a number of innovative features, including NAMA vendor financing and equity participation.”
Also in the statement, Jeffrey Dishner, senior managing director at Starwood, said: “We look forward to a successful working relationship with NAMA and are excited about this investment opportunity.
“Since 2009, Starwood has taken on over $7bn in non-performing loans as a key part of our distressed investment strategy and demonstrated an ability to work in partnership with financial institutions throughout the world to successfully manage the portfolios to meet their needs while achieving strong investment results for our investors.”
NAMA’s confirmation of the sale of Aspen is expected to trigger the start of the Project Club NPL sales process, which is being managed by CBRE.
@IAFK yeah based on irish media reporting its a ‘coup’ a stunning victory with everyone ‘happy’,how to turn 810 MILLION into maybe 60 million of cash,revenue must be delighted too,no recording costs on loan sales!
But in fairness NAMA does have now instead of 810 MILLION of loans,eh 60 million in cash a bit of paper for 120 million that is useless and a lottery ticket for 20% off upside BEHIND the original 810 million!
How will NAMA manage its lender liability issues,they are the primary lender and ALSO an equity participant,what happens if there is a ‘conflict of interest’ btw. the SPV and its lender……curios how they will AC for this upside participation too.
As they are now a ‘lender’ will they have to reserve additional for participating loans………..
Why does NAMA not simply give it up and JV the balance with Starwood?
BTW, NWL, Well done; You were 2 months ahead of today’s headlines!
@WSTT-tks for co-star link so NAMA is lending 5 year money based on this..
“CoStar News understands that the Aspen SPV is structured with €64m of equity from Starwood and €16m of equity from NAMA, with the Irish bad bank providing a five-year €120m facility priced at sub 400 basis points over three-month EURIBOR.”
So to buy/control 810 million of Irish loans you need only 48 million of cash !
Its free money too,what could possibly go wrong here…….is NAMA really mandated to co-invest with its buyers w/o any oversight ?
The loan pool is currently producing 15 million in cash-link attached.
It appears to include some development and redevelopment situations,is NAMA all in-will they also be providing any required financing at below market rates,funding any additional equity required pari passu ?
Its this is NOT an unfair advantage what is,how can any other seller possibly compete with this funny money and deal structure,is NAMA distorting the market with this transaction ?
http://www.businesspost.ie/#!story/Home/News/Nama+completes+sale+of+%E2%82%AC800m+Project+Aspen+portfolio/id/19410615-5218-5182-148e-81d444542207
@JG
I agree 100% with you. This is a real donkey of a deal.
From the IT
http://www.irishtimes.com/business/sectors/financial-services/nama-agrees-deal-to-sell-a-portfolio-of-irish-properties-for-200-million-1.1379741
“Project Aspen
Called Project Aspen, the portfolio includes the Garda offices at Harcourt Street, four Superquinn stores, an interest in the Dawson Street building used by stockbroker Davy, and sites in the IFSC and Carrickmines Retail Park.”
The yearly rentals must be substantial.
As you say:
“So to buy/control 810 million of Irish loans you need only 48 million of cash !
Its free money too,what could possibly go wrong here…”
It is inexplicable. I repeat my assertion:
Ireland is being ransacked.
@JR,hi Joseph if you have not yet,grab a copy of this-linked.
The Irish media is absolute drivel,a mouthpiece for vested interests who have the country by the ba**s,fawning all over NAMA-its a sad reflection on NAMA’s skill set or lack there off-they outsourced asset management and upside for pennies….to a bunch of yank carpetbaggers.
http://www.social-europe.eu/2013/04/the-role-of-the-media-in-propping-up-irelands-housing-bubble/
@JG, Just got awarded an F in maths, John….. Starwood needs €64 million cash, not €48 million. (120+64+16 = 200).
This is all about recapitalising the country with foreign money- principally US Dollars. No Irish need apply….. their money is needed to pay future taxes to our new financial German ubermeisters.
I love the American Declaration of Independence. The early Americans put life’s ambitions very succinctly in 1776:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
I never liked the legal coldness of the Irish Constitution produced by the grey faced wigs for the government. I much prefer the emotive language of the 1916 Proclamation of the Irish Republic.
“We declare the right of the people of Ireland to the ownership of Ireland, and to the unfettered control of Irish destinies, to be sovereign and indefeasible. The long usurpation of that right by a foreign people and government has not extinguished the right, nor can it ever be extinguished except by the destruction of the Irish people. In every generation the Irish people have asserted their right to national freedom and sovereignty: six times during the past three hundred years they have asserted it in arms. Standing on that fundamental right and again asserting it in arms in the face of the world, we hereby proclaim the Irish Republic as a Sovereign Independent State…..”
Well, by 2016, we will have relinquished both of these great Statements of Democracy. Liberty and the pursuit of happiness have already been replaced by the EU and austerity and Ireland will no longer be owned by the people of Ireland with control over their own destinies.
All won and all lost within a century.
@WSTT,I know hoped no one would notice,tks….I was using the 180 pp utilized by NWL…but yeah my math all over the place above…is NAMA still hiring,whatever about my math……how do you think they secured the 120 “senior” secured position!
I was so incensed when I read the deal particulars…..
@JG, ah John blame someone else, the calculation on here is Starwood needed €57.6m if the transaction value was €180m. But is appears that with the new deal with NAMA taking a 20% stake and offering 60% staple finance, the transaction price may indeed be closer to €200m.
wstt. Do not despair- as you can see from comments on here, our spirit is not quenched.