“DBRS sees NAMA’s efficient operating structure, good revenue stream from investment properties and continued solid realization of value from the property portfolio as underpinning NAMA’s profitability in 2013. Further, DBRS sees Irish property values as staying within a narrow band through 2013, which combined with the noteworthy discounts on the property book, should limit further credit losses and support earnings.” Ratings agency DBRS note on NAMA
Canadian ratings agency, DBRS is generally overshadowed by its more successful troika of competitors – Standard and Poor’s, Fitch and Moody’s – though the NTMA seems to disproportionately refer to DBRS. This week, it issued a briefing note on NAMA. It is available here though free registration is required to access it, it’s contains a large amount of well-assembled facts and figures though there is nothing there that should surprise the regular audience on here. You might take some opinions with a pinch of salt, but ratings agency opinions are of more interest than the norm on here, because they tend to be independent.
DBRS pays NAMA some handsome compliments. It says the Agency has assembled a “talented team” with “deep experience” and with “the necessary skills to extract the best possible return from the loans and underlying property assets”. DBRS goes on to say “NAMA has developed a robust and efficient infrastructure that allows NAMA the flexibility to develop individual responses to each debtor that bests maximizes the returns “
DBRS might be overegging NAMA’s progress with agreeing business plans and a sizable number of developers might take issue with the view expressed that “NAMA continues to actively manage the assets and invest in the assets so to optimize the income producing potential and disposal value of the assets” The sale of the Project Aspen portfolio with 60% staple funding and a 20% equity retention for NAMA in return for diluting its security, was not greeted well on here. The recent move by one of NAMA’s most reputable developers, Sean Mulryan’s Ballymore, to sell a large development site in London’s Docklands also prompts questions about NAMA’s mission to profitably enhance assets with the objective of maximizing returns – here you have a 37 acre site being sold off by one of the few companies which has a proven record of developing such large sites, and you have NAMA snaffling the proceeds so that it can pay down funding which costs it 0.3% per annum – full cost of capital has been recently estimated at 1.5%.
DBRS also notes that the short term outlooks for the Irish property markets are “challenging” though unlike Fitch, Moody’s and S&P, there is no prediction for price changes; it says “DBRS considers NAMA’s credit risk profile as elevated given the concentrated exposure to the Irish property markets, which remain challenged owed to the lack of liquidity, high unemployment, strained rental rolls and weak consumer confidence.” However DBRS notes that NAMA acquired the loans at just 43c in the euro so has some cushioning, though I don’t think DBRS has sufficiently accounted for the 27% and 32% declines in commercial and residential property since NAMA’s valuation date of November 2009.
The note is well worth a read, and at the bottom has a useful three year financial summary of NAMA’s operations.