Feeds:
Posts
Comments

Archive for the ‘Irish Property’ Category

Last week, NAMA announced that it has at last sold its Project Aspen portfolio of €810m par value loans that related to Dublin developer, David Courtney. But what about Project Club, the c€300m portfolio which relates to loans to developer, Eamon Duignan. Sources are this afternoon claiming that NAMA has pulled the sale amid general concerns that borrowers are teaming up with potential buyers which is undermining the reputability of NAMA’s processes.

You will recall that when NAMA sold Donal Mulryan’s €250m of UK loans to Morgan Stanley that Donal then became a consultant to Morgan Stanley after the sale. Out of sight, out of mind it seems and the involvement of Donal never made news in Ireland. But in the case of the recent sale of David Courtney’s Project Aspen, there was considerable comment on David’s involvement with Starwood pre-sales and before the portfolio was offered to the market and that he will act as a consultant for a period post-sales.

In the case of Project Club, NAMA delayed bringing it to market following criticism of its failure to provide a valuation to bidders on Project Aspen – the absence of a valuation, which would be shared with all potential bidders, was seen as unusual and is understood to have had a deterrent effect on bidding generally. However, NAMA duly went about getting a valuation of Project Club after the criticism with the previous portfolio. Now it seems that NAMA has become sensitive about borrowers teaming up with potential bidders for single-borrower portfolios, and there has been some unsubstantiated talk of Eamon Duignan having an involvement with a potential buyer, Patron Capital Partners.

NAMA and Patron were both asked for comment, but there hasn’t been a response at time of writing.

A fortnight ago, the Sinn Fein finance spokesperson Pearse Doherty challenged Minister for Finance Michael Noonan about borrower involvement in single borrower portfolio sales. It seems NAMA has taken the concern on board. If the story is confirmed, it would seem that it won’t stop NAMA selling loan portfolios, it will just mean that loans from different borrowers will in future be packaged for sale so as to prevent any particular borrower conferring benefit on a potential bidder.

This is the parliamentary question and response:

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. [18471/13]

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.

Read Full Post »

CSOHousingApr13

This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for April 2013. The monthly headline Consumer Price Index (CPI) was flat in April 2013 compared to the previous month, and is still only up a modest 0.5% year-on-year. April’s results mirror those of Sept 2012-March 2013 and continue a subdued annual inflation trend seen in recent months compared with the 2%+ that pertained before January 2011.

Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 6.8% in the past year, as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for over 5% of the basket which measures inflation, the impact on inflation was substantial.

Energy costs in homes on the other hand, which account for over  5% of the total basket examined by the CSO, have risen by 4.4% in the past 12 months, mostly driven by the 9% price hikes at the ESB, and in October 2012 at Bord Gais.

CSORentsApr13

Elsewhere, private rents rose by a stonking 1.0% for the second month in a row – this after modest increases in February and January but bigger increases in previous months: 0.7% in December, 0.6% in November, 0.7% in October  and  0.9%  in September 2012. Over the past year, such rents are up by 5.0% according to the CSO – there is some small rounding in the figures above which show 5.4%. The results today are supported by the PRTB index launched yesterday which shows actual rents nationally up by 2% in the past year, and the Daft.ie asking rent index which suggests rents are up nearly 3%. There are no doubt regional and property-type variations, yesterday’s results from the PRTB suggested rents on apartments in Dublin were still declining but houses were increasing.

It seems that in our financial crisis, 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 9.3% increase (mostly recorded in February and October 2011 and February and September/October/November  2012 and March/April 2013).

Rent assistance levels have not been affected by the recent Budget 2013, neither the rates nor contribution have changed.

Read Full Post »

PRTBLogo

The old media is today claiming that the new residential rent index from the Private Residential Tenancies Board provides for the first time an index of actual rents rather than the asking rents that Daft.ie tracks. That claim is rubbish, as the CSO incorporates private rents in its monthly inflation figures, and the source for their figures, are estate agents across the country providing actual rents. Apparently the PRTB index will support the findings of the CSO index and confirms residential rents are up modestly over the past year, 2% according to the old media which is in line with the 3.4% increase in the CSO index.

The PRTB index is not yet online but it should be available here later today. It has been produced with the ESRI – no, don’t groan – and in the near future, not today, the CSO will provide a facility whereby you can look at types of property is all parts of the country, so if you want to see what a two-bedroom apartment costs in Athlone, you’ll be provided with averages and an index to indicate if prices are increasing or decreasing.

“This is all great” I hear you say, so why are we being shortchanged?

It recently emerged in the Dail that the PRTB had provided the Minister for Social Protection Joan Burton with a complete listing of ALL residential property rented in the country including address and rent amount. The listing did not contain the name of the landlord and tenant, and apparently in this way, according to Minister Burton, no data protection laws were broken.

The Opposition tried to get hold of the database, but was told that the information had been provided by the PRTB to the Department of Social Protection pursuant to Section 146 of the Residential Tenancies Act 2004 and Section 261 of the Social Welfare Consolidation Act 2005. Minister Burton suggested to the Opposition that they might contact the PRTB themselves for the data, but because the Opposition is not the Minister or a Local Authority and therefore can’t rely on the 2004 Act, they’re not likely to be successful.

So, perhaps today, we will get a small additional chink of light refracted through the dubious lens of the ESRI, but there is no data protection impediment to getting the full listing of addresses with rents, so that you would have true transparency. If you can see what a particular property sells for on the Property Price Register, why can’t you see its rent.

The parliamentary questions and responses seeking the underlying data are here:

Deputy Pearse Doherty: To ask the Minister for Social Protection further to Parliamentary Question No. 586 of 16 April, 2013, if she will make available the file of data received from the Private Residential Tenancies Board, data which she says does not give rise to data protection implications, but which presumably provides addresses, details of accommodation and rent costs.

Minister for Social Protection, Joan Burton: As part of the review of rent limits, the Department has received information from the Private Residential Tenancies Board (PRTB) from its register of tenancies. This data exchange is provided for by legislation under Section 146 of the Residential Tenancies Act 2004 and Section 261 of the Social Welfare Consolidation Act 2005. The data snapshot provided contains details of registered tenancies and does not contain names of tenants or landlords.

There are no data protection implications from the use of this information by this Department. However, the data provided to the Department remains the property of the PRTB.  If the Deputy wishes to access such data he should contact the PRTB directly.

Deputy Pearse Doherty: To ask the Minister for Social Protection further to Parliamentary Question Nos. 136 and 144 on 21 March 2013, in which she stated she had obtained data from the Private Residential Tenancies Board including a snapshot of the PRTB’s database which stores all annual rental values and relevant addresses, if she will confirm the way accessing such information was permitted in the context of data protection legislation

Minister for Social Protection, Joan Burton: The purpose of the rent supplement scheme is to provide short-term support to eligible people living in private rented accommodation whose means are insufficient to meet their accommodation costs and who do not have accommodation available to them from any other source.  The overall aim is to provide short term assistance, and not to act as an alternative to the other social housing schemes operated by the Exchequer. There are currently approximately 86,000 rent supplement recipients for which the Government has provided €403 million for 2013.

As part of the review of rent limits, the Department received information from the Private Residential Tenancies Board (PRTB) from its register of tenancies. This data exchange is provided for by legislation under Section 146 of the Residential Tenancies Act 2004 and Section 261 of the Social Welfare Consolidation Act 2005. The data snapshot provided contains details of registered tenancies and does not contain names of tenants or landlords. There are no data protection implications from the use of this information.

Read Full Post »

“An Individual Voluntary Arrangement* would have produced a much greater financial return to NAMA and my other creditors. However, I have been advised that NAMA would never, and had by then never, engaged constructively with an IVA and so my only real option, in the absence of being able to satisfy the demand was to petition for bankruptcy. “ Businessman John  Fraher’s affidavit in his unsuccessful defence against NAMA’s application for a €5.9m judgment

This may not be a first, but it is the first that has made it into the media. Kerry developer John Cahillane is attempting to negotiate what the Brits call an Individual Voluntary Arrangement or “IVA” – see below* for summary explanation. This is an alternative to bankruptcy and is roughly akin to our Personal Insolvency Arrangement which allows for assets to be disposed of, for the debtor to work with their creditors over a period of time, and to provide what would usually be a better result for creditors.

In John’s case, he claims that if he files for bankruptcy, his unsecured creditors will receive 0c in the euro but through an IVA they will receive about 13.5c in the euro. John Cahillane says he has assets of €56m and liabilities of €73m. This is a Part 1 of a 2-part blogpost, Part 2 tomorrow will examine the IVA proposal in detail but in essence, John is trying to get NAMA to accept that its recourse is only to the property securing the loans, and John is saying he will make a €60k-odd contribution to the IVA from third party contributions – maybe from his wife, but that doesn’t appear to be specified – and from equity in his family home.

NAMA moved against John’s company in December 2011, having KPMG appointed as receivers to Cloonbeg Developers Limited. It would appear from the IVA that John subsequently relocated to the UK, his present address is in Kilburn, north London and he says he informed his creditors of this relocation in January 2013. He is presently employed as a business development executive with Purcell Development Services Limited, a new company in which John “identifies new development and construction projects for investors in the UK and Europe”.

John’s property businesses were based in Ireland (mostly Kerry, it seems), Portugal, mainland Spain, the Canary Island and Cape Verde.

John’s biggest creditor at €54m is NAMA following NAMA’s acquisition of AIB loans, and NAMA has apparently taken a negative position on the IVA proposal. This is seemingly a policy stance at NAMA, because John Fraher in a completely unrelated court matter last week, said in his affidavit that NAMA won’t entertain IVAs. NAMA was asked today to comment on its position on this IVA proposal, and also about its general stance towards IVAs. There has been no response at time of writing.

Other creditors, apart from NAMA, which comprise a minority of the €73m of debts, are more supportive – creditors in a Cape Verde scheme apparently owed €11m are supportive. There is a creditors meeting scheduled for Friday 10th May 2012 in London to determine the way forward. The London City branch of English accountancy firm, MHA MacIntyre Davis is acting on behalf of John Unfortunately John needs 75% of his creditors to agree to the proposal, and the scheme will fail unless NAMA accepts it.

What is an IVA?

Alternative to bankruptcy, akin to our personal insolvency scheme, but has very significant differences.

Term, can be days but typically is for five years, six if the IVA doesn’t force the sale of the family home

Assets and liabilities, like a bankruptcy, most assets are generally liquidated to pay the liabilities.

Pension pots, generally protected.

Family home. If your home is worth more than its mortgage, usually you’re required to re-mortgage and pay the equity into the IVA. If you can’t then your IVA period may be increased by 12 months.

Income. Like the personal insolvency scheme, you work out with your Insolvency practitioner, or IVA practitioner, what you need to live on and the rest gets paid into the IVA, which pays the practitioner and your creditors.

Read Full Post »

I believe the revelation of the overall value of Sean Dunne’s creditors last night – put at USD 942m on his filing – took some by surprise, with the expectation the total would have been closer to the USD 500m lower limit in the range Sean had indicated in his initial filing on 29th March 2013. Sean has even omitted a liability when he notes the amount owing to KPMG as “unknown”.

This is a brief blogpost on the creditors. Firstly this is the list sorted in descending order. We had previously known of a €164m (USD 215m) judgment against Sean in favour of Ulster Bank, so it was a surprise to see Sean listing his Number 1 debtor as Ulster Bank owed USD 394,334,536.  It was also surprising to see another NAMA developer, O’Flynn Construction listed as being owed USD 102,061,490; however, it is understood that this loan was in de facto provided by Irish Nationwide Building Society and the loan has since been transferred to NAMA, so it is NOT O’Flynn Construction which is the owed the money. Alas, NAMA won’t comment on individual loans.

SDCreditorsSortedName

If we group the loans according to assignment, we see that NAMA is in fact Sean Dunne’s largest creditor with USD 445,323,628 owed, comprising original loans from IBRC of USD 188,216,722 and Bank of Ireland of 151,158,009 and O’Flynn Construction of USD 102,061,490. Bank of Scotland’s loans appear to have been all assigned to Certus though a company incorporated last November 2012 called Risali Limited appears to have acquired USD 16,975,267 of those loans.

SDCreditorsAssigned

If we group the loans according to type, we see that an astonishing USD 612,217,333 is “unsecured non priority” with only USD 280,215,656 secured. All of the banks appear to have been guilty of advancing loans not secured on specific property, which must surely call into question further the behavior of Irish banks during the boom.

SDCreditorsType

Read Full Post »

WalfordPPR

This week, an eagle-eyed pinster over at thepropertypin.com spotted an unusually large sale on the Property Price Register – see above. Walford on Shrewsbury Road in Dublin sold for €14m (exactly) on 29th March, 2013. The Dublin Estates blog has been following the Walford saga for some time, and reports the sale and has nice piccies as well.

The property had been on the market in late 2011 through Savills with an “Advised Minimum Value” of €15m and there was a closing date for bids in November 2011.

WalfordSR

Walford is a crumbling, and not particularly grand, Edwardian detached home – pictured above – but its attractiveness in the past was derived from its 2 acres of attached land in the heart of Ballsbridge. It was purchased by Matsack Nominees Limited, an anonymous trust company in 2005 for €58m. There have been frequent reports in the old media – for example, here – that it was the Dunnes, Sean and Gayle who purchased it. The plans to build an ultra-exclusive estate never materialized, and with the collapse of the property sector, the land rapidly lost its value, indeed there will be many who will dispute its worth at €14m today and the PPR is noted for its volume of errors.

We don’t know the buyer yet. But they will be pleased to learn the new property tax will only apply to the house and 1 acre of amenity land, they will not pay a cent in property tax on the second acre. And until we identify the buyer, we can’t be even sure that the buyer will pay stamp duty or if the sale will ultimately involve the transfer of shares in a company with most of the €14m being paid off-shore. And if there is a change in beneficiary to a trust, then similar tax avoidance may be lawfully deployed to avoid stamp duty. Galling, isn’t it?

Separately, it is understood from reliable sources that the other great Celtic Tiger residential play, Gortanore, the 3-acre property in Foxrock with planning permission, has sold for €5.05m to the Kingdom of Saudi Arabia on behalf of its embassy. It was understood last October 2012 that it was under offer from the KSA. At time of writing Jones Lang LaSalle, one of the two joint selling agents, had not responded to a request for comment.

Read Full Post »

SDSoFASummary

They were filed in Connecticut late last night, and are available here – at 53 pages, might take a moment to download. The figures below are all in United States Dollars (USD) though Sean says in his statement that he used an exchange rate with the euro of USD 1.2798 and with sterling of USD 1.51. The value of real estate is, according to the statement, the same as was given to NAMA in December 2010 and has not been updated. Sean may sue other people, and he alerts us to that fact, “despite his reasonable efforts to identify all known assets, the Debtor may not have set forth all of his causes of action or potential causes of action against third parties as assets in his Schedules and Statements.”

Assets

Sean says that his USD 41m of “real property” against which there is a total of USD 745m of secured claims. What a sobering statement. The property includes a site at 72-80 North Wall Quay in Dublin currently worth less than USD 1m but with a secured claim of USD 282m, that’s a 99.7% decline from the secured amount. The main property comprising the USD 41m is Ouragh at 20a Shrewsbury Road valued at USD 10m and said to be his principal private residence – Certus is said to have a USD 15m secured claim on this property; land and sites at Charlesland in Wicklow of USD 8m, the Charles Retail and Leisure Centre of USD 5m and four apartments at Hollybrook on Brighton Road in Foxrock of USD 3m.

Sean’s non “real property” of USD 14m includes USD 960 of cash; most of the bank accounts are frozen, but interestingly, he has a measly USD 15 in People’s United Bank, the bank which the trustee has sought a subpoena to question. There’s a USD 1m pension pot at DCD Builders. He has listed a USD 12m claim against Kildare County Council as his main, non-real estate asset. This is a claim jointly with Sean Mulryan against Kildare CC and Sean describes it as a “50% Interest in Newbridge Inner Relief Road (counter claim against Kildare County Council Levies) constructed in lieu of levies for Whitewater Shopping Center”. Dublin solicitors, Beauchamps are said to owe Sean USD 53,572 in “overpaid legal fees”. There’s an insurance claim outstanding in respect of Sean’s home on Shrewsbury Road.

The vast majority of what would have been considered Sean’s assets, his developments, have now mostly been placed under the control of his creditors and are not included in the above, though they are itemized. Surprising not to see property in the UK or elsewhere, but perhaps it has all been disposed of as part of Sean’s efforts to repay his creditors.

Liabilities

The biggies are Ulster Bank owed USD 394m; NAMA owed USD 340m; Michael O’Flynn’s O’Flynn Construction owed USD 102m [UPDATE 4th May 2013] though it is understood that this loan was in fact provided by Irish Nationwide and has since been assigned to NAMA; Sean owes USD 50m to parties identified only as “A” and “B” resulting from judgments of the court in matters heard in camera, probably family law matters; Kildare County Council is owed USD 12m but there is a counterclaim against this;

Although not “biggies”, seems top-tier Dublin solicitors Arthur Cox are owed USD 1.5m; Bruce Shaw is owed a relatively small USD 12,798; the IDA is owed USD 140,778;  it is “unknown” how much is owed to KPMG – this is the crowd who audited AIB, Irish Nationwide and Permanent TSB during the boom, who oversaw the balls-up at the Lotto draw recently, who believe IBRC’s loans are worth about 60c in the euro and who, we learned last week, have not yet raised a single fee note for their work on IBRC.

Ballymore’s Sean Mulryan is claimed to be a co-debtor on some of Sean’s obligations.

Income and expenses

SDIncome

Sean declares USD 808,000 of income in 2011 and USD 204,000 in 2012 and USD 66,000 in 2013. This includes sales of land, rental income and the USD 30,000 sale of a car in February 2013 to Mahoney Motors in Dublin – there is a Denis Mahony Toyota, Lexus and Mercedes group in Dublin, and maybe Sean means this, but it is not quite clear as Sean spells it Mahoney with an “e” and the group trades as “Denis Mahony”

Elsewhere Sean says he is now employed by Mountbrook USA as a project manager with monthly gross income of USD 8,333.33. In addition he shows his estimated monthly gross rental receipts at USD 13,670 which equals a mortgage payment of USD 13,670 shown under his monthly expenses. His itemized monthly expenses mostly comprise that mortgage payment, rent of USD 3,600 and life assurance of USD 1,007. His total monthly income is shown as USD 22,003 and his expenses at USD 21,807

Law suits

Sean has to list current and recent law suits in his filing, and we learn that two defamation proceedings dating from 2006 against Associated Newspapers Limited, publishers of the Daily Mail and Mail on Sunday, are pending. There is also a case by Irishman, Sean Doyle against the Dunnes in a New York court, that case is in arbitration.

Where Sean lives

SDAddresses

Sean was required to list his place address of residence for the past three years, and lists four addresses, one in Switzerland, one in Dublin and two in Connecticut – above. Interesting that he indicates that his residence at 526 Indian Field Road was January 2011 through to March 2013, but Sean was only required to provide addresses UP TO his filing for bankruptcy on 29th March 2013. Recent indications are that the Dunnes have now vacated this property.

Oddities

Sean is required to provide “bookkeepers and accountants” kept records in the past two years and Sean merely lists two in a manner which doesn’t fully identify them “J Ryan Ireland” and “R Connolly Ireland” who are both described as providing services “periodically during the past two years”

Sean’s award-winning bankruptcy attorney, James Berman, says that he has already been paid USD 15,000 by Sean.

We cannot see much of the detail of who Sean co-owns some real estate property with, because the spreadsheet submitted to the court truncates descriptions. That will need be rectified.

Sean says his loans – just some of his loans from later on – from Bank of Scotland Ireland have been sold to a company called “Risali Limited” and if that is an Irish incorporated company, then it is the company incorporated in November 2012 whose directors are Wendy Merrigan and Rory Williams (43). According to the creditors listing included in the statement, he now owes USD 16.2m to Risali secured on property on Serpentine Avenue in Ballsbridge and a company called Breccia Limited.

The statement of financial affairs is electronically signed by Sean on 3rd May 2013, and his signing is “under penalty of perjury” with penalties of fines up to USD 500,000 or imprisonment for up to five years, or both”. There is a creditors meeting scheduled for 8th May 2013, and we should learn soon afterwards if issues are raised with the bankruptcy, though it should be stressed that it is for the trustee to decide how the bankruptcy will proceed.

Read Full Post »

We don’t hear much about Galway developer, James Clancy these days. We say “developer” but James has had his finger in many pies over the years. Back in 2009, when the creditors started closing in after the collapse of the property sector, he was the man who famously told Judge McGovern in Dublin’s High Court that he had been “living on fumes” since 2007. He is the man who brought the Emmedue building material franchise to Ireland, had promoted plans to build a factory in Portarlington in Laois to manufacture the panels, though those plans were never fully realized and there has been a bit of an easter egg hunt to locate the machinery. James was behind the development of the infamous Riverside estate in Portarlington where substandard building made life a nightmare for residents. In 2010, James was jailed for 14 days for contempt during legal action when ACC Bank was trying to recover a debt. There was some rough stuff when creditors tried to recover debts. But he has not hitherto been associated with NAMA, despite it being reported that he had loans from Anglo.

This afternoon’s edition of Iris Oifigiuil reveals that NAMA has had receivers appointed to two of his companies. In both cases, the receivers were appointed on 19th April 2013 and the receiver is David O’Connor of BDO. Both companies are already subject to receiverships so this is presumably just NAMA laying claim to the security underpinning its loans. James’s wife is Sarah.

(1) Clanview Construction Limited. Sole director James Alphonsus Clancy (58)

(2) J&S Property Developments Limited. Directors James Alphonsus Clancy (58) and Sarah Clancy (55)

Remember you can see a comprehensive list of Irish foreclosure action by NAMA here and in this regularly updated spreadsheet.

Read Full Post »

This morning, Ireland’s number one residential property website, Daft.ie published its quarterly rental report which showed asking rents has increased by 2.7% in the past year. This supports the results of the monthly CSO  index which shows actual private sector rents had increased by 3.4% in the past 12 months. Rents are rising, it seems, albeit at a relatively modest pace. The CSO doesn’t analyse rents by area, but Daft.ie does and it says that rents in Dublin are up 5% in the year whilst provincial rents are up just 0.2%.

A question often asked about NAMA is whether or not it is distorting the rental market by withholding property.  This is an understandable question, after all NAMA is a colossal company, now controlling €23bn of loans (down from €32bn which was its acquisition value and the original par values were €74bn).

But NAMA does not really have a very large impact at all on the residential market. We previously learned that NAMA has 14,000 homes securing loans under its control. This is in a State which has 2m homes in total. And of the 14,000 homes, 10,000 are already rented out mostly in urban areas. The other 4,000 are available for sale or rent.

When asked in the Dail last week, the Minister for Finance Michael Noonan pointed out that the last Census 2011 results showed that there were approximately 320,000 private rented properties in the country, so NAMA’s 4,000 which are vacant and available for sale or rent are not sufficient to distort the market.

As Daft.ie’s economist, Ronan Lyons says today, it really does seem that there are supply constraints in some areas which are driving up prices. Unfortunately with existing building costs, there is no sign of waves of development to meet the demand, so it would seem in some areas prices may be set to continue to rise until it becomes attractive to build again.

The parliamentary question and response are here:

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 91 on 21 March 2013, if he considers the 4,000 homes that the National Asset Management Agency controls which are vacant to be distorting rent levels in the urban areas where NAMA says the majority of its housing is located. [18450/13]

Minister for Finance, Michael Noonan: As advised in the response to Parliamentary Question No. 91, all properties securing NAMA’s loans are ultimately available for rent or sale. As advised in my response to Parliamentary Question 91, of the completed residential property securing NAMA’s loans, approximately 10,000 units are currently rented, primarily in the private rented market. The residual NAMA residential stock is being actively marketed for rent or sale by NAMA debtors and receivers at market prices or has been made available for social housing or is currently being marketed under the Agency’s 80/20 Deferred Payment Initiative. According to the most recent Census there are over 320,000 private rental properties in the country. Therefore, the scale of NAMA’s vacant homes is not large enough to distort the market.

Read Full Post »

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.

Read Full Post »

« Newer Posts - Older Posts »