BEGINNING OF THE END OF NAMA . . . .
Over the past couple of weeks we have been hearing more and more journalists from Ireland reporting on the fact that NAMA are upping the ante in terms of the sale of various loans within their portfolio. Quick reminder, NAMA is the largest property company in the world with a business plan of selling assets and getting a return for the Irish taxpayer who ponied up with over €30bn to buy the loans to bail out bust Irish banks - all this in a set 10 year period. At the start of the program they projected they would make a profit of just over €6bn for the Irish people, however unfortunately the most recent figures is that they now only expect to break even. My own view would be that if they break even it will be a minor miracle, but lets see. I wonder if they predicted they would break even when they came up with the idea would it have went ahead...? well that's another story!!
Last week we heard that following PIMCO's approach to buy the Northern Irish NAMA loan book, NAMA have appointed Lazards to handle the sale and have named the exercise Project Eagle. In the last few weeks a number of investors and developers contacted me to see if I thought this was possible, and to everyone I told them absolutely - its going to happen. The likelihood now is that in the next 12 months, the NAMA NI loan book will be under the ownership of a huge fund and NAMA will be up in the region of €1bn in proceeds, as most anticipate that's the level the book might be worth.
What does all of this tell us - there are many ways you could analyse this new change in mind set in what is NAMA land. Michael Noonan has went on the record of late telling us that the sale of loans may speed up in the foreseeable future as the Irish property market is now hot again. I would certainly agree with the fact that there is now a huge demand in Irish property, mostly by USA funds who are looking to buy loans in particular at discount, work them for a few years and then sell at huge profit. Its a fairly straight forward business model, however its still a very risky business, and unless these funds do the proper due diligence on the loans, a happy ending may not be the case in some scenarios.
NAMA is a law onto itself, it does what it wants, and answers to ... well nobody really. Anyone unfortunate enough to be in NAMA, well it would appear that it's really a dead man walking scenario in most cases, as there are not too many borrowers coming out the other end. This might sit well with people, however I don't really buy into the fact that just because your in NAMA, you deserve all you get. I think most people in the country actually do not understand the NAMA deal, and in my view one of the major flaws in the legislation is the fact that the borrowers are not allowed to be involved in buying any of their assets or loans back. This is crazy as most accept that the people who would drive the most value out of the assets or loans are normally those who were once in charge. Hence if borrowers were allowed to bring in finance partners, NAMA would get much more in return for the assets. Anyway that sounds way too rational and logical but its certainly a point that I think most people who are working in real estate today would agree with.
Peter Bacon the architect of NAMA very alarmingly distanced himself from the organisation over 18 months ago, and that's when the warning signs started to flash for many people. In the last few months, the Guarda Siochanna have had to get involved as former employers are coming our of the woodwork to state that they maybe were not doing what they should have been doing with certain pieces of information. There are other similar stories and allegations breaking every other week now which is making life very difficult for messers Daly and Mc Donagh. In short, NAMA is under a constant media spotlight from many quarters, and it has to be seen as squeaky clean or its goodnight Irene!!
Its mainly for this reason that I believe the Loan sale process will be increased in the weeks and months ahead, and I believe that by 2016/2017 at the latest, the last loans will leave the organisation. I would imagine both the Irish people and the borrowers will be glad to see the back of it. 2014 maybe the beginning of the end for NAMA - lets see what happens as this thread will run on and on . . .