INCREDIBLE DEVELOPMENTS IN IRISH PROPERTY MARKET . . .
As I was having my morning cuppa yesterday, news broke of the biggest deal in Northern Irish property history. NAMA - the Republic of Irelands bad dysfunctional bank, had announced that it had sold the entire Northern Ireland loan portfolio for just over £1bn. Quite an astonishing development considering the NAMA business model which was sold to the Irish people only a few years ago, on the basis they would work the loans out over a 10 year period. NAMA had acquired over £4bn in NI property loans only a few years ago, so its fairly obvious that this sale represents a huge discount to the new owners, Cerberus Capital - a New York property investment firm - have a look http://www.cerberuscapital.com/
In the last two weeks, we have seen close to €25bn of property loan sales when you take in the sales of the IBRC (former Anglo) loan book. These really are incredible events occurring in the country and the outlook over the next 24 months is that these loan sales will continue as the Irish banks continue to try and get rid of the toxic property assets on their books, hoping to get their own businesses back into some form of shape. Ulster Bank, Danske, Bank Of Ireland, IBRC, KBC, PTSB.... all of the banks are now engaged in this loan note sale scenario.
So who is buying all of these loans - the answer in the majority of cases are the USA property investment funds namely Kennedy Wilson, Loanstar, Cerberus, Blackstone, Oaktree and Apollo to name a few. These guys are snapping up the loans at significant discount and the ironic thing is they are gearing up to sell the assets within these loans back to the Irish at a profit. Smart business if you can get a piece of the action.
In relation to the NI NAMA deal. My own view is that this will be positive news for both for the NI marketplace and also the borrowers. I have yet to meet anyone who has anything positive to say about their experience dealing with NAMA. NAMA is a secret service and extremely hard to deal with. They continually change their rules of engagement and its become very clear that one of their main objectives is to take the property investor off the pitch by way of judgement or bankruptcy. Its a pretty sad situation in many cases, as there are a lot of very capable decent businessmen in NAMA and very few of them have made any progress in the last few years,. On a more sombre note, a number of them are not with us anymore as the stress of the property collapse has been too much for them - one of the most distressing features of the collapse.
So what happens next for the NI borrowers who now owe Cerbebus the money. I would imagine over the next month, a relationship manager will contact the borrower and arrange a meeting. They will then be asked to discuss their business plan in terms of paying the loans back. They will then have to put their proposals in writing and attempt to cut a deal with Cerberus. I feel that given the fact that the NI First Minister is being kept up to date with developments, Cerebus will try their best to work with as many of the co-operative borrowers as possible. What will definitely happen is that we will now see more activity in the NI property market as a result of this sale. This can only be a good thing, as it has been stale for the last five years.
These really are incredible times for the country as a whole and its best to fasten your seatbelt as there will be many more twist and turns before we see any form of normality return to the property market in the country. I watch this space with interest...