NAMA exploring ways to provide finance for property transactions

The Chairman of NAMA, Frank Daly, has said that the Agency is exploring ways by which it can provide finance for commercial and residential property deals as part of its efforts to restart the Irish property market.

Mr.Daly was speaking at the launch of the Society of Chartered Surveyors Ireland – the result of the merger of the Society of Chartered Surveyors and the Irish Auctioneers and Valuers Institute. The new society represents 4,000 professionals working in the construction, land and property professions.

Mr.Daly said that the Agency sees it as “very much part of our brief” to generate transactions in the market. He said that “many sellers may still retain unreasonable expectations of the prices that can be realised for the foreseeable future” and that the only way that the market can be lifted out of its 4 year hiatus is by generating transactions “at whatever prices buyers are currently willing to pay.”

Further enforcement actions likely Mr. Daly warned that the Agency will be taking further enforcement action “shortly” against some of the thirty largest developers whose debts have been acquired by the Agency and whose business plans were not viable or who were attempting to prolong the process as much as they can while not dealing with the issues; “it is likely that we will end up enforcing against these debtors in the near term also.”

The meeting also heard that NAMA has set a deadline of the end of April for the submission of business plans by the second tier of debtors – some 145 people. These collectively account for some €34 billion of debts. Mr. Daly said that if these borrowers do not meet this end of April deadline, “we will not indulge them further” and will proceed straight to enforcement.

Property sales to increase in months ahead

Looking ahead, Mr. Daly predicted that “quite a number of properties will be going on the market over the rest of this year and into next year” to add to the €2.7 billion in property assets whose sales have been approved by NAMA over the past twelve months. Mr Daly predicted that many transactions similar to the recently announced purchase of the Montevetro Building in Dublin by Google would be facilitated over the coming months and said that the Agency had seen enormous interest from foreign investors in properties with good yields that are likely to be coming up for sale.

Property Valuations

On Irish property valuations, Mr. Daly said that NAMA’s view on valuations was that the bulk of the decline has already occurred in property prices but that the Agency was less sanguine in its view of residential property which may have a little more to fall than in the case of commercial property which is already 60% down from peak.

Upward Only Rent Reviews

On the issue of retrospective legislation to prevent Upward Only Rent Reviews on existing leases, Mr. Daly said that there was merit in many of the arguments made by opponents and supporters of the proposal. However he warned that there was a substantial risk that a retrospective ban on existing contracts with upward only review clauses would give rise to litigation which in turn could prolong the current stasis in the market at a time when stability and certainty is needed to attract foreign investors. Mr. Daly, stressing that he was not commenting on Government policy, stated that, one way or another, the current uncertainty needs to be removed as quickly as possible so that we can maintain and capitalise on the
appetite of those with funds for investing in Irish property. Whatever decision is to be made should be made quickly so that the market can digest it and move on.

Property bubble raises questions for the profession

Finally, Mr. Daly spoke of the property bubble in Ireland and the questions it raised for the two professional bodies which were merging to form the new Society. He questioned whether the two bodies might have been more vigilant in drawing attention to the enormous systemic risk that was being created through the bubble and suggested that, in hindsight, the two bodies should have signalled some concern that what was taking place was unsustainable. He proposed that the new Society should consider undertaking a critique of the performance of the profession during the evolution of the property price bubble and use that as a learning mechanism for the future.