NAMA Sticks to Asset-Sales Target Even as Irish Properties Slump

Brendan McDonagh
In the last two years, NAMA has raised 3.1 billion euros ($4.3 billion) from divestments, Chief Executive Officer Brendan McDonagh said in an interview at the company’s headquarters in Dublin. Photographer: Aidan Crawley/Bloomberg

The National Asset Management Agency, set up in 2009 to purge Irish banks of risky real-estate assets, is sticking to its target of selling 25 percent of its loan book by the end of 2013 even as property values in its biggest market plunged.

In the last two years, NAMA has raised 3.1 billion euros ($4.3 billion) from divestments, Chief Executive Officer Brendan McDonagh said in an interview at the company’s headquarters in Dublin. The asset manager needs to sell 9 billion euros of property loans and real estate to meet its 7.5 billion-euro debt-repayment goal by the end of 2013, he said.

NAMA acquired assets from Irish banks with a face value of 71.2 billion euros in the past two years and expects to purchase an additional 1.9 billion euros in the fourth quarter, according to documents distributed to its potential advisers. The agency has paid 31.5 billion euros for the loans and plans to sell them by 2019.

“My job is to get from 31.5 billion down to zero as quickly as possible and make sure we do it in a commercial way. Hopefully we don’t lose any money for the taxpayer along the way,” said McDonagh, 43.

NAMA reported a loss of 1.2 billion euros for 2010 because of a 1.5 billion-euro impairment charge to account for falling property values. The company will probably post a profit of more than 500 million euros for this year, excluding impairments, and will eventually raise as much from asset sales as it spent on the loans and properties, the CEO said.

Potential Profit

“Over the long-term horizon, we still believe that we will at least break even and hopefully make a profit,” said McDonagh, a former finance director at Ireland’s National Treasury Management Agency, which manages the country’s national debt.

The value of the agency’s assets has been hurt by a four-year property slump in Ireland. In the first nine months, home values dropped 11.5 percent, according to a Jones Lang LaSalle Inc. report last month.

About 54 percent of NAMA’s assets are in Ireland, while 38 percent are in the U.K., according to its last annual report. The rest are in the rest of Europe and the U.S.

“I always worry about impairments,” McDonagh said during the Oct. 21 interview. “It’s the only thing I can’t control. If the market is still falling, but at a slower pace, that’s certainly something we would be worried about.”

Stapled Finance

The asset manager will probably sell more loans than properties next year and may provide loans to buyers to make deals easier for them, he said. NAMA will also consider offering finance to purchasers of its loans as well as the properties themselves. NAMA is mostly likely to provide so-called stapled finance for Irish property sales because that market has the “least liquidity and the least amount of transactions,” McDonagh said.

“I’m beginning to feel that effectively there’s a bottom not too far away on the investment side of it,” he said, referring to the Irish property market. Some potential homebuyers are holding out for lower prices or improved mortgage availability, he said. Even so, sales of NAMA-linked homes have increased to about 100 a month from as many as 25 a month last year.

McDonagh said NAMA will redeem at least another 500 million euros of bonds this year due to the banks from which it acquired the property loans, subject to NAMA board approval. That would bring total redemptions since the company was created to 1.75 billion euros.

The sovereign debt crisis in Europe hasn’t yet harmed NAMA’s divestment strategy, though “it’s something we’re watching very closely,” McDonagh said. Private-equity firms and sovereign wealth funds have significant funds for property investment, he said, and interest in its assets has come mainly from the U.S., Asia, the Middle East, Germany and France.

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