Oireachtas Joint and Select Committees
Thursday, 28 September 2023
Public Accounts Committee
NAMA Financial Statements 2022 and Special Report 116 of the Comptroller and Auditor General
9:30 am
Brian Stanley (Laois-Offaly, Sinn Fein)
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We have apologies from Deputies Ó Cathasaigh and Verona Murphy, who are engaged in other parliamentary duties. All in attendance are welcome and I remind them to ensure mobile phones are switched off or on silent.
I will explain some limitations to parliamentary privilege and the practice of the Houses as regards reference witnesses may make to other persons in evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. This means they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Cathaoirleach to ensure it is not abused. Therefore, if a witness's statements are potentially defamatory in relation to an identifiable person or entity, the witness will be directed to discontinue their remarks. It is imperative they comply with that.
Witnesses are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of a person or entity. Therefore, if a witness's statements are potentially defamatory in relation to an identifiable person or entity, the witness will be directed to discontinue their remarks and they must comply with that.
Members are reminded of the provisions within Standing Order 218 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policies. Members are also reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.
The Comptroller and Auditor General, Mr. Seamus McCarthy, is a permanent witness to the committee. He is accompanied this morning by Mr. Tony Peteh, audit manager at the Office of the Comptroller and Auditor General. They are welcome.
This morning we will engage with the National Asset Management Agency, NAMA, to examine its financial statements of 2022 and the Comptroller and Auditor General's special report 116 - National Asset Management Agency: Progress on achievement of objectives as at end 2021. We are joined by the following representatives from NAMA: Mr. Brendan McDonagh, CEO; Mr. Aidan Williams, chairperson; Ms Noelle Condon, chief financial officer; Mr. Alan Stewart, chief legal officer; and Mr. Jamie Bourke, chief strategy and transformation officer. They are welcome.
I call on the Comptroller and Auditor General for his opening statement.
Mr. Seamus McCarthy:
Go raibh maith agat, a Chathaoirligh. As members are aware, NAMA was established in December 2009 as part of the State’s response to the 2008 banking crisis. It was set up to acquire property-related loans from the commercial banks, to hold and manage the loans and related collateral and ultimately to dispose of those assets in a manner that protected the State’s interests. At the outset, it was envisaged that NAMA would have a life of around ten years, and would therefore be winding up around 2020. However, following a Department of Finance review published in July 2019, NAMA’s timeline was extended to the end of 2025 to allow additional time to deal with its residual loans.
NAMA’s financial statements indicate that it had income of €128 million in 2022, mainly arising from gains on the value of its loans. After administrative expenses of €44 million and payment of tax of €3 million, the profit for the year was €81 million. This was down from the profit of €195 million reported for 2021. The decline in profitability reflects the continuing reduction in NAMA’s debtor loans.
NAMA’s accumulated reserves were €1.4 billion at the end of 2022. This was down from €1.8 billion at the end of 2021, mainly as a result of a transfer of €500 million to the Exchequer during the year. This brought the cumulative transfers from NAMA to the Exchequer up to the end of 2022 to €3.5 billion.
Because of NAMA’s remit to dispose of its assets as advantageously as possible over a set time period, it is probably more useful to look at what NAMA has achieved cumulatively over its lifetime than to look at the year-on-year movements captured in the annual financial statements. By law, I am required to carry out reviews every three years of the extent to which NAMA has made progress towards achieving its overall objectives. The report before the committee today is the fourth such progress report. The formal scope of the report is up to the end of 2021, but here I add 2022 updates where available.
At the outset, based on its own loan valuation methodology, NAMA paid €31.8 billion for the property-related loans it acquired from the participating lenders. At the time, this represented a 57% discount on the €74.4 billion par value of the loans, crystallising losses of some €43 billion for the lenders. NAMA funded the purchase of the loans by issuing debt. A key objective set by NAMA was to redeem all that debt by 2020, and it achieved this target. Without recourse to any further borrowing, NAMA has been able to invest in and manage its loan portfolio, and to cover its own operating costs, which, to end 2022, were just over €1.1 billion.
NAMA has a statutory objective to obtain the best achievable financial return for the State. At the end of 2021, the projected return on NAMA’s overall operations was calculated to be around 6.7%.
In fixing the prices it paid for the loans it acquired, NAMA effectively anticipated achieving a rate of return of around 5%. By reference to that benchmark, NAMA is likely to achieve a modestly better return for the State by the time it winds up.
A substantial part of NAMA's remit involved managing and, where possible, working with debtors to achieve the best financial return for the State. Receivers were appointed where enforcement of debts, including sale of collateral, was required. The sale of property directly back to debtors at discounted prices was prohibited in the NAMA Act 2009. In the course of the audit of the financial statements for 2021, it was noted that NAMA had finalised a sale of loans related to a debtor connection for a consideration of €265,000. This represented a 97.5% discount on the par value of the loans, and resulted in NAMA incurring a loss of just under €6 million. The loans had not been openly marketed prior to the sale, which was to a newly-incorporated company that NAMA understood to be promoted and funded by a family relative of the debtors. The loans were secured by property collateral comprising 14 occupied residential units, 28 unfinished residential units, and seven plots of land totalling 20.9 ha with varied planning status. Following the commencement of enforcement proceedings around October 2018, NAMA appointed a receiver over the assets. The debtors strongly resisted the enforcement proceedings. NAMA stated that the receiver resigned in May 2020, after a potential sale of some of the assets fell through, and he could not find a sales agent to market the properties. An independent desktop valuation of the remaining collateral assets commissioned by NAMA stated that the market value of the assets was "unlikely to ever be achieved or the lands disposed of while the threats and intimidation continue", and that the assets were not considered marketable. However, no specific instances of alleged threats or intimidation were described in the valuation report, or in the November 2020 paper submitted to the NAMA board, seeking approval for the proposed sales terms. NAMA confirmed that it does not have a set process for dealing with incidents of alleged intimidation of its staff or agents on the basis that it is something that has arisen very rarely, and the circumstances tend to be very specific in cases where it has arisen.
I will conclude with progress of some secondary objectives of NAMA. In 2014, NAMA had an interest in a substantial proportion of the undeveloped land in the Dublin docklands strategic development zone. By the end of 2022, only one site in the zone in which NAMA had an interest remained undeveloped, and a provisional agreement to sell it had been reached. NAMA also had a substantial interest in the Poolbeg west strategic development zone, in the form of two large adjacent brownfield sites held by a NAMA subsidiary. In June 2021, NAMA sold 80% of the shareholding in the subsidiary company to a private development consortium. NAMA sold its residual 20% minority shareholding to the consortium in June 2023.
In November 2015, the NAMA board adopted a residential delivery plan which set out its intention to provide funding, and to co-ordinate and manage the delivery of 20,000 housing units by end 2020. The plan recognised the target would be a challenge. By the end of 2021, NAMA had delivered 11,049 units on sites in which it had an interest, representing delivery of 55% of the target.
NAMA also set a target of delivering 2,000 social housing units by the end of 2015 and this target was met. By the end of 2021, NAMA had provided a total of 2,621 social housing units with a further 66 units at contract stage and 117 units still under construction.
National Asset Residential Property Services DAC, a NAMA subsidiary company, held 1,366 social housing units at the end of 2022, which have been made available to approved housing bodies on long-term leases. It is anticipated that this company, which had property assets valued at €325 million at end 2022, will form part of NAMA's overall surrender when it completes its work.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I thank Mr. McCarthy. It was outlined in the documentation that Mr. McDonagh has five minutes. I know he has quite a long statement but I ask him to try to keep within the time. Perhaps he could try to summarise it. The submission is available to members.
Mr. Brendan McDonagh:
I am joined here today by colleagues who were listed by the Chair so I will not repeat who they are. The important thing is that, as members can see, the Comptroller and Auditor General's report has summarised its analysis of NAMA's progress under seven headings.
The first is the loan acquisition, which has been well rehearsed here and in other forums. The second is the recovery of our costs, and the fact that we expect we are going to contribute approximately €4.9 billion by the time we finish our work. The third, as the Comptroller and Auditor General mentioned, is that we are achieving a 6.7% per annum, compared to the original EU approved model where it was expected we would get a 5% return. The fourth is that we acquired the loans. There was reference to a particular transaction, which I will come to in more detail in a moment.
The fifth heading relates to the Dublin docklands. We have only one site remaining in the portfolio and we hope that will be a joint sale with Waterways Ireland, but it needs North-South approval and obviously that is an issue at present.
The sixth heading relates to the 20,000 units that were outlined in the report. We maintain that we have exceeded the 20,000 target, either through direct funding, or through the sale of sites where debtors got out of NAMA. The seventh heading relates to the delivery of social homes, which are very important. We had a target of 2,000 and we delivered more than 2,600 homes.
Housing is one of the issues I would like to highlight here today because it is a matter that affects everybody in the country. Since 2014, we have been involved in one way or the other in the delivery of some 32,000 new homes. We are working to ensure that as many of the sites as possible that we have in our remaining portfolio are shovel-ready for future development. However, as has been noted by several house-building companies in their public statements, there are a number of significant obstacles to delivering additional quantities of housing at the levels Ireland needs. One of the major issue is the achievement of the appropriate planning. Planning costs are significant. In any multi-unit development they average approximately €3,000 per residential unit. Achieving a grant of planning permission continues to be a significant challenge, with many applications awaiting a decision for almost two years, in particular from An Bord Pleanála. Our debtors and other house builders deem it as almost inevitable that a judicial review will follow any planning approval that is granted. Unfortunately, this adds to the timeline, uncertainty and costs and halts the building of necessary housing. These issues then result in the development becoming either commercially unviable or add considerably to the cost that the ultimate buyer or renter will have to pay.
While construction cost inflation is starting to abate, NAMA's own analysis shows that the costs of building a two-bedroom apartment, excluding land costs, increased by 18% between 2021 and 2022, with more modest, albeit significant, increases of almost 6% for an average three-bedroom house. When coupled with the difficulty of obtaining funding and higher borrowing costs, viable residential development is going to remain challenging for some time. With less supply of new housing and demand continuing to outstrip supply, the sales price of new housing developments are still rising at about 11% per annum. Meanwhile, second-hand housing sales price inflation has, thankfully, slowed to under 1% per annum and is slightly negative in Dublin.
In terms of the 2022 financial statements, I am pleased to report that these results show we continue to generate strong cashflow and profits despite having a significantly smaller portfolio. We made €81 million in profit in 2022. The fact is that NAMA took full advantage of the opportunities presented between 2012 and 2022 when interest rates were low and large numbers of buyers were in the market. By doing this, we delivered large volumes of asset sales at significantly higher prices than would be achievable today. Crucially, our strong position has enabled us to do surplus transfers to the Exchequer with €3.5 billion cash paid to date and another €350 million will follow before the end of the year. We believe that by the end of our life the overall surplus will be at least €4.9 billion.
I will now return to the €265,000 loan sale at market value that was referred to in the Comptroller and Auditor General's report.
In respect of the report’s references to the transaction I would like to make the following important points. There is no suggestion in the report that the sale was conducted improperly, without sufficient due diligence or was non-compliant with the NAMA Act. The Comptroller and Auditor General report refers to the loans being sold at a discount of 97.5%. It is important to stress that this is a discount to par value. The historical amount originally advanced by the bank prior to NAMA buying the loans was €8.6 million, plus accrued interest that was unpaid, but required, of €1.9 million. It should not be confused with a discount to the market value of the properties securing the loans at the time the sale was approved by the NAMA board.
The loans were sold for the full market value of the secured properties, as determined by independent professional valuers at the time of sale. There was no means available to us to recover any additional money to reduce the losses on the loans. Our rationale for the transaction was to maximise the amount recoverable for the taxpayer in line with its statutory mandate set by the Oireachtas. Our legislation takes precedence over any internal NAMA policy and the transaction was approved by the NAMA board on the basis that it was consistent with this legislation. Ultimately, this was an exceptional situation involving a highly contentious lender-borrower relationship that was inherited by us from the bank.
There was no possibility of NAMA achieving a full repayment of the €10 million par debt owed to it and no alternative legal options to achieve any repayment from all the debtor companies or their bankrupted guarantors. There was no amount that could be recovered, as per the independent valuation, other than what was only worth €265,000, irrespective of the size of the loan of €10 million. We paid the financial institution, or the bank involved, €4.38 million for these loans at acquisition, meaning the originating bank incurred a loss of €4.21 million on this loan at the time we bought it.
The courses of action available to NAMA were severely limited by a number of factors, including: the resignation of the receiver; the debtor companies regaining full control of the property assets as a specific legal consequence of the receiver resigning; no estate agent was willing to try to sell the properties and we could not legally appoint a sales agent; and the debtor companies were insolvent, the owner SPV was in liquidation and their promoters-guarantors were bankrupt, which is outlined in figure No. 1. Legally, once an individual is made bankrupt, all their debts are extinguished and they no longer legally owe any money on those debts. The insolvent and liquidated companies had no other assets to meet the €10 million par debt.
The other factors are as follows. External professional independent valuers assigned a valuation of €265,000 to the bundle of property assets in October 2020 based on the assessment that the assets could not be sold in the circumstances. The board relied on this information when making its decision. To pursue or defend litigation would have been an expensive and drawn-out process, the legal costs of which would almost certainly have exceeded the value of the properties that were independently valued at €265,000. There was a history of protracted litigation with this debtor and their companies, including prolonged litigation in relation to assets owned by the debtors in the UK, which was exacerbated by multiple appeals in multiple jurisdictions. While the courts consistently found in favour of NAMA and the insolvency practitioners, we were unable to recover the significant litigation and other costs of £2.5 million from the debtors or the companies involved.
A graph illustrates quite clearly that effectively there was no further recourse. Our only option was to recover cash from the sale of the assets and to minimise costs by conducting an off-market sale to a third party with both the appetite and the resources to acquire the property assets. It was approved by the NAMA board after careful consideration of all material facts and an acceptance of the lack of possible commercial alternatives. We are fully confident that it was the best viable option available to achieve a return in accordance with our legal obligation under section 10 of the NAMA Act.
We are not in a position to identify the debtors or parties connected to them, as this would be in breach of our legislative obligations and confidentiality and could expose NAMA and the State to the risk of litigation.
Regarding the loan purchaser, I can confirm that a newly established corporate entity, an SPV, purchased the loans and that written confirmation was received from the company’s directors, who are not related to the original debtors, via their solicitors, stating that they were not connected persons as prescribed under section 172(3) of the NAMA Act, although we understand that a relative of the debtor, who was never a NAMA debtor, provided funding to finance the purchase to the SPV.
I will conclude by saying there is still much work to be done by NAMA to deliver additional surplus moneys to the Exchequer. Our focus now is twofold: first, to extract as much value as possible from our residual portfolio with a view to maximising the surplus that we ultimately hand over to the Exchequer and, second, to progress the orderly resolution to wind-down the agency.
We welcome the publication by the Comptroller and Auditor General of the NAMA progress reports. It is important that we can independently demonstrate to the public that NAMA is adhering to ambitious commercial targets and mandates assigned to it on establishment. Not every transaction is straightforward or easy to complete, but we fulfil our legal obligations. The agency has and will continue to effectively utilise its unique position to continue to provide a valuable social and economic contribution from its operations.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I welcome the witnesses. It is good to engage with Mr. McDonagh again here. I thank him for his opening statement.
I will start with the Comptroller and Auditor General in respect of the three-year reports. He has been involved in probably nearly all of the four reports to date. If NAMA is wound up by 2025, assuming that is the case, will there be a final report on it by the Comptroller and Auditor General?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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The most revealing part of the Comptroller and Auditor General’s remarks about the report is in respect of the sale that Mr. McDonagh just spoke about. In the other four reports, has he come across a similar type of incidents in the accounts?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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This committee has delved into-----
Mr. Seamus McCarthy:
There would have been other loan sales that we would have looked at where there perhaps was an issue of concern. Where we chose not to, we did not feel there was a need to report. I think this one was exceptional, so much so that I felt it was appropriate to include in the section on debtor management.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Absolutely, very much so. I thank the Comptroller and Auditor General for that.
Turning to Mr. McDonagh and his statement on that, from the sound of it, this was not easy from the get-go - and that is probably an understatement if we knew every bit of detail to it. I refer to the receiver who resigned in May 2020. How many asset sales was that receiver who was appointed to that portfolio involved in?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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From that, I presume that points to and illustrates the exceptional nature of this type of sale that NAMA was engaged in.
Mr. Brendan McDonagh:
Absolutely. In the life of NAMA, I think we have had more than 500 receiverships. The receiver indicated just before Christmas in December 2019. Usually a receivership has to be consensual between the secure lender who appoints the receiver and who discharges the receiver. The receiver told us he was taking legal advice and was effectively self-resigning. It was absolutely exceptional.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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When was the receiver initially appointed?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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So he had been undergoing quite a bit of work up to the point of resignation.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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That is not unique in the work of NAMA though, right?
Mr. Brendan McDonagh:
No, it is not resisted. However, sometimes some of these are more unique than others. The companies were dissolved. We had to get the companies reinstated into the companies office to appoint a receiver. We appointed a receiver. A local authority had expressed some interest in some of these assets, so when we appointed the receiver, we told them to engage with the local authority to see if they could sell these assets. The receiver engaged with the local authority for about a year and a half. Then, in late 2019, the local authority indicated that having looked at the assets and circumstances, it was not going to proceed.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I understand Mr. McDonagh does not want to identify the person or persons involved.
On the assets, are they located in a particular geographical area in the country or are they spread out across the country?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Okay. Mr. McDonagh mentioned that the sales agent also reported that a sales agent could not be found to actually take on the portfolio, is that correct? Was that before or after the local authority declined elements of the portfolio?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I presume sales agents outside of that county were sought.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Through that, of the sales agents and the local authority, who exactly came under pressure and intimidation? The phrase Mr. McDonagh used was "threats and intimidation".
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Just the receiver.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Were they reported to An Garda Síochána?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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What struck me was the Comptroller and Auditor General said that NAMA confirmed that it does not have a set process for dealing with incidents of alleged intimidation of its staff or agents on the basis that it is something that is very rare. "Very rare" does not mean it has not happened before. Maybe it has not happened to this level, if I am reading between the lines here. Given the fact that NAMA is engaged in large-scale assets that could be owned or operated by various entities, some good and some not so good, does Mr. McDonagh not think it is remiss of NAMA, or an oversight on its behalf?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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It still does not make NAMA immune though.
Mr. Brendan McDonagh:
No, I absolutely agree. Let me break it into two parts to explain it for the Deputy. Where there have been other incidents and the receiver was involved in another debtor connection, that particular receiver actively engaged with An Garda Síochána on that matter. I will not say that they got an absolute resolution but they found a way to keep operating. On NAMA staff members, this is the point that is rare. There has only been one other direct occasion where-----
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Roughly, when was that?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Okay. This is my point. NAMA was set up in 2009 by statute, and from 2009 all the way to the current day, incidents have taken place and a receiver resigned in May 2020. Did nobody think, for Mr. McDonagh's sake, that of his staff and the agents NAMA is employing, to put in place a procedure around engaging with the proper authority, An Garda Síochána, to report these incidents? It seems to me that if it was anybody else, like a local authority or any other agency, if threats came in, they have to be dealt with through the appropriate channels.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I am a little under time pressure but go ahead.
Mr. Brendan McDonagh:
I appreciate that. NAMA is an organisation with staff seconded to us by the National Treasury Management Agency, NTMA. The NTMA is the employer. Regarding the 2012 incidents, there were attempts to intimidate two individuals in NAMA who were dealing with this connection at that time. I remember at the time that I went to the head of human resources, HR, in the NTMA and that person engaged with gardaí in Pearse Street Garda station, which sent two gardaí to speak to the two guys who were working with me. They visited their homes and gave them some advice on how to deal with it. There is no question that we would not, if someone within NAMA was being intimidated-----
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I am not suggesting NAMA would not engage but given the history and even though it is rare, we are talking about 2012, if not before that, all the way through to the current day, and NAMA should have a procedure. I will leave that there and will move on to other elements.
On NAMA's contribution to social and affordable stock, I have spoken before about the valuable contribution that NAMA has made in realising assets for the State and selling certain portfolios. Mr. McDonagh mentioned direct sales to the Land Development Agency, LDA, local authorities and approved housing bodies. Does Mr. McDonagh have a breakdown of those sales between the LDA, which would be relatively recent, I presume, the approved housing bodies, of which there are plenty, and local authorities? Does he have a rough breakdown of those?
Mr. Brendan McDonagh:
Regarding ones that NAMA bought itself and leased to local authorities through National Asset Residential Property Services, NARPS, that is 1,366. We are going to deliver about 2,800 units in social housing. We have the other 50% on our balance sheet and we have sold 50% to approved housing bodies and the LDA. The LDA is a very late addition, as the Deputy will appreciate, but it is obviously more recently a buyer of social housing units in the market.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Okay. Does Mr. McDonagh have it in percentages?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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He can send it in a note, that is fine.
I refer to the assets themselves, and NAMA is heading towards the latter end of disposing of the assets and great progress has been made. In terms of assets NAMA inherited, maybe before Mr. McDonagh's time, was planning permission maintained on assets that NAMA had secured all the way through? By that I mean large swathes of land that had full planning permission. My belief is that planning permissions lapsed and, therefore, the sites were not as valuable as they could have been and where we could have realised further income for the State.
Mr. Brendan McDonagh:
First of all, when we inherited some lands with planning permissions and zoning, planning permissions expired on some of that land because it was, effectively, not commercially viable at that particular time. Some of the land was also dezoned by the local authorities. Where we believed the land was going to commercially viable in the longer term, we invested money to extend the planning permissions wherever we could. That has been a whole part of our remit all the way through the life of NAMA.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I accept the point about the change of zoning. That is understandable. Were personnel appointed by NAMA to ensure the value of those assets were maintained by maintaining the planning permissions? I hear what Mr. McDonagh is saying, in that there could be good, bad and indifferent types of planning on certain sites but, ultimately, as he knows, they are far more valuable with planning than without. He might send on a note, and he might not have a breakdown of it, on the assets that had full planning at the time of NAMA acquiring them and on whether they were maintained in the vast majority of cases.
Mr. Brendan McDonagh:
I have that detail but I just do not have it with me. To answer the Deputy's questions on whether there was someone appointed within NAMA, one of the teams that we established within NAMA was for that very purpose. We recruited three professional planners and they were part of NAMA for a long number of years. As NAMA got smaller, we now have one very senior professional planner within our team. All along, we have tried to maintain planning permissions where we could, having taken the advice of our in-house planning team and, obviously, the people working in NAMA in dealing and working with debtors and receivers, wherever possible. I would find it very hard to give up planning permission, if I had it. It adds to the value of the land, rather than reverting to agricultural value. We have spent a lot of money on planning permission over the years to try to maintain planning and get it extended where possible.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I will ask a final question as I only have a minute left. Keeping with housing, NAMA has a target of 20,000. I think NAMA has 55% of that realised to date. For the remainder of it, what is the plan to ensure that NAMA meets the target or preferably exceed it?
Mr. Brendan McDonagh:
This is a point of disagreement between myself and Mr. McCarthy.
Back in 2015, when NAMA, with then Minister for Finance, Michael Noonan, set a 20,000 unit target, we only had planning for 13,800 units at that stage, but we said we would try to work it up through our portfolio to get planning for another 6,200 units and that if the debtors were still with us, we would provide funding. However, as land values and house prices increased substantially from 2015 onwards, many of the debtors who had land banks and who continued to build on that land were able to pay off their debts to NAMA and take themselves out of NAMA, so they were no longer available for us to provide funding, they got their funding elsewhere and buildings were completed. Through the support they had from NAMA, they were able to maintain planning to get them shovel ready, and then they went elsewhere and paid off their debts. That was the right thing to do for the taxpayer, that they paid off their debts and moved on. We would say we have been involved in 32,000 units. Direct funding was for more than 11,000 to the end of 2020-2021. We had the value to provide for the other 9,000, but if the debtors had left us and paid off their debts to the taxpayer, we could not hold them against their will.
John Brady (Wicklow, Sinn Fein)
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I welcome the witnesses. I want to follow on from my colleague in relation to that particular transaction, the discount of 97.4%, which has been described as exceptional. I would go further. I would say it is extraordinary that such a discount would be imposed. I find it extraordinary and unbelievable, to be honest. I want to delve in and try to get some more answers about that. I will start with the relative. It is stated that, ultimately, it was sold to him or he promoted or he funded the business that ultimately ended up with this portfolio. What was the nature of that relationship? What kind of relative was he to the previous owners?
John Brady (Wicklow, Sinn Fein)
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He was a brother, so a very close relation.
John Brady (Wicklow, Sinn Fein)
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In relation to the receiver, it is reported that an apartment complex that was being held as collateral against other loans had been sold was described as a large apartment complex. To whom was that complex sold?
Mr. Brendan McDonagh:
It was sold to a company in UK. I do not have the particular name with me at present. It was openly marketed, and because the debtors resisted the sale, we had to go to the court in the UK to appoint an administrator through the courts in the UK. The administrator is effectively the same as the receiver and he appointed sales agents to openly market it, so it was fully openly marketed.
John Brady (Wicklow, Sinn Fein)
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Okay, and that had been strongly resisted. What was the apartment complex valued at?
John Brady (Wicklow, Sinn Fein)
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What was it valued at?
John Brady (Wicklow, Sinn Fein)
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Okay, thanks for that. Is the relationship NAMA has with sales agents throughout the State generally a good one?
John Brady (Wicklow, Sinn Fein)
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How many sales agents are in the particular county where this portfolio was held?
John Brady (Wicklow, Sinn Fein)
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A reasonable number. Ten, 20, 30?
John Brady (Wicklow, Sinn Fein)
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Nationally, there would multiples of that number of sales agents.
Mr. Brendan McDonagh:
Yes, but a local sales agent generally does not take on something in another county because of local knowledge. What I call a national sales agent would be the major sales agents like CBRE, Jones Lang LaSalle and Savills. They are the national sales agents whom we would approach if the local sales agents would not take it on.
John Brady (Wicklow, Sinn Fein)
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Regarding this portfolio, the sales agents in that particular county and nationally all refused to engage in dealing with this.
John Brady (Wicklow, Sinn Fein)
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A number? Or all?
John Brady (Wicklow, Sinn Fein)
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Both within the county and nationally. No one would take it on.
John Brady (Wicklow, Sinn Fein)
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Was there a reason given why they would not take it on?
John Brady (Wicklow, Sinn Fein)
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Would it be exceptional that sales agents would refuse work in this way?
John Brady (Wicklow, Sinn Fein)
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Was any attempt made by anyone other than the receiver to verify what had been said?
Mr. Brendan McDonagh:
In fairness to receiver, we have had him as a receiver on a number of NAMA assets over the years. He is a very professional gentleman and leads quite a big receivership team. We would have no reason to doubt his bona fides.
John Brady (Wicklow, Sinn Fein)
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Nor would I. Mr. McDonagh said that, back in 2012, there were attempts to intimidate two other staff members. Will Mr. McDonagh elaborate a little on the nature of the attempts?
John Brady (Wicklow, Sinn Fein)
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And that was reported to An Garda Síochána.
John Brady (Wicklow, Sinn Fein)
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Was an investigation opened by the Garda?
Mr. Brendan McDonagh:
No. Gardaí came in and spoke to the two individuals involved. Somebody saying something is different from somebody actually doing something. However, it does not mean that someone on the receiving end hearing something said directly to their face does not feel somehow intimidated by that.
John Brady (Wicklow, Sinn Fein)
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Can Mr. McDonagh give more information regarding the nature of the intimidation against the receiver?
John Brady (Wicklow, Sinn Fein)
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That was not reported to the Garda at the time, was it?
John Brady (Wicklow, Sinn Fein)
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What action was taken by the board of NAMA when it was fed back that the receiver faced this intimidation?
Mr. Brendan McDonagh:
There was not much action we could take because it did not directly involve us. The board of NAMA and I were more concerned that, once the receiver resigned, the debtors sought a meeting with NAMA. Three of my colleagues met with the debtors involved.
Arising out of that, the long-standing complaint about the UK asset being sold under value was aired. There were threats to reopen litigation on that and, obviously-----
John Brady (Wicklow, Sinn Fein)
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Did NAMA take the easy road out of this in giving a discount of 97.5%?
John Brady (Wicklow, Sinn Fein)
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There was no easy road. In the last minute I have, I will express my concern that the message going out today is that, when dealing with a State body such as NAMA, intimidation works.
John Brady (Wicklow, Sinn Fein)
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Intimidation clearly worked in this situation.
John Brady (Wicklow, Sinn Fein)
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Staff working for NAMA were intimidated back in 2012. The receiver was intimidated. No action was taken in terms of Garda investigations. Ultimately, a 97.5% discount was awarded. That is rewarding thugs and intimidation and it was facilitated by Mr. McDonagh and the board of NAMA.
Mr. Brendan McDonagh:
No, it was not. That is a completely wrong interpretation. As I showed in the graphic in my opening statement, the debtors were bankrupt so no money could be offered to them because your debts are extinguished once you are made bankrupt. All of the companies involved were either liquidated or insolvent. They had no other assets. The only assets we had were worth €265,000. The fact that there was a €10 million loan against it did not matter because there was no way of recovering the other €9.7 million. There was therefore no discount given by NAMA. I have been in this business for 14 years and I assure the Deputy that he will meet no one who thinks anybody can intimidate NAMA, myself or the board. That is not the way we operate.
John Brady (Wicklow, Sinn Fein)
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That is not the message going out from here. To conclude-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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I will let the Deputy back in for a second round. He may make a very brief point.
John Brady (Wicklow, Sinn Fein)
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I probably will not be here. I ask that the minutes of the board meeting convened to sign off on this final sale and at which this report was given be furnished to the committee. Could we also be furnished with any reports relating to investigations by An Garda Síochána going back to 2012 and the report given at that board meeting with regard to intimidation and the rationale for the discount? I ask that this documentation be furnished to the committee.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What county did this happen in?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It sounds like somewhere in the wild west. All that is missing is the hats, the horses, the guns and the sheriff. It is an absolutely incredible story. The brother rocks in with the bag of money on the side of the horse and buys this for €255,000 or €260,000. It is an absolutely incredible. This happened in County Donegal in this State. What we are hearing this morning is unbelievable. Anyway, we will continue with questions. I call on Deputy Dillon.
Alan Dillon (Mayo, Fine Gael)
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I again thank our witnesses for joining us. I also wish to follow up on the sale of the loan at a discount of 97.5%. As other members have said, it is absolutely shocking. The remit of NAMA was to ensure the best financial outcome for the State. We have certainly failed significantly in this regard. Will Mr. McDonagh detail the decision-making process behind such a sale and how NAMA plans to mitigate such losses into the future?
Mr. Brendan McDonagh:
We have been here before and we have been criticised for not having an up-to-date valuation of the assets. We did have an up-to-date valuation of the assets, which valued them at €265,000, whether the members like it or not. That is not NAMA's valuation but an independent third-party valuation. We achieved the value for the assets. The fact that, before NAMA ever acquired the loans, the original bank had lent these debtors €8.4 million on these assets clearly means they were never worth €10 million in the first place. When we inherited it, it was €8.4 million. What brought it over €10 million was that we charged €1.9 million in interest during our life but that was never paid by the debtors. They never paid a penny of it. Effectively, that brought it to more than €10 million. That does not change the fact that, if your only recourse is to the assets themselves and they are worth €265,000, that is all that can be recovered, whether by NAMA, Bank of Ireland, AIB or any other body, because that is the value of the assets.
The fact that €10 million had been built up and was owed is shocking. I agree with Deputy Dillon on that. I totally agree with everybody and can understand people's angst about it but the reality was that, when we got to dispose of the assets, we got a valuation that said they were worth €265,000 and we got €265,000 for them. That was the only alternative open to us. After the receiver resigned, the assets were back in the control of the debtor and we could not do anything about that. In fact, when the receiver resigned, the HSE contacted us and said that there was a vermin infestation on these lands and that it wanted to pursue whoever was responsible for the infestation under the Rats and Mice (Destruction) Act 1919. We said that we were not responsible because, once the receiver resigned, the lands were back in the control of the debtors.
There were all sorts of issues attached to these lands. These were not grade A quality assets. They were assets in a dishevelled state and situated on very poor quality marshland. What shocks me is that this amount of money was lent against this really poor quality land and unfinished housing estates that had been subject to all sorts of vandalism. In correspondence with us that I am happy to provide to the committee, the HSE even outlined how there were open manholes, which were a big problem in terms of health and safety. It is important to understand that the assets were worth what they were worth. Do I wish the assets were worth more? Of course I do. However, they were impaired by the fact that we could not get anybody to sell them for us. On that basis, there was no alternative bar holding onto the assets and getting nothing for them. They would still be there at the end of the life of NAMA and I would not be before the Committee of Public Accounts having to deal with this because somebody else would have had to deal with it at the end of the life of NAMA. However, we are charged by the Minister of Finance with getting our portfolio down to zero and, as part of that, we have to take difficult decisions. Part of this is involved getting all of the relevant information. We had the independent valuations and all we could get for it was €265,000. Unfortunately, there was only one buyer for this asset.
Alan Dillon (Mayo, Fine Gael)
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I will talk about how there was no set process for dealing with incidents of intimidation. Given the effect on property value and sales, as mentioned, does Mr. McDonagh believe it is now imperative to establish a protocol for such incidents to safeguard the assets and financial interests of the State?
Mr. Brendan McDonagh:
We try to look at everything we can do in such situations. The reality is that, because we only have the loans and not the assets, we need somebody to act as receiver to get control of the assets. No receiver would take it on once the receiver resigned. The receivers all talk to each other and would know who was involved and the reasons the receiver resigned. There was then the problem of appointing a sales agent to sell it. The receiver could not get any local sales agent to take it and none of the national sales agents were interested either. There was then a situation where the assets would effectively be abandoned and left there. All of the difficulties, including those the HSE contacted us about, would have got worse and worse over time and would have to be dealt with. This was an extremely exceptional situation. There was no recovery because the companies were bankrupt or liquidated and the debtors had gone bankrupt so we could not get anything back other than the value of the assets. Believe me, I want every single penny out of every single asset. I work my hardest every single day to achieve that. With regard to there being no set process, it is very hard to have a set process when you do not have any options.
Alan Dillon (Mayo, Fine Gael)
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Mr. McDonagh has answered that and I thank him for that. I will move on and ask about NAMA's timeline. Why did it get extended by five years despite the initial plan?
What went wrong?
Mr. Brendan McDonagh:
Nothing went wrong. We were working to pay off all our debts by 2020. We paid off our Government guaranteed debt by 2017, which was €30 billion. Our subordinated debt was due in 2020 for the private investors, we paid that off in 2020 and we gave a €2 billion surplus back to the Government in 2020. The view of the Minister at the time was that we were continuing to work on a number of things. First, we had additional money we could make out to the portfolio and were able to demonstrate to the Minister that we could do that, so he said if NAMA gives me €2 billion by 2020 and the best part of another €3 billion by 2025, that is a good thing for Ireland Inc. Second, we are continuing to fund a number of house builders that are continuing to build houses and it was also important that we continued to do that. Anything we do in social housing or for sites for schools and so on, which we have been doing and facilitating, is also important.
Alan Dillon (Mayo, Fine Gael)
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NAMA's profits have plummeted from €195 million in 2021 to €81 million in 2022. Can Mr. McDonagh give us the reason why?
Alan Dillon (Mayo, Fine Gael)
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The cumulative transfer to the Exchequer amounted to €3.5 billion towards the end of 2022, and then NAMA transferred €500 million to the Exchequer. What was done and where is that money now?
Mr. Brendan McDonagh:
We have transferred it into the Exchequer and the Minister and the Government spend that money. It goes into the general Exchequer bank account and they spend it on current and capital services. They do not take the money in and allocate it to a particular thing; it is just there as part of the overall budget that is spent.
Alan Dillon (Mayo, Fine Gael)
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I refer to social housing. NAMA has provided 2,600 social housing units, which is commendable. What is the plan moving forward and for the next two years?
Alan Dillon (Mayo, Fine Gael)
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How many affordable houses has NAMA delivered, of the target of 20,000?
Alan Dillon (Mayo, Fine Gael)
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Some 100 affordable houses.
Alan Dillon (Mayo, Fine Gael)
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I refer to NAMA's operational costs. How are they run? To the end of 2022 they were just over €1.1 billion. Are there any specific measures NAMA is taking to control operational costs? In its direction towards 2025, how does NAMA intend on seeing that reduced?
Mr. Brendan McDonagh:
Our costs are reducing every year because we are making people redundant every year as NAMA gets smaller. In 2020 we had just over 200 people. We have just run this year's redundancy programme and when that completes we will be down to 82 people so we are reducing our costs. One of our biggest costs is staff and we are about 60% down from what we were at.
Catherine Murphy (Kildare North, Social Democrats)
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Let me get this right; there were two dissolved companies and a new company was created by the brother of the people who owned the dissolved companies. These assets were then sold to the brother through that company. That is it; is it not?
Catherine Murphy (Kildare North, Social Democrats)
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NAMA knew it was the brother of the-----
Catherine Murphy (Kildare North, Social Democrats)
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Section 172(3) of the National Asset Management Agency Act 2009 prohibits the agency from selling loans or property to a defaulting borrower or connected party. I have asked questions about this on several occasions when NAMA was here because we were hearing of people who were back in control of assets and we were asking how the hell that had happened, given that the State and the taxpayer picked up the tab, of the discounts as well as everything else, because of the losses in the banks. How is that not a connected party?
Catherine Murphy (Kildare North, Social Democrats)
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So Mr. McDonagh is saying a company is a different entity to an individual.
Catherine Murphy (Kildare North, Social Democrats)
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Is he related to the people who-----
Catherine Murphy (Kildare North, Social Democrats)
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Who is he the brother of?
Catherine Murphy (Kildare North, Social Democrats)
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We were talking about these rat-infested hovels and there are 14 of them that are occupied as residential units. Is there rental income for those?
Catherine Murphy (Kildare North, Social Democrats)
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How much is the rental income?
Catherine Murphy (Kildare North, Social Democrats)
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What is the going rate for rental income in the area?
Catherine Murphy (Kildare North, Social Democrats)
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So €14,000 per month is likely to be the income from these 14 occupied residential units.
Mr. Brendan McDonagh:
I honestly do not know. When the receiver was appointed, he approached all the tenants and asked them to pay rental income to him. The receiver said not to pay the debtor but to pay the receiver and all of the tenants refused to engage with the receiver or pay him the rental income. Therefore, the receiver could not collect the rental income. I do not know what the rental income on these houses is.
Catherine Murphy (Kildare North, Social Democrats)
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The receiver was intimidated and it looks like the local authority was intimidated into not looking at buying. The estate agents and the tenants were also intimidated and NAMA rolled over. That is what it looks like.
Catherine Murphy (Kildare North, Social Democrats)
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Are the assets not collateral for the debt?
Mr. Brendan McDonagh:
They are collateral but we do not control the collateral; we control the loans. It like a case where one has a house and a mortgage from Bank of Ireland. In that case the bank cannot come into your house just because it has a loan to you. I have a mortgage and I would not let the bank that loaned me the money into my house. That is the way it is.
Catherine Murphy (Kildare North, Social Democrats)
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In theory, could all of the NAMA debtors have done this?
Catherine Murphy (Kildare North, Social Democrats)
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What is the state of the unfinished 18 units? Have they been finished since? Are they in a town? Are they viable?
Catherine Murphy (Kildare North, Social Democrats)
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So there are 18 individual units dotted around the place.
Catherine Murphy (Kildare North, Social Democrats)
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What would the cost per unit to have viable units be?
Catherine Murphy (Kildare North, Social Democrats)
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It is not unreasonable.
Catherine Murphy (Kildare North, Social Democrats)
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Will Mr. McDonagh tell me about the 3.2 ha of land? What was the zoning on it?
Catherine Murphy (Kildare North, Social Democrats)
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What was the zoning on it?
Catherine Murphy (Kildare North, Social Democrats)
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Okay. It is outside the town.
Catherine Murphy (Kildare North, Social Democrats)
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What was the valuation on that?
Catherine Murphy (Kildare North, Social Democrats)
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You would have got 18 houses for probably €1.4 million. You would have had 14 residential units with a rental income. I fail to understand how this valuation of €265,000 stacks up.
Mr. Seamus McCarthy:
If I may interject, the valuation that was put on the land was effectively the offer that had come from the local authority. It offered to pay that amount knowing it would have to spend a lot more money on the land to make it serviceable and so on. It seems as if that figure of €265,000 then stuck for the whole portfolio. It is important to recognise that the market value of an asset like this is the price that would be exchanged between a willing buyer and a willing seller. That was not really what the valuer was reporting at this stage. He was reporting on the circumstances of this sale, which were that there was a lot of resistance. There was not a willing seller in the situation. It is important to remember that when NAMA acquired the loan, the assets were valued at that stage to strike the price that would be paid to the financial institution. There was a write-down at that point. However, NAMA paid €4.37 million to acquire these assets but then sold them a number of years later for €265,000 and forewent the interest on what it had paid. That is where the economic loss comes in.
There is, however, another way of looking at this. If the problems that were identified with the properties and the realisability of it had been recognised at the beginning, NAMA would have probably paid less to the bank and the State would have picked up the expense anyway. It is a fairly unsatisfactory situation all told. One of the reasons I drew attention to this is the difficulty that these facts are known locally. People understand that this is what happened. I felt it was important it be recognised, discussed and talked about.
Catherine Murphy (Kildare North, Social Democrats)
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I will go back to the rental income. Are these properties registered with the Residential Tenancies Board, RTB?
Catherine Murphy (Kildare North, Social Democrats)
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NAMA would have some chance of finding out what the rental income was, if that was the case.
Catherine Murphy (Kildare North, Social Democrats)
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Did the tenants say why?
Catherine Murphy (Kildare North, Social Democrats)
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There are lines to be read through there. It is very difficult not to conclude that the tenants knew what they were supposed to say.
On the wind-up, how many staff are now in NAMA?
Catherine Murphy (Kildare North, Social Democrats)
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Where does that go to from there?
Catherine Murphy (Kildare North, Social Democrats)
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What happens then, if there are still loans or assets? They will be subsumed, presumably.
Catherine Murphy (Kildare North, Social Democrats)
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Are there other examples of this kind of thing? NAMA sold off the things that were easy to sell off at the beginning. The more difficult ones that had problems with title and things like that were more difficult to sell. They are the residual ones. Is there anything else that is in this kind of range?
Catherine Murphy (Kildare North, Social Democrats)
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What are the key outstanding issues in disposing of the other loans or assets?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Deputy Catherine Murphy will have a second round.
Imelda Munster (Louth, Sinn Fein)
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I will go back to the €265,000 sale. It was confirmed that it was a brother of the debtor and that brother had no debts. Did NAMA do a background check on whether they had any involvement in the lands, the housing estate developments or whether they had ever gained any profits from any of it?
Imelda Munster (Louth, Sinn Fein)
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Did NAMA do a background check?
Imelda Munster (Louth, Sinn Fein)
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Right, but did NAMA do that background check-----
Imelda Munster (Louth, Sinn Fein)
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-----or was it just word of mouth? Did NAMA do a thorough background check?
Imelda Munster (Louth, Sinn Fein)
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I know he was not a debtor. Out of curiosity, was NAMA not concerned about somebody Mr. McDonagh said had either caused staff to feel intimidated or where the receiver resigned because of intimidation? Was NAMA not concerned about selling the debts off to a brother of that person who, according to Mr. McDonagh, may have been involved in either the intimidation of the receiver and other staff or had others carry out those acts of intimidation?
Mr. Brendan McDonagh:
What I was more concerned about was more litigation, which would be very costly. We were already involved in litigation with these debtors in relation to UK assets that cost €2.5 million. We were not able to recover any of that money, even though we were ultimately successful, despite multiple appeals in multiple jurisdictions. If you are sitting in our position of having an asset that has a monetary value of €265,000, and this debtor starts up a whole new wave of litigation, you will not be long exceeding €265,000, the majority of which will be in legal costs to defend it, even though you know it will be hopeless. The problem is that people have a right to take litigation, even if it is hopeless, but it still costs us a lot of money to defend it. That will eat up the majority of the €265,000.
That is not acting in section 10. Section 10 of the NAMA Act, about maximising return, is very important but you can also maximise return by minimising the costs, including avoiding litigation, which might cost a couple of hundred thousand. That is very important.
Imelda Munster (Louth, Sinn Fein)
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NAMA had already given the 97% reduction so-----
Imelda Munster (Louth, Sinn Fein)
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Had NAMA not paid €4.3 million?
Mr. Brendan McDonagh:
We had paid €4.3 million in 2010 but as the years went on, the problems became more and more in relation to these assets. They were left go to dereliction; all these types of issues arose with them. Effectively, we overpaid the bank as the Comptroller and Auditor General said before the Deputy came in. We overpaid the bank from day one. Based on advice that we took at the time, we paid the bank. For argument's sake, if we had only paid the bank the same price that we sold it for in the end, €265,000, the difference would have been made up by the Government recapitalising the bank for the difference.
Imelda Munster (Louth, Sinn Fein)
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Even if NAMA had overpaid the bank for whatever reason, there is a considerable difference between €4.3 million and €265,000.
Imelda Munster (Louth, Sinn Fein)
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Mr. McDonagh is concerned about the litigation. Did he gloss over the fact that there was a very close relative, a brother, of somebody? NAMA staff felt threatened. Its receiver had resigned. The decision was to sell it to him anyway and gloss over that because-----
Mr. Brendan McDonagh:
This is important here. There was intimidation attempted previously by the debtor back in 2012 with two staff members. They had left NAMA in 2016 anyway and were not involved in the current thing.
Imelda Munster (Louth, Sinn Fein)
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However, the act of intimidation still occurred irrespective of whether they were current staff.
Mr. Brendan McDonagh:
Yes, but that was with the receiver. It was not with the NAMA staff who were there in 2019 or 2020. The assets are worth what they are worth, the €265,000. Do we gloss over anything? We certainly do not. We had to make a very tough decision about what we were going to do. The alternative was to leave the assets there at the end of life of NAMA, hand them over to the Minister in 2025 and say, "We could not sell these assets, there are big problems with them but, by the way, it is not our problem and you can find someone to deal with them." However, that is not what NAMA does. We had to make a decision. If that had-----
Imelda Munster (Louth, Sinn Fein)
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However, NAMA would already have had to tell the Minister that it bought it for €4.3 million and was then flogging it at €265,000.
Mr. Brendan McDonagh:
To be fair to the Minister, he does not get involved in the day-to-day activities of NAMA. He expects me and the NAMA board to do our job as best we can and get the maximum value that we can in what we try to do every single day. However, the reality here was that if we did not do this transaction through the brother of the debtor providing the funding, these debtors would have commenced litigation; that is guaranteed. There is a long track record with these guys. It had already cost us €2.5 million in relation to assets in London. They would have started litigation. By the time 2025 came, we could have run up €200,000 in litigation costs so effectively the assets would be worth nothing. We would not have got €265,000. Mr. McCarthy could well be coming here in 2025 saying that NAMA had an opportunity to get €265,000, did not take it and now litigation has cost €200,000 and therefore it has lost €200,000 in the meantime by not actually engaging in the transaction.
Imelda Munster (Louth, Sinn Fein)
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However, looking at that, it could be said that NAMA had already lost €4.3 million.
Imelda Munster (Louth, Sinn Fein)
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In the greater scheme of things, €200,000 in litigation costs-----
Imelda Munster (Louth, Sinn Fein)
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It is still a fair way off €4.3 million.
Mr. Brendan McDonagh:
We had paid the bank that money. Clearly the assets, because of the deterioration in them, ended up being much less than €4.3 million. That happened. That does not change the outcome. The outcome is that we have an up-to-date valuation indicating that all anybody could hope to get for it would be €265,000. We either take it or we do not.
Imelda Munster (Louth, Sinn Fein)
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Was that one independent evaluation? Sorry, I missed that earlier. Were there two or three?
Imelda Munster (Louth, Sinn Fein)
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One was the local authority.
Imelda Munster (Louth, Sinn Fein)
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Had NAMA furnished them with information that the local authority had already made an offer of €265,000?
Imelda Munster (Louth, Sinn Fein)
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Did they base it on that?
Imelda Munster (Louth, Sinn Fein)
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However, NAMA gave them that information.
Imelda Munster (Louth, Sinn Fein)
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They knew that figure.
My colleague requested information on how it was presented to the board in the minutes and the complaints to the Garda. I do not know if Mr. McDonagh confirmed he would furnish the committee with that information.
Imelda Munster (Louth, Sinn Fein)
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However, the deal is done so-----
Imelda Munster (Louth, Sinn Fein)
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If we can be furnished with as much of the information my colleague requested as possible, that would be very useful.
I wish to ask about Project Jewel. What was the par value of the total Project Jewel package, the Hammerson deal?
Imelda Munster (Louth, Sinn Fein)
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It is a fairly sizeable package. I thought Mr. McDonagh would have it on the tip of his tongue.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I will just intervene for a second. I accept that it was not on the notice of invitation, but it is a significant project in the centre of the capital city. If there are specific questions that Mr. McDonagh does not have the answers to, I want to allow the committee members to ask questions and perhaps he could come back within a week or so, or maybe by the end of this meeting, with some replies if that is possible.
Imelda Munster (Louth, Sinn Fein)
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I am simply looking for the par value of the total package. What was it sold for? What was the discount given? I ask Mr. McDonagh to furnish us with that information.
Mr. McDonagh will be aware of the Moore Street campaign and the good people involved in that campaign - James Connolly's great-grandson for one. Was it the case that the investor was not interested in buying the ILAC Centre if Moore Street was not included?
Mr. Brendan McDonagh:
I can give the Deputy some high-level information off the top of my head. We sold the loans relating to Project Jewel in 2015. We put them on the market, based on an independent valuation of €1.5 billion. The purchaser bought it for €1.8 billion which was great for the taxpayer who got €300 million more than the valuer estimated we would get. Project Jewel comprised three shopping centres and the site in central Dublin. The main shopping centre was Dundrum Town Centre. That was 100% owned by the debtor. The ILAC Centre and Swords Pavilions were only 50% owned by the debtor. The other 50% was held by the Irish Life Property Fund. Obviously, it contained a number of other assets around that, including the site that was being assembled by the debtor in central Dublin, that the Deputy referred to, which is part of Moore Street.
Imelda Munster (Louth, Sinn Fein)
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Did NAMA ever ask them to take Moore Street out of the package? Did Mr. McDonagh ever meet with the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media to discuss it? He would have been fully aware of this campaign for a cultural quarter.
Mr. Brendan McDonagh:
Absolutely. I engaged with the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media and the Department of the Taoiseach in 2015. It was agreed then that the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media would buy the site in central Dublin from the debtor and it was bought from the debtor, I believe for a price of €4 million. The remaining part of the site was part of the loans that were sold with the shopping centres.
Imelda Munster (Louth, Sinn Fein)
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Is Mr. McDonagh aware that Hammerson initiated a judicial review in January of this year?
Imelda Munster (Louth, Sinn Fein)
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Could NAMA have, at any stage, removed Moore Street, given the significance of the site? As Mr. McDonagh said, it included Dundrum Town Centre and Swords Pavilions. It was a massive area. Could NAMA have removed that from the package and still proceeded with the sale?
Mr. Brendan McDonagh:
Like anything, we could have removed it, but we were selling the whole debtor connection, the whole debtor's loans, in one go. That included that he had security over the Moore Street site.
We worked with the Department of the Taoiseach and the Department of Tourism, Culture, Arts, Gaeltacht, Sports and Media to make-----
Imelda Munster (Louth, Sinn Fein)
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Did they ask you to remove it from the package?
Imelda Munster (Louth, Sinn Fein)
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They did not.
Imelda Munster (Louth, Sinn Fein)
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Yes, it is just-----
Imelda Munster (Louth, Sinn Fein)
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Just a moment. It is hard to credit. You go round to any city in Europe and history and cultural quarters are preserved for generations to come, and for tourism. With such a site, you did not state to me here that the buyer insisted that Moore Street be in it. It could easily have been removed, because the rest of the site was massive. You did not make any attempt to protect the site as such-----
Imelda Munster (Louth, Sinn Fein)
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-----or to remove it from the package altogether.
Imelda Munster (Louth, Sinn Fein)
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Hammersons already have a judicial review going on to demolish the site. That could have been prevented had it been removed initially. I often think about being able to do something to preserve a site like that and doing your utmost to make sure it is preserved. That is particularly the case with NAMA, which was tasked with selling off sites. You could have done that. That would be some legacy to leave to our grandchildren and future generations. To think it was not done and not much effort was put in is a legacy you would not want them ever to know about.
Mr. Brendan McDonagh:
Deputy, I dispute the fact about effort. We engaged with the Department of Tourism, Culture, Arts, Gaeltacht, Sports and Media and the Department of the Taoiseach. They said they were interested in some sites, so we asked them to tell us what they were interested in and we would ensure the debtor engaged with them appropriately. They came back and identified what they wanted. It was their decision, not my decision. We told the debtor he had better engage with this. In fairness to him, he engaged with them and they bought what they wanted to buy, and what they identified. It was not me who identified it. It was they who identified it. That is all I can say, and I have been completely up-front with you.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I just want to clarify something, Mr. McDonagh. I have been following the Moore Street issue somewhat for the past ten or 15 years. I want to clarify that part of the terrace is now in the ownership of the Department.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I do not expect you to go into fine detail of it or be able to rattle it off. Is it that section that people are concerned about, that group of houses where the provisional government had its last stand?
Mr. Brendan McDonagh:
Again, off the top of my head I remember it was 2015. My understanding is that the Department of Tourism, Culture, Arts, Gaeltacht, Sports and Media had identified these houses as being the most historically significant. They were the ones they wanted to buy. We arranged for them to engage with the debtor at the time. They did buy them - the ones that they wanted.
Brian Stanley (Laois-Offaly, Sinn Fein)
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No one campaigned to buy the whole terrace.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It was a group of five or six houses.
Brian Stanley (Laois-Offaly, Sinn Fein)
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We will resume after a short break, and Deputy McAuliffe will be first. We will suspend for ten minutes.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The next speaker is Deputy Paul McAuliffe.
Paul McAuliffe (Dublin North West, Fianna Fail)
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I thank our witnesses for being here today. Looking back on the body of work that NAMA has done, you would have to say that, by and large, it has completed the job. We could have arguments about whether at times sales were done with too much expediency and the taxpayer may not have gained a long-term benefit given property values and everything else. Over time, perhaps there were opportunities where sales could have achieved a higher value if we had waited longer. I accept that is all from the window of hindsight.
The real test for many people on the ground is those sites they see that are in NAMA's control. The one in my constituency that has caused a significant amount of concern is the Prospect Hill site. There are a large number of apartments there purchased by NAMA in 2010 for sale on the housing market in 2021. That is essentially a ten-year period during which the housing crisis grew in scale. The housing crisis did not land on us in 2014 or 2015. It had its roots in the myth that there was an overhang in housing supply and we know now that overhang was not there. Despite the narrative when NAMA was set up about there being too many houses and so on, clearly there were not a sufficient number of houses. I am using Prospect Hill as a way of trying to get an insight into how NAMA approached its requirement to fulfil social housing need or the broader housing function and whether enough emphasis was given, on reflection, to the provision of housing. Did NAMA also fall into that narrative of there being an oversupply and not prioritise the housing element of its remit? For example, I understand that the National Asset Residential Property Service, NARPS, still has not transferred to the Land Development Agency, LDA. Am I correct in saying that? There seems never to have been any sense of urgency in what NAMA has done with regard to housing, when there was urgency in getting stuff off its balance sheet. The Prospect Hill site, which has been empty for ten years and has only just been put on the market for sale, is an example in my constituency of a missed opportunity for housing and I am sure there are others.
Mr. Brendan McDonagh:
Prospect Hill is an example, as the Deputy has pointed out. It was sold in 2021. We acquired it in 2010 and the loans associated with that. As far as we were concerned, that was a fine apartment scheme. There were no issues with it. Dublin City Council came in and bought around 50 units out of the scheme and we were happy to facilitate that. We appointed receivers in 2012 or 2013, and about a year after that, Dublin City Council identified serious remediation issues in relation to the 50 units it acquired. I remember the chief executive of Dublin City Council ringing me personally at the time and saying, "We bought the 50 units from you, there are serious issues here, and I think you need to get the receivers to look at the remaining units because I am concerned about this." The receiver engaged people and it was agreed that a major remediation programme would be required. The apartments had to be evacuated. A fire safety officer deemed them not safe. Over a number of years, to satisfy the fire office, we had to spend €10 million remediating that apartment block.
When those apartments were remediated, I rang the chief executive of Dublin City Council back and said they were all remediated. I said the receiver was going to put them on the market for sale but that I would give him first dibs and I could arrange for the receiver to sell them directly to him at market value if he was interested. He went away to think about it and rang me back and said he had talked to his colleagues and they were not interested in buying any more since they had 50 there and that was enough. I am paraphrasing what he said. I did offer them. I told the receiver that Dublin City Council was not interested in them so it could put them on the open market. They were put on the open market and ultimately they were bought by somebody who acquired-----
Paul McAuliffe (Dublin North West, Fianna Fail)
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By an approved housing agency.
Mr. Brendan McDonagh:
I am not so sure they were bought by an approved housing body. I thought it was a private investor but they might have leased them to an approved housing body afterwards. We did offer them and I had specific conversations with the chief executive of Dublin City Council at the time and I did do my best. I thought once they were remediated, because there are lots of apartments that have remediation issues, and with the growing housing crisis that Dublin City Council would be interested in them but it decided it was not.
Paul McAuliffe (Dublin North West, Fianna Fail)
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I accept that the site had what is now identified in a new Government scheme around defective issues in apartment blocks. Perhaps Prospect Hill was a sign that that was a more widespread issue. Again, that is something that was well known back in 2013. My point was that, the works aside, this was still a ten-year period, albeit with legal issues and so on, and whether it was NAMA or Dublin City Council, there was no urgency. The time is proof of that. There was no urgency to turn these apartments around in a more speedy manner.
Mr. Brendan McDonagh:
The remediation took about four years because of the scale of it and what was involved. I think the receiver had to evacuate the tenants to get the remediation done around 2016, and it was 2015 when Dublin City Council contacted me and said there were serious issues with the ones it had bought back in 2013. The problem with apartment blocks is that you never really see what the issues are until you do opening-up works or some other problem happens. Generally what happens, in my experience of this, is that when problems emerge, it is usually when there is a pipe leak and you have to go behind and cut out the wall or whatever the case is-----
Paul McAuliffe (Dublin North West, Fianna Fail)
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I do accept that. It is important to say that all those works were done and all those units are back up to full scratch. In many ways, the residents were in a better situation when dealing with NAMA than if they had dealt with a developer that was not in NAMA, had gone defunct and did not have to deal with it. I accept all of that. However, my broader question was about the narrative around oversupply, as well as the belief that priority should be given to increasing supply by turning the units NAMA had in stock into useable units. That is one is example, and there may be complicating factors. Overall, over a ten-year period when the State had an interest in large tracts of land, NAMA did not significantly increase the housing supply.
Paul McAuliffe (Dublin North West, Fianna Fail)
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However, was it not the case that the issue of delivery of supply was also an issue for NAMA?
Paul McAuliffe (Dublin North West, Fianna Fail)
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It is still the case now.
Mr. Brendan McDonagh:
Yes, exactly, but from 2014 onwards, the sales price of the house exceeded the cost of building. In that period, we have been involved in the delivery of 32,000 units. I agree with the Deputy that there was a misconception back during what I would call the "troika blackout". Let us put it this way. When the troika was in the country, we were completely focused about getting out of the troika programme. There was an emerging housing crisis as the economy began to grow. The economy was growing rapidly from 2014 onwards, which enabled us to get out of the troika programme. However, the issue with housing is that clearly enough housing was not built. There are lots of reasons housing was not built. It was not commercially viable. Even when it was commercially viable, there probably was not enough emphasis on actually building the right type of housing. My own personal view is that there is a pyramid structure in terms of any housing market. If you do not build enough social housing, you are putting subventions into the market for those social housing tenants to compete with people in the private sector market. Effectively, the only way you can actually get the housing problem down, in my personal view, is to provide more social housing. That viewpoint is beginning to emerge, but we are late to the game.
Paul McAuliffe (Dublin North West, Fianna Fail)
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I appreciate that this is with the benefit of hindsight and so on, but it is part of the reason we are now are we are. It is disappointing that when we had so much control, more emphasis on a policy level was not placed on turning that around.
I will make one last point, which is that both the Department of Housing, Local Government and Heritage and the Construction Industry Federation, CIF, have both said that within the core city of Dublin the cost of construction will likely always exceed a possible affordable sale value. Therefore, every house that will be built in the core of the city will require some Government scheme or it will be required that there will be some form of public housing. My point is that there were many sites that NAMA owned within that. Had that conclusion been reached earlier, we could have had actually delivered more public housing over the ten-year period in which NAMA had control over the portfolio.
Paul McAuliffe (Dublin North West, Fianna Fail)
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It has not yet been transferred to the Land Development Agency, LDA, for example.
Mr. Brendan McDonagh:
No, but we are working on a programme whereby by the end of 2025 we will be able to hand over sites for 9,000 units. We have agreed that with the Minister for Finance, Deputy Michael McGrath. Effectively, we have identified some longer term sites and these are in Deputy McAuliffe's own constituency in particular.
Paul McAuliffe (Dublin North West, Fianna Fail)
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Yes, I know of it.
Mr. Brendan McDonagh:
This is where we have the major land bank, as well as in Kildare. We have sites there and we have identified them. We have told the Minister that the Government should hold onto these, that they should not be sold and that they should be transferred to wherever the Government wants to transfer them to. However, NAMA will finish its work in 2025 and housing will be built. When the chairman came in in 2019, we had our first meeting with the then Minister for Finance, Deputy Donohoe. We had our subsequent meetings with the Minister for Finance, Deputy Michael McGrath. We have been steadfast in saying this, and they have both agreed with our proposition that this is the right thing to do.
Paul McAuliffe (Dublin North West, Fianna Fail)
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I am over time.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is helpful to know that information. I will bring in the Comptroller and Auditor General for a moment.
Mr. Seamus McCarthy:
I want to bring the Deputy's attention to the section in the progress report that deals with the sites that were sold by NAMA between 2011 and the end of 2021. It was estimated that they had the potential to deliver an estimated 86,000 residential units, but by 2022, it was expected that only 14% of that was delivered.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I call Deputy Colm Burke.
Colm Burke (Cork North Central, Fine Gael)
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I thank the representatives for giving us their time here this morning, as well as for the work they have done. My question may have already come up because I was out for a short period of time. In 2021, NAMA identified a potential for 7,283 units. In fact, I think the figure that has now been reached is 2,621. Why is there such a difference between the potential that was identified and what has actually been physically delivered?
Mr. Brendan McDonagh:
We identified those units from 2012 onwards. We gave a list of all those units to the Housing Agency, which then engaged with the local authorities. They only came back and accepted that they wanted 2,600 units. This has been well versed here in this forum in previous years, even when the County and City Management Association, CCMA, had been in and out of forums. It was asked why they did not take more and they cited many issues, such as that they were in poor condition, they were in the wrong location, they were the wrong type, etc.
Colm Burke (Cork North Central, Fine Gael)
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Where are they now?
Mr. Brendan McDonagh:
They are gone because, effectively, we have to sell our portfolio. It was the case that either the debtors had the money because they paid off their debts and were able to refinance themselves out of NAMA, or they were sold on the market, but-----
Colm Burke (Cork North Central, Fine Gael)
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They were-----
Colm Burke (Cork North Central, Fine Gael)
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Yes, but the impression may have been given that only 2,600 have been put into use-----
Colm Burke (Cork North Central, Fine Gael)
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-----but Mr. McDonagh is now saying that more than 7,000 have been put into use.
Mr. Brendan McDonagh:
No, when we offered them up, we said to the local authority that they were ready for occupation. The local authorities were saying that some of them were unfinished. We said that if we could sell them to the local authorities, we would finish them out. That was if they were going to buy them.
Colm Burke (Cork North Central, Fine Gael)
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Okay, but is it the case that they are physically in use?
Colm Burke (Cork North Central, Fine Gael)
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One of the problems I am coming across is where financial institutions - this is nothing to do with NAMA - have received possession of properties. I have come across at least four properties where the financial institution has had possession of them for more than 15 years and they have remained idle for that 15-year period.
Mr. Brendan McDonagh:
Again, to be upfront with the Deputy, I had a look at the number of properties NAMA has through receivers or debtors at present. We have 219 properties at present. Every one of those properties is occupied. We do not have any vacant property at present. It is a pretty small number in the scheme of what we originally had, but in this housing market-----
Colm Burke (Cork North Central, Fine Gael)
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I know of a number of properties which originally had mortgages with AIB and are now with Everyday Finance. They have all been idle for more than 15 years. Has there been any engagement with the banks, and especially with AIB? I ask this because NAMA came in and assisted AIB. Has there been any engagement with AIB as regards the number of properties they sold on to other financial institutions which are still currently not occupied?
Colm Burke (Cork North Central, Fine Gael)
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I have spoken to the local authorities and they are saying they try to engage with the financial institutions and it is a waste of time. They cannot get responses.
Mr. Brendan McDonagh:
That may well be case, but we get queries into our email boxes every single day of the week. They will say, for argument's sake, that there is a house in Leixlip and it is vacant. They have been told it is with NAMA and they want to buy or rent it. Invariably, when that query comes in, that house was never with NAMA in the first place. We can go onto the land registry. When we look at it, we can see that the loan was originally-----
Colm Burke (Cork North Central, Fine Gael)
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There was one situation where someone contacted me. She moved into a terraced 13 years ago and the house next to her has been vacant for that 13-year period. When I checked it, I found that people bought it in 2002 and a judgment mortgage was marked against it in 2012. It has been vacant for at least 13 years, if not 15 years.
Mr. Brendan McDonagh:
There is a house near where I live that is in the exact same situation. Somebody asked me about it during the week. They asked if that house was with NAMA.
I checked it out and said it was not in NAMA. It was with a financial institution, which had sold the loan on to Everyday Finance. That house has been vacant for the past two years.
Colm Burke (Cork North Central, Fine Gael)
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In the four cases I have they have been vacant 15 years.
Colm Burke (Cork North Central, Fine Gael)
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National Asset Residential Property Services, the agency now dealing with the houses in NAMA, was to transfer to the Land Development Agency in 2022. Did that occur?
Mr. Brendan McDonagh:
No, because there is a legislative change required. That amendment to the Land Development Agency Act 2021 has to be done by the Department of Housing, Local Government and Heritage. We are able to transfer NARPS to the Minister for Finance but the Minister cannot transfer it to the LDA until the Act is amended. That is my understanding.
Colm Burke (Cork North Central, Fine Gael)
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Mr. McDonagh has not been given any indication as to when that is likely.
Mr. Brendan McDonagh:
That legislative change has to be made. We talk to the Department of Finance about it regularly because we are trying to figure out how long NARPS is going to be with us. The Department of Finance tells us it is with the Department of Housing, Local Government and Heritage and it is waiting. It is hopeful the amendment to the Land Development Agency Act will be made by the end of this year. I understand there are a few other amendments to go in.
Colm Burke (Cork North Central, Fine Gael)
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The loan book that would transfer with that-----
Colm Burke (Cork North Central, Fine Gael)
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Okay.
Colm Burke (Cork North Central, Fine Gael)
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Are some units still under construction?
Colm Burke (Cork North Central, Fine Gael)
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Will those be delivered by the first quarter of 2025?
Colm Burke (Cork North Central, Fine Gael)
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We are talking about 800 units.
Colm Burke (Cork North Central, Fine Gael)
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I will go back to the start of NAMA. It paid €31.8 billion as part of a write-down on loans of €74.4 billion. That was technically a 57% write-down. Taking into account what NAMA realised on its assets and everything else and the return, what has been the percentage write-down? Is it still approximately 50% in real terms from the original loans?
Mr. Brendan McDonagh:
At the time, it was a 57% discount. We bought €74 billion for just shy of €32 billion. Obviously we paid €32 billion. The easiest way to look at it is to ask what, having paid €32 billion for it, will NAMA get back?
Colm Burke (Cork North Central, Fine Gael)
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Yes.
Mr. Brendan McDonagh:
After paying our operational costs and the interest on the loans we originally took out to pay to the banks, we were going to return about €5 billion to the Exchequer. As the Comptroller and Auditor General pointed out in his report, at the start of NAMA, under the European Commission model that was agreed with him, it was expected that we would return 5% per annum. If we do not count the €5.6 billion overpayment to the banks, whereby we paid them €5.6 billion more than the loans were originally worth, the return is 6.7% per the Comptroller and Auditor General's report. We agree with that. If we exclude the €5.6 billion in state aid, our return is 12.9% per annum, which is substantial. In simple terms, compared with what we paid, plus our operating costs, we have €5 billion going back to the Exchequer that it might never have had if NAMA had never existed.
Colm Burke (Cork North Central, Fine Gael)
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The write-down in real terms, when we take it all into account, is around 48% rather than 57%.
Colm Burke (Cork North Central, Fine Gael)
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I know.
Mr. Seamus McCarthy:
I think effectively the chief executive is saying that NAMA paid more than the houses were worth at the time. The true write-down at that point, instead of being 57%, would have been around 65%.
Colm Burke (Cork North Central, Fine Gael)
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Will the process for the winding up of NAMA start within the next-----
Mr. Brendan McDonagh:
It has already started. We have been in wind-down since 2015. We peaked at 387 staff in 2015. We will be down to 82 staff after the current redundancy programme completes. We are down more than 300 staff from our peak. We have been on wind-down for a lot longer than people think.
Colm Burke (Cork North Central, Fine Gael)
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On the properties that NAMA still has, are there any with legal issues attached? One of the problems the banks had when dealing with properties was that legal issues arose that complicated the process.
Mr. Brendan McDonagh:
None of the assets remaining in NAMA are straightforward. I will not lie to the Deputy. We think the majority of the assets are solvable, effectively by working with the debtors and their solicitors. As a solicitor, the Deputy will appreciate that a lot of the problems arise where things were left resting in contract. That is what went on during the 2000s. Those entities are no longer around and they are resting in contract. How do you unravel that? It takes a bit of time to do that with the Property Registration Authority, PRA, and the Land Registry. We have a lot of experience in this now, having been doing it for a long time, so we believe we can resolve a lot of these problems.
Colm Burke (Cork North Central, Fine Gael)
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The issue I am really interested in is defective title. Is there still a problem with defective title?
Mr. Alan Stewart:
We are talking about a small number of assets. The main legal issue remaining, and that we occasionally encounter, would be to do with things like litigation with an adjoining landowner that might be holding up the sale of a site, for example, a boundary dispute or right of way. Those types of issues are the ones we tend to come across rather than defective title per se.
Colm Burke (Cork North Central, Fine Gael)
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There are still some problems.
Colm Burke (Cork North Central, Fine Gael)
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Will they be finalised within the next 12 months?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I will go back to the loan sale. I preface what I am about to say with an apology as I know everything is easy until you go about doing it. This would not have been the easiest portfolio that NAMA dealt with. I acknowledge that. We have established today that it happened in one county, Donegal, and that an individual owned two companies on which loans were taken out. There was intimidation regarding the same individual to do with a sale in Britain 11 years ago. This surfaced again. I know the argument about the sale price and value and I acknowledge the sale price of €265,000. I just want to clarify this. There were 14 occupied residential units. To make a rough calculation, if we assume rental income from those to be €850 per month, we are looking at a figure of between €600,000 and €700,000 per year. Is that right? We are looking at 14 units. I have not brought out a calculator. This figure is off the top of my head but there are 14 units and we will assume a monthly rent of between €800 and €1,000, which would be at the bottom of the market. That gives €11,000 or €12,000 per month, multiplied by 52.
Brian Stanley (Laois-Offaly, Sinn Fein)
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My apologies, multiplied by 12. I accept that. We are looking at a rental income from these units. They are occupied, which means they are liveable. They are presumably in a town or on the edge of a town. We can assume they have a value of somewhere between €150,000 and €300,000 each. There are 28 unfinished residential units. Are some of those on the edge of towns or in towns?
Brian Stanley (Laois-Offaly, Sinn Fein)
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They are on the edge of the town.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Are they serviced units?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay. There are sprawls outside a lot of towns in Donegal but there is serviced land on the edge of the town. There are 46 acres, or 21 ha, of land. That is what we are talking about here. By any stretch of the imagination and in normal circumstances, even if it is full of rushes, when the value of that land is totted up, we are looking at a value of somewhere between €5 million and €7 million for that portfolio of properties. Here we have a situation where it is sold for this amount. We know that National Asset Management Agency, NAMA, staff and auctioneers and valuers were intimidated. We know the liquidator felt intimidated. We know that it is possible the tenants felt intimidated and possibly local authority staff. With the power of this State and An Garda Síochána and everything else, I cannot accept that this can happen and for us to sit back at accept the situation. I cannot accept that this kind of bail out would happen.
I want to develop this a bit further. I read some of the detailed information we received on this. At any time, did officials in NAMA pick up the phone and talk to the chief superintendent in the area? I am not suggesting getting involved. The members of An Garda Síochána are the experts and it is their job to police but here is a situation where this is happening within a county or a Garda district. Was it taken up with the chief superintendent in the area? Was there a meeting the chief superintendent and with the county manager in the area to try to get a handle on what was going on here? Did that happen? Mr. Stewart may be able to tell me if it happened.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Would NAMA have been intimidated by this individual or by somebody acting on his behalf?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I know that. It was the same individual though.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I want to drill into this further. What was the nature of it? Was it saying "If you buy this land you will be bumped off"? Was that what they were being told?
Brian Stanley (Laois-Offaly, Sinn Fein)
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"If you try to sell this land, you will be bumped off". Is that what they were being told?
Brian Stanley (Laois-Offaly, Sinn Fein)
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What were they told?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That happens every day of the week.
Mr. Alan Stewart:
It does and I have held many robust meetings in NAMA where these things happen-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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An Garda Síochána would normally pull up on these things.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Was there an arrest? Was anyone arrested?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Here we have property that in the normal course of events would make somewhere around €6 or €7 million. I am being conservative with this. Some of it is actually zoned land.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Some of it is zoned land. It is said the land was of various planning statuses and some with planning permission.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I accept that.
Brian Stanley (Laois-Offaly, Sinn Fein)
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You could graze sheep on it.
Brian Stanley (Laois-Offaly, Sinn Fein)
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One unit or one three-bedroom house would be worth what it was sold for.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Roughly €70,000 per unit.
Mr. Brendan McDonagh:
Yes, absolutely. The local authority said that after taking account of the repair costs, the units might be worth €250,000 it. This is what the local authority said. We can speculate about what things should be worth but if we engage professional valuers and they tell us this is what it is worth-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is not what it is worth. That is the value due to intimidation. It is the intimidated price that can be got. That is what that is.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Remove the intimidation and the threats----
Brian Stanley (Laois-Offaly, Sinn Fein)
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-----and then you are talking about between €5 million and €7 million.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is great value per unit when you work it out.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I accept that. I know of a number of estates that were left like that. I am aware of one at the moment that is being developed by the local authority. It will be a turnkey project. It was left in a similar state. The local authority will be spending in excess of that money on it and it is still good value when it is compared to what is on the market. That will come in as social housing very soon; within the next 12 months. It was a bomb site. I am not going to say where it is but I have a good bit of knowledge of it. The local authority considers that worthwhile. What I am saying is that in this case we are looking at houses that were substantially finished. Judging by the conversation earlier on, we are looking at something in the region of €70,000 to €75,000 per unit. That is still very good value to finish these off, considering the price they are coming in at. They can be bought for a song. However, the thing I have a problem understanding or maybe accepting is that we have to accept the situation because somebody decides to carry out widespread intimidation. Their brother comes in and buys it up. It does not matter what way it is sold. If it is a special purpose vehicle, SPV, or another company, the buyer with the bag of money is the brother, which is very convenient, and the intimidation stops. We just cannot accept in this State that this is how we are going to do business, or that this is permissible. What I am not hearing from NAMA is if the chief superintendent in Donegal in the north-west region was contacted and sat down with, to see what could be done about this?
Brian Stanley (Laois-Offaly, Sinn Fein)
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This is worse than the Quinn situation.
Mr. Brendan McDonagh:
I do not want to get into talking about individuals who are not here. However, we have another situation with a receiver who is facing intimidation and who did go to An Garda Síochána. Its members said to that receiver that they should engage their own security around that site while they were getting works done on that site. They were told people were making verbal threats and until something was done to the receiver, An Garda Síochána could not get involved. That is the situation you are faced with here. I will repeat it again. Nobody in NAMA was ever intimidated to my knowledge or in my experience but the reality here is that you had a third party professional receiver who decided he did not want to deal with this anymore, resigned, and the assets went back under the control of the debtors. That was the issue here.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Did NAMA check back with An Garda Síochána to see how this investigation was going? It was clear where the intimidation was coming from.
Mr. Brendan McDonagh:
The reality is that An Garda Síochána will only deal with the people who have been intimidated. NAMA was not intimidated. It was a third party who was intimidated and the receiver decided not to engage. I cannot do anything about that.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The taxpayer took the hit.
Mr. Brendan McDonagh:
What can we do? We could not sell the assets. We could not get a sales agent. As the Comptroller and Auditor General said earlier, there is local knowledge here about these assets and they decided that nobody wanted to touch them. How could we get them sold? If the Cathaoirleach or anybody else can tell me how we could have sold these assets in any other way, I will be delighted to hear it but we could not.
There was a meeting with the NAMA debtors in June 2020 at which the debtors made an offer to settle their obligations regarding the two companies for €265,000 and NAMA would release the security over the collateral. A relative of the debtor agreed to fund the transaction. NAMA records state that subsequently the debtor's solicitor informed NAMA that the preference was for the relative to purchase the loans through a newly incorporated company. I know that was elevated to board level because it was unusual. As head of the board, Mr. Williams will know that. Mr. McDonagh was at that meeting with three of his officials. The debtor was in the room with them because the meeting took place with the debtor. At the meeting, the debtor made the offer to settle the obligations of the two companies. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Could Mr. McDonagh be brief because-----
Mr. Brendan McDonagh:
Absolutely. The debtor came in and said we should give the assets for free to them in compensation for the under-selling of these assets in London. We rejected that out of hand and said it was not going to happen. All sorts of things were said such as "We'll resume litigation with you and we'll do X, Y and Z" and we said "No, we're not agreeing to that". Eventually it came to a proposal that they would buy the assets at the valuation of €265,000 and we said we would take it away. Subsequently, they came back said they wanted to buy the loans. It was elevated to the board because it was such an unusual transaction so the board was fully aware of it.
Brian Stanley (Laois-Offaly, Sinn Fein)
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At that meeting, did NAMA raise the issue of intimidation with this individual?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Was it raised?
Brian Stanley (Laois-Offaly, Sinn Fein)
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What had they to say about it?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That was over-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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I would call it a hard neck.
Brian Stanley (Laois-Offaly, Sinn Fein)
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And intimidation to back it up. When this was put to them, was it ever considered that NAMA, the receiver and An Garda Síochána would sit in the same room and discuss this?
Brian Stanley (Laois-Offaly, Sinn Fein)
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As the chief legal officer of NAMA, was there any contact between his section in NAMA and An Garda Síochána and the chief superintendent?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There did not need to be.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Stewart is charged with disposing of an asset on behalf of the taxpayer - an asset on which taxpayer has already taken a serious hit and that caused a crisis in this country. It is now being sold for a fraction of what it would normally be worth if the words "intimidation" and "threats" were removed from the equation.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am not.
Mr. Alan Stewart:
He is grossly oversimplifying what occurred. It was not because of intimidation. There was more going on. There were 18 incomplete houses. There were issues with the site, which we spoke about earlier; no management companies were in place; there were threats of litigation, which would deter any purchaser; and it was not possible to market the properties. For all of those reasons as well as alleged intimidation, we ended up where we ended up, so please do not oversimplify it.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am not oversimplifying it. I am setting out the facts we established here today.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is Mr. Stewart telling me that there was no individual in this State who would have given €520,000 for it - who
would have given double that?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Because of intimidation and threats, the sale price was hanging over. That is why.
Mr. Brendan McDonagh:
Another salient fact is that we approached a loan sale buyer to say, and these people buy these type of assets, and asked them whether they would be interested in buying these assets. When they found out who the debtor was and the circumstances, they said it would not be worth their time and effort and that they were not getting involved. NAMA had only two options - to get the €265,000 funded by the debtor or hold on to these assets and be faced with guaranteed litigation by these debtors. I say guaranteed litigation because we had a long history of litigation with these guys.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I accept that it is a difficult one. I said that at the start. I can see that NAMA had a limited number of tools but what is infuriating is the fact that this was allowed to happen. In normal circumstances, these assets would have made multiples of that. I understand that NAMA had some tools as did the liquidator, An Garda Síochána and the local authority but between everybody, they could not arrive at a situation where these assets could have realised a much better value.
Mr. Brendan McDonagh:
I understand completely. The local authority could have stepped up to the mark, as it indicated it would do, but when it pulled out, that was the end of it. If the local authority had got it, it could have done up those houses and used them for housing and we would have had a much better outcome. I was shocked when it withdrew. It said it was not interested and was not getting involved. The receiver said they were not going to put with it and were resigning, so we had no options. That is the reality. I can understand the Cathaoirleach and others talking about this but this was an exceptional situation.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I will tell Mr. McDonagh what it was. What was allowed happen here was a national scandal. That is all I will say about it.
Catherine Murphy (Kildare North, Social Democrats)
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What age were the 14 occupied units?
Catherine Murphy (Kildare North, Social Democrats)
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So they were reasonably modern. What size were they?
Catherine Murphy (Kildare North, Social Democrats)
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Mr. McDonagh said they were on the outskirts of a town. Are they broken up into different locations?
Catherine Murphy (Kildare North, Social Democrats)
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One location.
Catherine Murphy (Kildare North, Social Democrats)
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So the 18 unfinished units are in different locations to that.
Catherine Murphy (Kildare North, Social Democrats)
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How many housing units were in those estates?
Catherine Murphy (Kildare North, Social Democrats)
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Are they still in that condition?
Catherine Murphy (Kildare North, Social Democrats)
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I just did the same calculation as An Cathaoirleach regarding the rents. Rents in Donegal vary from somewhere in the region of €1,000 to €1,5000 for a three-bed.
Catherine Murphy (Kildare North, Social Democrats)
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Will Mr. McDonagh describe what a secured asset is?
Catherine Murphy (Kildare North, Social Democrats)
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And if someone does not pay the mortgage, then what happens?
Catherine Murphy (Kildare North, Social Democrats)
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It was not the tenants who had to be got out of the house in this case. I want to get the intimidation or the alleged intimidation clear in my head. Who was doing it? Was it the people who originally owned the asset that was secured against the loan? Was it the people who owned the loan? Who was doing?
Catherine Murphy (Kildare North, Social Democrats)
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They were connected to each other.
Catherine Murphy (Kildare North, Social Democrats)
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I am trying to make the connection between the apartment block in London and the debtors. There is something not-----
Mr. Brendan McDonagh:
These debtors had borrowings against assets in Donegal. They also had borrowings against an apartment block in London. A court-appointed receiver is called an administrator in the UK. We had one appointed to sell the apartment block in London. The apartment block in London had all sorts of issues. It was not in compliance with building standards and there were all types of other issues associated with it. The administrator managed to get it sold.
Catherine Murphy (Kildare North, Social Democrats)
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Mr. Brendan McDonagh:
Behind any SPV there is someone who set it up, who is ultimately the owner. In these instances the debtors used SPVs but provided guarantees for the borrowings taken out by SPVs. They were personally liable. When they went bankrupt all those guarantees were gone and they owed no money. Once someone goes bankrupt all of the debts are gone.
Catherine Murphy (Kildare North, Social Democrats)
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The assets-----
Mr. Brendan McDonagh:
The assets are there, so the lender can only go after the assets. The lender can no longer go after the debtor. Once the debtor comes out of bankruptcy he or she can start again. We have all seen it. Sometimes people come out of bankruptcy and suddenly they have plenty of money. The bank or NAMA cannot get any money from them because they went through bankruptcy.
Catherine Murphy (Kildare North, Social Democrats)
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That is incredible.
I have seen a scenario in my constituency with a piece of land that was in NAMA for approximately ten years. It was zoned for housing and three schools. Mr. McDonagh knows where I am speaking about. Now it appears that planning permission has been secured for the housing element but this has to be delivered before we get the schools.
Mr. Brendan McDonagh:
The planning has not been delivered yet. It is still with An Bord Pleanála. The good news on this, and I know Deputy Murphy has asked about it previously, is that finally the Department of Education is in a position to buy the land. We have been waiting for it for a number of years. I have been waiting a long time for this to happen. I was just told last week that the Department of Education has finally agreed that it is in a position to buy the land.
Catherine Murphy (Kildare North, Social Democrats)
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It has been an impediment to delivering the three schools.
Catherine Murphy (Kildare North, Social Democrats)
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Was the blockage in the Department of Education?
Mr. Brendan McDonagh:
Effectively, yes. There was also Kildare County Council raising issues as to whether the site was big enough for the schools. The Department of Education had to clarify to it that the site was big enough. As Deputy Murphy said, this is all tied up as part of the planning application for houses. It is a strategic site as far as NAMA is concerned. We have already identified it as one that should be held onto by the State for housing.
Catherine Murphy (Kildare North, Social Democrats)
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The planning application is being made by a private entity.
Catherine Murphy (Kildare North, Social Democrats)
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I am in an area where there is high growth, with 25,000 additional people between the census of 2016 and that of 2022. The criticism is that it is all housing with no vital services such as schools. I honestly do not know where children will be accommodated.
Catherine Murphy (Kildare North, Social Democrats)
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Are there other scenarios such as this where the State will have an interest?
Mr. Brendan McDonagh:
In that particular location in Celbridge we believe that planning will be achieved for 1,000 houses. We have identified other sites, mainly in the Fingal County Council area, which we believe we should hold onto. They will deliver approximately 8,000 units and will include enough space for parks and schools.
Catherine Murphy (Kildare North, Social Democrats)
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What would be the impediment for these? The 8,000 units would be an awful lot in a housing crisis. What is the impediment?
Catherine Murphy (Kildare North, Social Democrats)
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The land is not zoned.
Catherine Murphy (Kildare North, Social Democrats)
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When the land was bought it had hope value rather than-----
Catherine Murphy (Kildare North, Social Democrats)
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The value of that land when it was not zoned was substantially less than its value since it has been zoned.
Mr. Brendan McDonagh:
Absolutely. I have my eye on the ball. The agricultural value today of some of the land might be only €14 million. Once it goes through the local area plan and gets planning permission it would be potentially worth multiples of this because of the planning gain. I believe this should rest with the taxpayer and not with somebody else.
Catherine Murphy (Kildare North, Social Democrats)
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There is no question of there being any difficulty similar to the other scenario we spoke about.
Catherine Murphy (Kildare North, Social Democrats)
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There is potential for 1,000 housing units in Kildare on one site and 8,000 in Fingal-----
Catherine Murphy (Kildare North, Social Democrats)
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Is there anywhere else?
Mr. Brendan McDonagh:
No, this is our remaining land bank. We have one other site in Newbridge. It is much smaller and will probably only accommodate approximately 200 units. Again, it is a site that is fully serviced. It is surrounded by three housing estates. Remarkably, it has not been zoned for housing even though it has all of the services and is very close to the town.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I want to ask about commercial housing developments and commercial developments generally. There is one sector remaining in the docklands. As has been said, a decision is required by Waterways Ireland. This requires North-South co-operation and the assembly in the North to be up and running. This is my understanding of it. With regard to the Poolbeg site, a development consortium acquired an 80% shareholding in it. NAMA had held 100% of it. The figure was approximately €200 million.
NAMA sold the 20% minority shareholding in that company. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Did NAMA incur any loss on the 20% shareholding of the company that owns that strategic development zone? Was any loss incurred?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Yes.
Brian Stanley (Laois-Offaly, Sinn Fein)
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How much of a loss?
Brian Stanley (Laois-Offaly, Sinn Fein)
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A loss of €10 million, okay. What caused the change of approach in respect of the holding of that 20%?
Mr. Brendan McDonagh:
The issue was construction costs, as I outlined in my presentation. I refer to that in appendix 1 to my opening statement. The overall cost of apartment development in 2021 when we sold the site had gone up by almost 18%. The plan for the Poolbeg site exclusively involved the development of apartments and with costs continuing to rise and the lack of funding availability, we got a good opportunity to sell to the other shareholder. The other shareholder made us an offer and we decided that it was the best thing to do for commercial reasons. We believed the value of our shareholding would have-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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Construction costs have gone up across the board.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Someone building a one-off house is caught by those increases. How many social and affordable units does that site have?
Mr. Brendan McDonagh:
The planning conditions designated that a special development zone so when it was approved by An Bord Pleanála in April 2019, the requirement was for 10% social housing and 15% affordable housing. The 10% of social housing was guaranteed. The 15% was subject to a commercial agreement between Dublin City Council, the Department of Housing, Local Government and Heritage and the owner of the site. It has been well documented that the 15% could be bought. In the first phase, I believe only about 4% has been bought by Dublin City Council and the Department, rather than the 15% they are entitled to buy.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What percentage has been bought?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Only 4% is affordable housing.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The social housing must be delivered.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Has Mr. McDonagh any notion of the average price per unit?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Would they cost €400,000 each?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That would be the cost for a one-bedroom unit.
Brian Stanley (Laois-Offaly, Sinn Fein)
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In respect of the Docklands strategic development zone, what was the total return on NAMA's investment?
Brian Stanley (Laois-Offaly, Sinn Fein)
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A housing target of 20,000 was set for the period 2015 to 2020. NAMA obviously did not meet that target. It delivered 11,049 units, which is just over 55% of the total. What was the main reason the agency did not hit that target or come closer to hitting it?
Mr. Brendan McDonagh:
When we started off, we had a large number of house builder debtors but as the values of houses and land went up, a number of those guys were able to raise money elsewhere and pay off their debts to NAMA. They were able to take the land we hoped we would fund for housing. They were able to get the funding elsewhere to build those houses. That is why we say they would not have been in the position to do that unless we had given them that support earlier in respect of planning to get them shovel ready. As soon as they got the increase in value, they paid off their debt to the taxpayer and, fair dues to them, they moved on elsewhere. That is why we have a different view from that of Mr. McCarthy. We were involved in facilitating the delivery of those houses because-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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What percentage of those approximately 11,000 units were bought by investment funds? Were some of them sold on the open market to try to give Joe and Mary, an average couple, the chance to buy a home?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Were they?
Brian Stanley (Laois-Offaly, Sinn Fein)
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When he says "the majority", does Mr. McDonagh mean 70% or 80%?
Brian Stanley (Laois-Offaly, Sinn Fein)
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The land NAMA sold had the potential for 86,000 units. How many units have so far been built on that land? There have been reports that the relevant figure is in the region of 12,000 or 13,000.
Mr. Brendan McDonagh:
That is increasing the whole time and we are trying to monitor that land. It is important to say that not all that land for a potential 86,000 units had planning permission or appropriate zoning at the time. Some of that land was agricultural and may or may not have got a zoning change or planning permission. Since 2014, we have funded more than 13,000 units. More than 32,000 have been delivered. Almost 20,000 units have been built on those lands.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Approximately 20,000 units have been built on those lands. In respect of the land that has not been built on, has some of it been sold to or acquired by property investors or speculators?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am asking about the basic land.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Are people sitting on land? Would it have been better for NAMA to sit tight for a little while longer and get better use of that land?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Some of it was and some of it was not.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Are investors sitting on some sizeable tracts of land?
Brian Stanley (Laois-Offaly, Sinn Fein)
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In respect of that land, would it not have better to have sat tight to ensure they would be used for housing developments?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I know that. I am sure the Minister would have been open to listening to NAMA about trying to get a better return on the lands.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Were they piling on the pressure on NAMA to offload those lands?
Mr. Brendan McDonagh:
No. They were telling us to realise the assets but Michael Noonan, the former Minister for Finance, said in 2015 that he wanted us to be involved in delivering 20,000 units. That was what we were talking about previously. We did our best to do that as long as the assets were with us. In terms of the remaining lands, we were being told to sell our assets, to sell down everything we had and if there was a surplus, we were to give it back to the Minister for Finance who could make use of it to meet other items. We were doing what it said on the tin. If a Minister gave us a direction to do something, we did it. We did not get the direction to retain land.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is what I am asking. Perhaps the Government should have been better at knowing when to hold them and knowing when to show them.
Mr. Seamus McCarthy:
It is important to recognise the distinction between the primary objective of NAMA, which was set in the legislation and not in Government policy, and the objectives in respect of the commercial and residential sectors, which were secondary to that. The first thing that had to be achieved was the securing of the best economic value that NAMA could achieve. For the record, as we have said in the report, the sites we are talking about that could accommodate the 86,000 residential units were all zoned for residential use. Other sites that were sold may not have had residential zoning but they were not taken into account in the 86,000 units. I looked back at what we had reported previously and even in 2015, one of the reasons for setting the objective of the 20,000 was it was recognised that sites that had been sold were no longer controlled. Effectively, there was only 9% development on the sites that had been sold by 2015.
It was recognised that selling it out ran the risk of no development or limited development going ahead and taking a longer time to deliver the residential units.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is my point.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Turning to social housing and the numbers delivered in this regard, many of them offered to the local authorities. As Mr. McDonagh correctly said, they were in the wrong place and at the wrong time and some required high maintenance. They would not have been a good investment for the local authority. It would have been better to build units or to buy turnkey units elsewhere. I understand these points. I am familiar with some of these properties. To date, however, how many social houses have been delivered?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Earlier, Mr. McDonagh mentioned, which I was happy to hear, that NAMA has a commitment to try to use the remaining assets, insofar as possible, with the tools available to it for social housing. What is the potential in this regard? I believe in a healthy mix. We have spoken a great deal about the commercial units in the ten minutes, but we need social housing as well.
Mr. Brendan McDonagh:
Yes. In terms of the planning conditions that exist in the country now, we have to provide both social and affordable housing. This is the legislation. If the figure is 20%, the local authority will not give planning permission exclusively to build 9,000 social units. That is not the way it works, as the Cathaoirleach will appreciate.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I understand that.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is hoped, therefore, that on this land there will be 1,800 more social houses to come.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Regarding leasing units, is NAMA leasing out units to local authorities now? There was some of this happening.
Brian Stanley (Laois-Offaly, Sinn Fein)
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NARPS is the mechanism used.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Do the approved housing bodies have first call on the purchase of social housing units below the market value? I am not arguing against this, by the way.
Mr. Brendan McDonagh:
No, the lease they signed, which was heavily negotiated with us and also involved the Department of the Environment, Community and Local Government and the Housing Agency, specified that two-thirds of the way through these 20-year leases, the AHBs can buy the properties at market value, less 10%, if they wish to do so.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Turning to the future of NAMA, it was due to close by 2020. An extension was then granted until 2025. Regarding the winding down, what is the value of NAMA's current assets?
Brian Stanley (Laois-Offaly, Sinn Fein)
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What were the organisation's operational costs in 2022?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That was quite high, with assets of just €500 million.
Mr. Brendan McDonagh:
It is high, but one of the measures we have been looking at since day one has been comparing ourselves to other asset management companies set up all over the world. The costs over the whole life of those companies have been around 6% cumulatively of the assets. Our costs are currently running at around 2.8%, but Ms Condon, the chief financial officer can correct me if I am wrong.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Well, €40 million into €500 million-----
Mr. Brendan McDonagh:
Yes, but as our portfolio gets smaller, it is the tail-end that is the problem. It takes more time. The bigger and more desirable assets were sold earlier. There were years in which we were generating €9 billion in cash flow, while our operational costs would have been €100 million, which would have been a very small percentage.
Brian Stanley (Laois-Offaly, Sinn Fein)
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In hindsight, would it have been desirable and better to have been able to hold some of the big bundles that were sold and were controversial for another year or two or even to have broken them up into smaller lots at that time and sold them?
Brian Stanley (Laois-Offaly, Sinn Fein)
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No, I am just asking about this aspect.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Does Mr. McDonagh think better prices could have been achieved, though, if those lots had been broken up?
Catherine Murphy (Kildare North, Social Democrats)
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Yes.
Mr. Brendan McDonagh:
No, as I said in my opening statement, between 2012 and 2022, interest rates went down to close to 0%. There were loads of buyers in the market and they had plenty of money because people were looking to purchase. They were getting a 0% return on Government bonds, so they were investing in property. If we were trying to sell those assets today, we would get 40% or 50% less than what we got for them. We took full advantage, therefore, of the low-interest rate environment.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The specific question I am asking is if it would have been better at the time if these assets were sold in smaller lots. Big bundles were sold off then.
Brian Stanley (Laois-Offaly, Sinn Fein)
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But NAMA had a limited number of buyers then because those lots were so big.
Mr. Brendan McDonagh:
No. The Project Jewel portfolio alone went for €1.8 billion but we thought we would get €1.5 billion when we put it on the market. We got €300 million more than we thought we would. There were three bidders on that portfolio in the end who had the money and wanted to write a cheque. The guy who paid €1.8 billion got the property, but there were other people who bid not far off that figure. There was, therefore, lots of money around in the low-interest environment to buy those portfolios, so I would not say it is a correct proposition to say there were a limited number of buyers, because there were not.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Turning to the remaining €500 million in assets and the loan value that is there, I hope we do not have the Donegal situation again. Is it anticipated that there will be significant losses on these? How does Mr. McDonagh think that NAMA will be able to achieve a fairly good return? He has acknowledged that the difficult stuff can be at the end.
Mr. Brendan McDonagh:
We still have good assets too. We have to fair value our accounts every year via the Office of the Comptroller and Auditor General audit and Mazars acting as another external auditor. We have to justify to both those auditors that we are carrying our loans at fair value, which is, effectively, the value that we would get at a point in time. Markets are tough, interest rates are high, fewer people are lending money to buy property and the available property is not as desirable, so property prices could fall. There is no point in me saying otherwise. If property prices do fall, then we will get less than €500 million. I assure the Cathaoirleach, though, that we will eke out every last cent we can out of these assets.
Brian Stanley (Laois-Offaly, Sinn Fein)
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On the operational costs, we moved on a bit fast from that point. In terms of the €40 million in operational costs on assets of €500 million, would Mr. McDonagh acknowledge that this is high?
Mr. Brendan McDonagh:
The board spends a lot of time on this. Many of our costs are fixed, in terms of people, etc. We have other costs that we must undertake all around the governance of NAMA, which s is very expensive. We have quarterly reporting requirements, two sets of external auditors, namely, the Office of the Comptroller and Auditor General and Mazars, internal auditors-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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There are also the legal costs. How much are they over a year?
Mr. Brendan McDonagh:
Our legal costs are a couple of million euro a year. We try to keep our legal costs to the minimum, but there are certain costs that we incur. Sometimes we incur legal costs not because we want to encourage this, but because people take litigation against us. The problem with some of these litigants, eve if we win the litigation, is we cannot get the costs from them because they have nothing.
Brian Stanley (Laois-Offaly, Sinn Fein)
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How much is Mr. McDonagh's current salary?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is still the same as then.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. McDonagh outlined that in respect of social housing he sees potential for approximately 1,800 units in respect of the remaining assets.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Will the rest be sold on the open market or will they be sold to investors?
Brian Stanley (Laois-Offaly, Sinn Fein)
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We have gone through many of the main issues and we have got a lot of answers. I thank Mr. McDonagh and his team for coming in today and his backroom staff for preparing the information for today's meeting. I also acknowledge the assistance of the Comptroller and Auditor General and his staff and thank them for attending as well. There are a few bits of follow-up information required and the clerk to the committee will pick up on these through the transcripts.
Is it agreed we seek any follow-up information and carry out any agreed actions? Agreed. Is it also agreed we note and publish the opening statements and briefings provided for today's meeting? Agreed.
I thank everybody. We will suspend until 1.30 p.m. when we will address correspondence and other business.