Brian Lenihan Jnr (Dublin West, Fianna Fail)

The valuations that will be reached, under the separate and independent valuation procedure that is envisaged in the Bill, will establish whether Deputy Burton is correct. The 5% discount rate in the draft business plan, which was mentioned by Deputy Bruton, is based on the current cost to the Government of funding ten-year bonds. This is an appropriate discount rate as the term of NAMA is expected to be approximately ten years. Private investors enjoy higher discounts that are linked to returns over shorter periods. I accept that the valuations used by NAMA will have regard to the discount rates in the private sector, when appropriate. I was also asked about the breakdown of the discounts. Deputy Burton referred to a particular case. It has to be said that a substantial discount is already factored into the draft business plan. The yield assumptions in the plan assume a fall of 40% in commercial rents for new leases. The yield figures already assume a 20% fall in rents and a 50% fall in property values.

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