Seanad debates

Thursday, 6 November 2014

Adjournment Matters

NAMA Property Sales

12:35 pm

Photo of Lorraine HigginsLorraine Higgins (Labour)
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I welcome the Minister to the House and thank him for taking this matter on the Adjournment. It was reported in the national media in recent weeks that a property sold at Sir John Rogerson's Quay, Dublin for €7.5 million in 2012 was flipped, so to speak, just over a year later for €18 million by NAMA, representing a 136% increase in price. This is astounding and not reflective of the commercial property price increases that have been recorded in the past year or two.
I am not from a corporate background but when all the forecasts suggested the Irish property market would improve, when there was a limited amount of this type of property for sale in the Dublin docklands region and with so many international investors looking to invest here, the question arises as to whether the property in question was sold under value in the first instance. If this is the case, why are we allowing corporate raiders, to come to this country, asset-strip and sell on property, making a huge profit at the expense of Irish taxpayers?
What is worrying is that I read in the Financial Timesrecently how a pension fund in the United States alleges that Blackstone, a company with which NAMA does a lot of business, although not in this case, entered into an agreement with another private equity company for the purpose of ensuring they would not compete with one another for the purchase of property, thus keeping the prices of properties down. They had set up a special purpose vehicle for that purpose. This is very much a feature of this corporate world and it is part of proceedings in the United States of America.
At a time when a report compiled for the agency by investment bank UBS reveals that "losses ranging from €1.4bn to €2.6bn would arise if an accelerated liquidation or fire sale" took place, what measures does NAMA have in place for dealing with those types of risk as they arise in order that the Irish taxpayer can be assured of maximum bang for their buck when it comes to selling off property?

12:45 pm

Photo of Kathleen LynchKathleen Lynch (Cork North Central, Labour)
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I thank Senator Higgins for raising this matter and while these issues can be extraordinarily technical, that is no excuse for shying away from further scrutiny of them.

NAMA's policy is that the sale of all loans and properties by debtors and receivers should be openly marketed to ensure the best price available in the market is achieved in all instances. NAMA enjoys a strong reputation in the market for the quality of information it provides as part of its open market loan sale process and for the transparent and professional manner in which such transactions have been completed to date. Its sales processes are built on international best practice and it uses experienced advisers to ensure transactions are executed to the highest market standards and that bidders are treated equally by mapping out a clear and rigorous process to be followed in each sale. NAMA requires sales agents to prepare final reports and recommendations. Included in these reports is a summary of the marketing campaign undertaken; a list of all parties who expressed interest in the loan or real estate or were contacted during the marketing campaign; a recommendation on whether to accept the terms of the purchaser's offer as the best price reasonably obtainable; confirmation that the agent has reviewed the purchaser's confirmation relating to connected party sales; and a statement disclosing any commercial relationship between the agent, debtor, purchaser or purchaser's ultimate beneficial owners in the past five years and how any actual or perceived conflict of interest was managed during the sales process. This process ensures all interested parties are given equal opportunity to bid for and to purchase loans or properties sold by NAMA or by NAMA debtors and receivers.

The Senator may be aware that the NAMA board is obliged under section 10 of the National Asset Management Agency Act to obtain the best achievable return for the State. Ultimately, over its lifetime, NAMA aims to achieve this by generating sufficient cash from its loans and the property securing them to redeem all its debt and potentially to generate a surplus for the Exchequer. This necessarily involves a constant process of business decision-making as to which assets to sell and when to do so. Having made a decision to sell an asset, the best assurance NAMA can get that it is achieving the best available market price is that it ensures that all sales are openly marketed wherever possible in order that all potential purchasers have an equal opportunity to bid for the asset concerned. This is very much the cornerstone of NAMA's sales processes.

To date, NAMA's strategy in each of its main markets has been to release assets for sale in a phased and orderly manner consistent with the level of demand, the availability of credit and the absorption capacity of each market. In 2013, the Irish market stabilised and commercial yields were at levels which began to attract the attention of serious investors. The patient strategy adopted by NAMA in earlier years has contributed to the robust recovery that is now evident in the market, a recovery which in turn has enabled NAMA to increase the flow of assets for sale and to sell loan portfolios and properties at very competitive prices. Against the backdrop of recovery in the Irish property market, earlier this year, NAMA announced that, in line with its obligations under section 10 of the NAMA Act, it considered that the best financial outcome for the State would be achieved through a managed process of accelerating disposals in an orderly way with the target of redeeming 80% of senior debt - a cumulative €24 billion - by the end of 2016. Following on from the section 227 review of NAMA, which was conducted by the Department of Finance, the Minister for Finance fully endorsed NAMA's strategy of seeking to take full advantage of strong market conditions to reduce the contingent liability on taxpayers represented by NAMA's senior, State-guaranteed bonds. The Minister is fully satisfied that both the strategy informing the NAMA sales process and its requirement that sales are openly marketed and implemented in a professional and transparent manner ensure it maximises the return on its acquired assets so as to repay its debt and therefore reduce and ultimately eliminate the contingent liability of taxpayers.

Having said all that, as with every process that is in place, there will always be people who find ways around it.

Photo of Lorraine HigginsLorraine Higgins (Labour)
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I thank the Minister of State for her response and take her views on board. I note her reference to openly marketing properties, but I was referring to the fact that a new company was set up with new directors who had no prior corporate relationship and, therefore, the question of a conflict of interest did not arise. There could not be a conflict of interest because they had no established relationship by virtue of limited liability. That is the issue, as well as the fact that NAMA does not seem to be engaging in any risk management in the context of such scenarios. Everyone in this House would agree that an increase of 136% in the price of a property in less than 18 months bucks every market trend.

Today I received correspondence from a man who wanted to buy a property. In order to be able to make a bid on that property, he had to view it. He was told that he could view it on a particular day during office hours. Unfortunately, he could not get to see it at that time so he could not make a bid on the property. The restrictive viewing time precluded him from even attempting to purchase the property. He was then informed that the property was sold without getting the opportunity to make a bid for it. He looked at a second property and the same thing happened. He then went to look at a third property but was subjected to the same treatment. All three properties were sold before he had an opportunity to make a bid. This man was a bone fide buyer and was trying his best to acquire a property in the north of Dublin. Unfortunately, he did not get that opportunity. I fear that he would have given more money for those properties than what they were actually sold for but he was not given the opportunity by NAMA to bid for them. He has been unfairly treated - there are no two ways about it. These practices need to be stamped out.

We read about NAMA in the newspapers in the context of social housing it will make available and the extra housing that it will build in Dublin. It is wonderful that NAMA has some social responsibility but if it is not looking after the pennies, how will it mind the pounds?

Photo of Kathleen LynchKathleen Lynch (Cork North Central, Labour)
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It is very difficult for me to comment on that case. Clearly the man in question has a grievance and I will ensure the Department of Finance hears of it. On the other hand, we do not know that everyone else involved in the sales process for those three properties was treated in the same way. That is the difficulty. We must assume they were all treated in the same way.

On the first issue that Senator Higgins raised regarding the shelf company, it is very difficult to weed out or ferret out that kind of activity unless it becomes absolutely crystal clear-----

Photo of Lorraine HigginsLorraine Higgins (Labour)
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It was the subject of court proceedings in America-----

Photo of Kathleen LynchKathleen Lynch (Cork North Central, Labour)
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Once it does become clear that such is the case, note should be taken of it. I will convey Senator Higgins' concerns to the Department and to the Minister himself.

The Seanad adjourned at 3.20 p.m. until 2.30 p.m. on Tuesday, 11 November 2014.