THE NATIONAL Asset Management Agency has approved salaries of €200,000 a year to two property developers and is agreeing incentive payments with others to encourage them to repay their debts.
Speaking to the Dáil Committee of Public Accounts, Nama chairman Frank Daly and chief executive Brendan McDonagh declined to name the two developers, citing client confidentiality, but said that they were managing “multibillion” euro portfolios, mostly in Ireland and the UK.
The agency said that it will have approved salaries, mostly between €70,000 and €100,000 a year, to between 110 and 120 developers by the end of the year, once it had finished assessing business plans from all of the top 188 debtors it will manage directly.
Mr Daly said he recognised that the salaries were not popular but Nama had to get the best commercial return for the taxpayer. “It is not making us popular but that is the reality of where we are,” he said.
Mr McDonagh said that if developers recovered the acquisition price paid by Nama for the loan plus a further 10 per cent, they could retain 10 cent for every euro repaid above that “financial milestone” to encourage debt repayments.
Nama has acquired close to €2 billion more in loans from the banks, bringing its portfolio to €74.2 billion, for which it has paid €31.7 billion.
Mr Daly said later that the agency did not expect developers to make large sums from incentives on loan repayments. “We don’t really see any portfolio in Nama that would result in a big payday for any developer in three, four, six years,” he said.
Mr McDonagh said that there was a misperception that borrowers were being forgiven debts.
Developers are obliged to repay the full €74.2 billion debt to Nama, he said, but property values had fallen by about 60 per cent in Ireland from peak so this would not be possible given the market.
There was “no pot of gold” beyond the properties securing the loans and that Nama would not take “gratuitous” court actions and waste taxpayers’ money if developers had no other cash, he said.
On property and loan sales of €4.6 billion approved by Nama, the agency had made average profits of up to 15 per cent on overseas assets but losses of up to 25 per cent on Irish properties.
“It’s a very difficult market. Asset markets are declining rather than increasing. Asset values have to increase by 10 per cent above 2009 before we see any profit,” he said.
Nama is “looking very closely” at the deleveraging by Royal Bank of Scotland and Lloyds through their respective Irish banks Ulster Bank and what was formerly Bank of Scotland (Ireland).
“We believe there is a certain element of dumping going on in the Irish market,” said Mr McDonagh.
He told the committee Nama had provided vendor finance under a new initiative to shift some assets in its €5.3 billion Irish commercial property loans and stimulate activity in the market.
Nama will provide up to 70 per cent “vendor debt finance” to generate cash from the portfolio. Mr McDonagh said that this is “likely to gain significant momentum next year”.
He expects the agency to make an operating profit of at least €600 million for 2011 but it would not know the annual impairment charge arising from valuing property assets until later this year.
Limited changes to the proposed ban on upward-only rent reviews on commercial properties would have “a minor effect on valuations”, said Mr McDonagh. Banning them outright would knock 20 per cent off property values and cost Nama “a couple of billion” euro, he warned.
