The 47 per cent drop in commercial property prices since 2007 presents a business opportunity, the former chief executive of Bank of Scotland (Ireland) Mark Duffy said today when announcing a new distressed assets purchase company.
As revealed in The Irish Timeson Saturday, Mr Duffy and property fund manager Kevin Warren have set up a new business, Asset Resolution Corporation (Arc) which aims to target distressed debt owned by foreign banks based in Ireland.
Mr Duffy said the new business will target the €61 billion in bank loans connected with the property market that are not covered by the State-owned National Asset Management Agency (Nama). This represents 33 per cent of all such loans.
Mr Duffy and Mr Warren said they had attracted a considerable level of support from the international investment community but would not reveal any figures. Mr Duffy said they would now be approaching the foreign owned banks to see if they were interested in doing business.
Asked if he would be approaching his former employer, which he left in April, Mr Duffy, said: "I'll talk to everybody."
He said that if the foreign owned banks had a difficulty with his seeking to buy loans from them, after having been a chief executive authorising such loans up to so recently, he would not be launching Arc.
Mr Duffy said he and Mr Warren had had preliminary talks with the banks, then had approached investors, and were now ready to return to the banks because they had secured investment support. They would not respond to reports they have an available fund of €3 billion. Arc may use funding from the banks it is purchasing debt from, as well as its own cash.
Mr Duffy said the property market always rebounds. "The name of the game is to do scale deals, and to do them quickly," he said. Mr Warren said there is a "wall of cash" in London which was not getting much return on deposit.
He said Arc would "work with" the borrowers who had originally taken out the loans from the banks. "We will cut people in for the upside," he said. "Agree a percentage" so they could get back some of their lost investment.
Mr Duffy said Arc would seek to buy the assets from the banks at market value, and that a fund of €3 billion, such as the one mentioned in reports, would be enough to "transform the market".
Asked would Arc do business with Nama, Mr Duffy said: “If we were invited to the party, we would do business with Nama.”
