Taxpayers are facing the possibility of losing several hundred million euro through the State’s toxic property loans agency, the National Asset Management Agency (Nama).
The Government originally said the agency would deliver a €4.8 billion profit to the exchequer.
Only about 20 per cent of the loans are generating any income, that is repayments or interest payments, and the rest are currently producing no returns at all. Nama originally expected that 40 per cent would be income-producing.
Nama will release its first business plan later this week. The document is expected to outline three possible results from the agency’s work, due to finish in 10 years.
In a worst-case scenario, Nama could end up losing several hundred million euro. If that is the case, the Government will levy the five participating banks – AIB, Bank of Ireland, Anglo Irish, EBS and Irish Nationwide – in an effort to make up the shortfall.
In a second case, it could gain several hundred million. In a third “very best case”, it could make “a couple of billion”. It is understood that the agency is still hopeful that it can make a profit.
However, sources said that Nama, which has begun buying commercial property loans from the five banks, is unlikely to make the €4.8 billion profit originally predicted by the Government in October.
The revised forecasts for Nama’s performance stem from the fact that the loans it has so far taken over from the banks are in a far worse state than the institutions originally led it to believe.
Nama has taken over €16 billion worth of property loans from the banks, the first tranche of an €80 billion total. It paid about €8 billion, a discount of 50 per cent. The banks led it to believe that this discount would be about 30 per cent.
Sources said yesterday that the agency was “shocked” at the scale of repayment problems it had encountered with most of the loans.
It has also found that the banks did not take up a number of options open to them for recovering cash from property developers who were not making repayments.
One option was a charge over rent rolls. This gave the banks the right to collect rent from tenants in properties such as shopping centres and offices, if the owners were not meeting their loan repayments on those developments. Industry sources said the banks were “scared of pushing developers to the brink” and did not take this option, even though they had a right to do so.
Nama is likely to enforce charges over rent rolls. This will involve the agency going to court and seeking the right to collect rents directly from the borrowers’ tenants.
The developers whose loans have gone into Nama deal directly with the State agency itself.
It can tell them to sell properties and take whatever other steps it believes are necessary to recover the money now owed to the State rather than the banks.
It is shortly expected to buy a second tranche of loans, totalling about €13 billion, from the banks. It will pay about half that figure, €6.5 billion, to purchase these debts. Once that round is complete, it will have a further €50 billion of loans to purchase.
The developers whose loans have been taken over by Nama so far include Bernard McNamara; Liam Carroll, whose Zoe group is in receivership; Seán Mulryan of Ballymore Properties, Johnny Ronan and Richard Barrett of Treasury Holdings and its listed arm, Real Estate Opportunities (REO); and Gerry Gannon.
The properties in which the State has an interest as a result include the Glass Bottle site at Ringsend, which was bought by a consortium for €412 million, and is now reckoned to be worth just over 10 per cent of that figure; and Battersea Power Station in London, which REO bought for €600 million in 2006. Bank of Ireland loaned about €100 million towards its purchase.
All loans on property with an original value of €5 million or more will end up in Nama, irrespective of whether or not they are being repaid.
