“This, therefore, looks like slim pickings for Nama…”

At the Guardian’s Ireland Business blog, Lisa O’Carroll notes of Ireland’s National Asset Management Agency [NAMA]

I wrote about the London trophy and landmark buildings amassed by developers for the Observer back in January and at the time, there was a view among the large property agencies in the capital that NAMA wouldn’t flood the market by offloading stock at one time because London, by definition, is “prime” stock – in other words, always sellable.

As the head of investment at global property consultancy, King Sturge, Chris Ireland, told me “the issue with Nama and the UK banks is whether they flood the market with secondary stuff, and they all have loads of it”. “Secondary” property is taken to mean “assets outside London”.

About a third of NAMA stock is in the UK – around €16bn and it was no coincidence that Brendan McDonagh, NAMA chief executive, recently told the Financial Times that he wanted to push through the sale of at least €2.5bn of UK commercial property in the next three years. I’d wager that it will be a lot more than that.

That figure of £16billion should probably include the £3.35billion linked to assets in in Northern Ireland.  Although, they are supposed to have a 10-year time-scale for the disposal of assets…

Lisa O’Carroll goes on to point out

As Chris Ireland says, flooding the market isn’t the issue. But is there is an issue around timing?

Although the commercial market is London is showing signs of recovery, many of these properties were bought at the height of the market. Property investors normally use rental yield as an indicator of a property’s value, but as NAMA is not in it for the long haul, all it can do is look at capital growth.

The Citigroup Tower in Canary Wharf is one example of a building that looks good but may not raise a lot of dosh for NAMA.

The 42-storey Citigroup Tower looks set to be sold to China Investment Corp in a deal worth £1bn plus.

This is an eye-watering sum.

But it was bought by tax-inspector turned property investor Derek Quinlan at the height of the boom on Irish finance for €1.48bn – the equivalent of £1bn in 2007 exchange rates when £1 bought €1.41-1.47.

This, therefore, looks like slim pickings for NAMA.

Selling at a loss isn’t necessarily a problem, as far as I understand it, as NAMA effectively acquired the assets at a reduced rate.  But on the scale of what NAMA has to deal with it might be.  From the NAMA press release on the most recently published [Third Quarter] Report and Accounts [pdf file]

The Report represents NAMA’s position as at 30th September of last year (2010). By that date, the Agency had acquired €27.3 billion in loans from the five participating institutions. NAMA had purchased these loans for an amount of €13 billion. As of today[2nd March], the Agency has acquired €71.2 billion of loans for a consideration of €30.2billion – a discount of 58%.

, , , , , ,