Developer asked Nama for €1.5m annual salary

A PROPERTY developer suggested to the National Asset Management Agency (Nama) that he be paid an annual salary of €1.5 million, a Dáil committee heard yesterday.

The chairman of the agency, Frank Daly, said the suggestion did not get past “first base”.

“The jets, the yachts, the Bentleys will not be supported by Nama,” he told the Dáil Committee on Public Accounts.

The top 10 debtors whose loans have been transferred to the agency have all given personal guarantees to the banks which due diligence has indicated will “stand up”, chief executive Brendan McDonagh said.

Nama has resolved to pursue borrowers for all their debts and not just the value the agency had paid for the borrowers’ loans.

The agency expects that by the end of next month, it will have acquired loans with nominal balances of €73 billion at a cost of €30 billion. This is a discount of about 58 per cent.

The agency has been inviting borrowers to submit business plans and has received 30 to date. It has noted the widespread transfer of property to other persons, usually family members, which it believes is designed to remove the property from Nama’s reach.

For the larger borrowers, the majority would have transferred property, Mr McDonagh said.

Reasons such as tax planning, providing for family, and following the advice of professionals were given “but I would be pretty sceptical”, Mr McDonagh said. “A lot knew what was coming, especially if they had given personal guarantees.”

Mr Daly said people are being told to return the property voluntarily or face legal action. In one instance, property with a value of €50 million had been returned voluntarily.

He said the business plans submitted showed a number of common features, such as wanting to develop green field sites, have high overheads, and not sell for a number of years.

“Some people believe the market will come back and that if we would leave them alone for five years, they would be alright,” Mr Daly said. However, he said the agency was only accepting plans that set out a target for significant debt reduction over a three to five-year period. “This means submitting a list of assets which will be sold to raise cash and to repay debt.”

If the agency is not convinced a debtor cannot meet a debt reduction target “the only option is foreclosure”. The agency wants debts reduced by 25 per cent by 2013 and 40 per cent by 2014. Mr Daly said the property market needs to be started again even if that means selling property at below what the agency paid.

Mr McDonagh said most disposals to date had been overseas but the agency will “tease the market here shortly” and find out what the floor is.

Mr Daly said the disposal of property would then “accelerate very quickly”.

He was questioned by a number of deputies about the salaries being earned by the agency’s employees and the fees being paid to Deloitte and others, but did not disclose the information.

Mr McDonagh said he was very concerned about the fees being paid to insolvency practitioners. Recent highlighting of the issue by the Commercial Court had led to substantial fee reductions.

The widespread use of corporate receivers for property assets was inappropriate and unnecessary, he said.

“I am determined that Nama is going to change the market by using statutory receivers and property receivers as is the practice in the UK.” Property receivers are appointed to sell a property but not to take control of the entity that might own the property.

Banks here traditionally appoint insolvency practitioners who often end up getting the bank to work for the receiver, creating a double layer of fees.

The agency’s head of portfolio management, John Mulcahy, said it had 87 hotels in Ireland, 37 in Britain, five in Germany and five in France, two in the Czech Republic, and one each in Spain, Malta and Belgium.

Mr McDonagh said the agency was “not in the business of supporting zombie hotels”. Other financial institutions were allowing hotels operate uncompetitive rates and this was something the agency had to deal with.