Developers in denial about crisis, says Nama

THE NATIONAL Asset Management Agency (Nama) has accused developers of being in “denial” about the crisis in construction and rejected criticisms that it had compounded problems in the banking and property markets by applying steep discounts to loans transferred to the agency.

The comments followed the release yesterday by the Construction Industry Federation (CIF) of a report – commissioned from Lombard Street Research – on Nama’s impact on the banking and property sectors one year on from its establishment.

The report calls Nama a “flawed idea and a failure”. Its publication came on the day the European Commission approved the valuations applied by Nama to loans acquired in the second tranche of transfers from the banks.

Loans with a nominal value of €11.93 billion were acquired with Nama bonds for about €5.28 billion – a discount of 55.6 per cent.

Nama chairman Frank Daly rejected criticisms that it should have paid more for the loans.

“I’ve been struck in recent days at suggestions from some quarters that Nama has compounded the problem of the banks by virtue of the amounts it was paying to acquire relevant loans,” Mr Daly said. “This EU decision confirms we have adopted a prudent, consistent and fair valuation policy.”

The 22-page report for the CIF says that Nama should be a developer and not just a liquidator.

“By acting in this fashion, Nama is destroying value at a time when it is crucial to try and put a floor under property prices in order to stop the downward spiral in valuations,” the report says.

It states that the agency should accept an element of debt restructuring. It suggests Nama’s €5 billion in working capital is not enough and that €15 billion would be more appropriate. Acknowledging the constraints in the public finances, the report says the agency should “encourage the use of outside capital to help stabilise the construction industry”.

Lombard’s research was critical of Nama’s policy of acquiring unimpaired loans. It found that this undermined the banking system by taking good as well as bad loans from the banks.

The CIF-sponsored report claims that Nama’s “implicit” objective was to restructure the construction industry.

“Attempting a root and branch restructuring of the existing industry is not necessarily in Ireland’s long-term interest,” it says.

In response, Nama said the CIF had a “naive expectation” that it would “protect developers and the broader construction sector from the impact of the excesses of the property bubble”.

Nama said it did not discourage external capital and had worked with borrowers to enable joint venture projects to be pursued with third parties.

The agency said it had worked with borrowers and non-Nama banks to dispose of €1 billion of property assets since March 2010.

It has approved advances of close to €400 million since March to allow the completion of developments that make commercial sense. A spokesman for Nama added: “Self-serving reports like this suggest that the leaders of that industry are continuing to live in denial of the crisis . . . Nama did not cause the problems in the construction sector or the banks but we are trying to find solutions and fix them in a way that does not penalise taxpayers.

“The CIF . . . would be better off helping their members deal with that changed world and working constructively with Nama rather than criticising how works.”