Publication of Nama guidelines amounts to little more than a sop to disappointed tenants, writes SIMON CARSWELL

THE PUBLICATION of guidelines on how Nama approves rent reductions for struggling retailers appears to be little more than window-dressing to cover up the Government’s failure to abolish upward-only rent reviews.

The guidance note on the protocol for approving rent reductions between Nama-banked landlords and tenants is a public statement of what the agency has been agreeing privately for some time.

For retailers grappling with boom-time rents and falling turnover, this is little more than a sticking plaster and only for tenants whose landlords are in Nama.

“As this seems to acknowledge a practice already in place, this doesn’t appear to be anything particularly significant,” said analyst Stephen Lyons at Davy.

Minister for Finance Michael Noonan and Minister for Justice Alan Shatter said abolishing existing upward-only rent review provisions would interfere with contracts between private parties and it would be “extremely difficult” for it to survive a constitutional challenge.

Retailers will hate the decision, which represents another broken election promise by Fine Gael, but it will be welcomed by Nama.

Prospective buyers interested in Nama’s Irish investment property had been sitting on the sidelines due to uncertainty surrounding upward-only rent clauses and fears that leases would be revoked.

Brendan McDonagh, chief executive of Nama, warned that changes could shave up to 20 per cent off property values, a hit of about €2 billion.

As one of the biggest lenders to landlords, Nama sought budgetary changes not just to retain value on Irish investment property supporting €9.25 billion of loans but to attract buyers for these assets.

The agency successfully lobbied for changes to stamp duty on commercial property deals to breathe life into the moribund market. Noonan reduced the rate from 6 per cent to a flat rate of 2 per cent.

A capital gains tax exemption on properties bought over the next two years and held for at least seven years has also been dangled as a carrot to attract investors into the market, although the shortage of bank credit will remain a problem.

While no one believes the boom-time levels are sustainable, transactions worth about €1.5 billion a year are thought reasonable.

Nama will hope Noonan’s changes will help push the market to that kind of activity as it plans to reduce its €30 billion debt pile from Irish asset sales as gains on foreign properties start declining.

Noonan’s plan to set up a group to advise him on Nama’s capacity and strategy to manage and sell assets shows he thinks tax changes are not the only things required. As Nama moves to a phase of enhancing the value of and selling assets, the group will advise the Minister on how to attract international investment.

The group – to be led by the man who reviewed the agency for Noonan, former HSBC chief Mike Geoghegan – will help inject enterpreneurial and property blood into the Nama boardroom.