Nama is where investors want to be

The agency is well positioned to take advantage when the market turns

One of the key elements of the National Asset Management Agency’s annual report this week was a breakdown of the assets in its portfolio.

The perception is that Nama’s portfolio is populated with poor-quality sites in bad locations that will never make back the money that the agency paid when they were transferred in 2010 from the five Irish banks bailed out by the State.

To recap, Nama paid €31.8 billion to the banks to acquire loans with a face value of €74 billion.

Since then, it has booked impairment charges on the loans of €3.26 billion, reflecting continued weakness in property valuations, particularly in Ireland.

Nama acquired more than 12,000 loans in a range of currencies relating to 775 debtor connections. These have been broken up into 56,000 "saleable property units".

London property
Data published by Nama this week shows that at the end of last year, 36 per cent of its portfolio was based in Dublin and 21 per cent in London.

The rest of Ireland accounted for 18 per cent, other parts of Britain for 12 per cent, Northern Ireland for 3 per cent, and other parts of the world 10 per cent.

Chief executive Brendan McDonagh made the point that while Dublin and London are not without their challenges, theses cities are where the vast majority of investors want to be when it comes to investing in the UK and Ireland. This is borne out by the statistics around asset sales to date. By the end of last year, Nama had approved €11.7 billion of asset sales. This included €4 billion in 2012 with another €2 billion in the pipeline.

The agency said 80 per cent of the sales have taken place in Britain, with almost two-thirds in London. This is what a lot of Nama watchers would say is the low-hanging fruit.

Prices in London have remained strong since the financial crash in 2008. A signal of this was the £1 billion secured for Citi Tower in Canary Wharf earlier this month from an investor based in the Middle East.

Nama had a one-third share in that sale relating to loans connected with Derek Quinlan and Glen Maud, a Sheffield lawyer turned investor. It is believed to have washed its face on the transaction.

Nama’s report states that it is devoting “particular attention” to the Dublin Docklands, where it has significant holdings that it believes will be attractive for expansion of the IFSC and to further develop tech hubs for the likes of Google and Facebook.

If you take Nama's portfolio by sector, one quarter is development while 9 per cent is land. Mr McDonagh acknowledged that these are the "riskiest" elements of its portfolio but he said they were mostly based in Dublin or London.

UK market
Nama chairman Frank Daly said much of the agency's focus to date has been on selling in the UK but said momentum is building in Ireland.

“The UK has been very good to us. We were lucky in that we had a portfolio there that included very good assets, which has enabled us to sell those assets, fund our investments, wash our face and pay down debt,” he said.

“We do see now, but it’s only emerging now, demand for Irish assets. We are selling here and I suspect you will see an increase in that in the coming year.”

He rejected the suggestion that Nama is sitting on a lot of dud properties and noted that it would make €4 billion available here for capital investment and vendor finance to help stimulate the market out to 2016.

“Actually, our portfolio is much better than perhaps even ourselves would have imagined years ago,” he said.

“As recovery comes, and Nama contributes to that recovery, the prospects for our Irish assets will be much, much brighter. They will become quite quickly the low-hanging fruits of the future.”