North's property market may be set for a shake-up as Nama prepares to move in

BELFAST BRIEFING:It looks like Nama is not the only one keeping a close eye on the property market

ABOUT 180 debtors could find themselves marching to a different beat in Northern Ireland this summer as the National Asset Management Agency gets down to some serious business north of the Border.

Nama has acquired loans with

a nominal value of about £3.35 billion (€3.82 billion) in the North. But just how many Northern Ireland debtors has the agency processed to date?

Not many, it appears, but that is all about to change.

While Nama was initially busy reviewing the business plans of its 40 biggest debtors, whose loans account for more than €32 billion, it is now turning its attention to the next tranche. Among these are 180 companies and individuals in Northern Ireland whose loans represent 5 per cent of Nama’s total portfolio.

In the past 12 months banks operating in Northern Ireland have become much more aggressive towards property developers and companies in financial difficulties.

It is not just the Northern Ireland participants in Nama that have shown their clients a different side to doing business with them.

Ulster Bank has its own specialist organisation dedicated to taking certain problems off its hands.

West Register (Northern Ireland) Property is an asset management company within Ulster Bank, which is owned by Royal Bank of Scotland. It has acquired certain assets from Ulster Bank’s distressed portfolio locally including the Outlet retail park near Banbridge.

Northern Bank, which is part of the Danske group, has also moved to counter its exposure to “fragile market conditions primarily linked to the property market”.

There is a certain irony about all of this in Northern Ireland.

The same banks that were once falling over themselves to lend money to clients are in a similar mad rush to reduce the percentage of their loan book on property relative to their overall loan portfolio.

Once Nama starts flexing its muscles in Northern Ireland, will this change the dynamic in the local market?

More than likely, depending on whom you talk to.

According to sources close to the agency, Nama could be beneficial because it can provide working capital and development capital to “maximise” the value of certain projects.

But it has also warned that it will foreclose on debtors who “have business plans that Nama deem unviable or are unco-operative or can’t service their debt”.

The agency wants its mantra in the North to be that it “is part of the solution, not part of the problem”. But the fact that Nama holds roughly £2 billion in loans which relate to undeveloped land in Northern Ireland means that, whether it likes it or not, the agency is part of the problem.

Peter Stewart, chairman of Nama’s Northern Ireland advisory committee, has said that the North’s bubble in terms of undeveloped land is “well and truly” burst.

Because of this the agency is facing a very different prospect in the North than in the Republic or Britain. Not only is it holding a huge bank of land that is worth a fraction of what Nama’s debtors paid for it, but it also has to contend with the fact that the Northern Ireland property market has its own peculiarities.

This chiefly revolves around the fact that in the past 10 years it has been controlled by a small number of local high net-worth individuals.

These are people who own some of Northern Ireland’s prime commercial property. They own these properties because they were advanced large sums of cash by banks. The majority of these banks now want their money back, or the loan has moved out of their control to Nama.

So the balance in the local market is shifting and, according to senior industry sources, it could present a number of potential scenarios.

If certain debtors are reluctant to play ball with Nama there is a feeling that the agency could insist on the repayment of loans and, failing that, it could move to appoint a fixed-charge receiver.

Senior property industry figures believe there is evidence that institutional buyers are becoming increasingly interested in the North. They also believe current property values, particularly in cities, offer good return potential for investment funds. They predict some major properties will come on the market before Christmas.

Nama may be keeping a close eye on the Northern Ireland property market but it appears it is not the only one.