The good, the bad and the ugly

Clockwise from above: Shelbourne Hotel: part-owned by Bernard McNamara; Anglo Irish Bank's unfinished headquarters; Treasury Holdings' Battersea power station

Clockwise from above: Shelbourne Hotel: part-owned by Bernard McNamara; Anglo Irish Bank's unfinished headquarters; Treasury Holdings' Battersea power station

 

The first wave of Nama transfers will contain some landmark sites and spectacular follies

THIS WEEK’S startling admission by property developer Bernard McNamara that he is “broke” and that his businesses have debts of about €1.5 billion will undoubtedly place him among the first borrowers to move to and be addressed by the National Asset Management Agency (Nama).

Brendan McDonagh, chief executive of Nama, said last week that the top 10 borrowers, who owe development and associated loans of €19 billion, will be transferred to the agency by early February. A second wave of transfers will take place in early March. The top 100 borrowers, who account for about half of the €80 billion face-value loans to be acquired by Nama, will move to the agency by the end of April, he said.

The borrowers will be asked to submit business plans for their projects showing how they plan to develop them and whether they are viable. Nama will then assess whether to develop, manage, hold, lease or sell them.

Developers among the top 50 Nama-bound borrowers are already preparing their plans.

Among the first who, with Mr McNamara, will see their loans move to Nama are the Johnny Ronan and Richard Barrett-backed Treasury Holdings; Liam Carroll; Seán Mulryan and his company, Ballymore; Dublin housebuilder Gerry Gannon; Castlethorn’s Joe O’Reilly, developer of the Dundrum Shopping Centre; and Michael O’Flynn of O’Flynn Construction in Cork.

Other large developers moving to Nama in the coming months are Jervis Shopping Centre owner Paddy McKillen, property financier Derek Quinlan, Cork businessman John Fleming, developer John Flynn and hotelier and shopping centre owner Gerry Barrett.

As Nama is taking over portfolios of development loans from five domestic lenders, being transferred into Nama doesn’t mean that all the borrowers are in default on their loans.

“The good, the bad and the ugly will be going in,” said John Bruder, managing director of Treasury Holdings. “There is no shame in being a Nama client no matter how good or how modest your property development loan is, once it is over €5 million.” Mr Bruder said he expects Irish bank loans owing by Treasury and its various subsidiaries to be among the first wave. The company’s main Irish banks are AIB, Bank of Ireland and Anglo Irish Bank, who have joined the “bad bank” plan.

Almost all loans backing large-scale development projects across the Irish property market, as well as major investment properties supporting them, will be transferred into Nama, he said.

“They are all going in,” he said. “Essentially Nama will be the only game in town for a period of time. The Irish banks had too much property development loans on their books – they will soon have no development loans.”

As Nama starts acquiring loans totalling €80 billion (for an estimated €54 billion) next month, management decisions on the loans and the properties securing them will fall to the State agency. Among these assets are well-known landmark sites and properties. Below are several properties backing loans which will move to Nama over the coming months.

Liam Carroll: Anglo Irish Bank’s proposed headquarters and the Castleforbes development site in Dublin’s north docklands

One of the best-known unfinished buildings supporting loans that will fall under Nama’s control, the proposed headquarters for Anglo was owned by Liam Carroll’s Zoe Group.

That was until the group collapsed into receivership and liquidation last year following his unsuccessful bid for court protection and his banks seized control of the properties backing loans totalling more than €1.3 billion.

Anglo loaned Carroll’s group €40 million to develop the property and the High Court heard last year that the bank was willing to provide a further €68 million to complete it, including €8 million to clad the skeletal structure to protect it from damage. Construction on the project stalled following developer Seán Dunne’s challenge against the fast-track planning permission granted by the Dublin Docklands Development Authority (DDDA).

Bernard McNamara and Derek Quinlan: the Irish Glass Bottle site, Ringsend, Dublin

Purchased by McNamara, property financier Derek Quinlan, investors of Davy stockbrokers and the DDDA for €412 million, the Irish Glass Bottle site was bought at the height of the boom and represents one of the frothiest deals of the Celtic Tiger era.

Financed with almost €300 million in bank borrowings from Anglo and AIB in 2006, the site will be one of the first properties backing loans to come under the control of Nama. The value of the property has fallen to €50 million.

This is one of the projects likely to be held over time by Nama to await for an uplift in the property market to recoup some of the massive value lost in this property.

Bernard McNamara: Shelbourne

McNamara’s loans are spread across Nama banks AIB and Anglo, and non-Nama banks Bank of Scotland (Ireland) and Ulster Bank. He has debts of about €1.5 billion, of which he is unable to pay €62.5 million to Davy investors in the Glass Bottle site.

Mr McNamara’s one-sixth ownership of the Shelbourne Hotel, which he and his fellow investors purchased for €120 million with borrowings from Bank of Ireland, will come under the control of Nama if the property has been provided as collateral for loans financing development projects involving the various investors. The High Court was told earlier this week that all of the equity in McNamara’s personal assets had been used to support his various businesses. Given the likely collateralisation across his development projects, the developer’s personal investments, including his investment in the Shelbourne, could fall under Nama’s control among the €27.7 billion in associated loans that the State agency is to acquire.

Treasury Holdings: Battersea power station site, London

While 66 per cent of the loans heading to Nama relate to properties in the Republic of Ireland, some 21 per cent are based in the UK. One such major development project is the Battersea power station site in London which is owned by REO, the firm majority owned by Treasury Holdings.

The company purchased the power station and 40-acre site for £400 million (€532 million) in 2006 with borrowings from a syndicate of banks led by Bank of Ireland and UK bank HBOS.

The company’s loans to Bank of Ireland means that Battersea will be one of the largest development projects in the UK to fall under Nama’s control. REO plans to develop the site into seven million square feet of residential properties, offices and shops in £5.5 billion project. Given that the UK market is likely to recover faster than in Ireland, it could well be the largest development project to be signed off by Nama.

Seán Mulryan: Ballymore’s landbanks in London’s East End

One of the country’s largest developers, Seán Mulryan’s property empire stretches from substantial landbanks in Co Wicklow to apartment blocks in London and residential, office and retail projects in Bratislava through his company, Ballymore Properties.

Mulryan has substantial borrowings from Anglo and Irish Nationwide, as one of the building society’s top 10 developers, to finance his projects in Ireland and the UK.

He owns the Whitewater shopping centre in Newbridge, Co Kildare (in partnership with Seán Dunne), and substantial housing schemes in Greystones, Co Wicklow, and Pelletstown, Dublin.

Among his properties in London are the 29-storey Ontario Tower in the docklands area of the city, which was marketed as the city’s tallest residential building when it launched, and the Pan Peninsula, which comprises two towers of 40 and 50 storeys.

He owns large landbanks in the East End of London which are likely to fall under Nama’s control given Mulryan’s Irish bank debts.

Again, the development of these lands by Mulryan could be lucrative to Nama as a source of cashflow given that the London property market will be boosted when the city hosts the 2012 Olympics.

John Fleming: Sentinel building, Sandyford

One of the largest developers in the south of the country, Fleming has debts of about €1 billion. Among the projects owned by the Co Cork businessman is the Sentinel building in Sandyford, south Dublin, which will be one of a number of properties backing loans moving into Nama.

Fleming used borrowings from State-owned Anglo to purchase the site and a further €22 million from ACCBank, the Dutch lender which is unlikely to participate in Nama, to develop the building.

The developer owes €268 million to Anglo and about €300 million to AIB, which means he will, at the very least, be among the first two waves of borrowers being transferred into Nama this spring.

Tom Considine, Paddy Sweeney and Gerry Prendergast: Millennium Park, Naas, Co Kildare

These three low-key developers broke the record for a land purchase outside Dublin when they bought the 331-acre site for €315 million in 2006. Filings lodged in the High Court last month showed that partnerships involving Mr Considine had bank borrowings totalling €615 million.

A large part of the debt relates to the Millennium Park site, which is located next to the M7 Dublin-Cork/Limerick road outside Naas.

The three investors owe €143 million to AIB and €45 million to Irish Nationwide on the site, loans that will be transferred to Nama.

Mr Sweeney told The Irish Timeslast month that they plan to “make a strong pitch” to fund the development of the land, which remains largely a greenfield site.