Life in Nama limbo | The Post

Life in Nama limbo

Three big-name property developers who were once flying high but now find their fates inextricably linked to the Nama juggernaut tell Ian Kehoe what they think of the agency’s approach.

The figures are familiar at this stage: 850 borrowers who got 11,000 loans totalling more than e70 billion. Those loans have been transferred to the National Asset Management Agency( Nama) for just over e30 billion, a recognition that the properties behind them are worth an average of just over 40 per cent of what the banks originally thought.

But behind the staggering numbers of Nama are the developers who borrowed big and built big during the boom, and have now either been forced to adapt to Nama or get left out in the cold in the bust. Since its establishment, Nama has been dealing with these developers, with varying levels of success. Its immediate focus has been on the top 180 developers who, Between them, borrowed more than e62 billion. The remaining 670 ‘‘smaller’’ borrowers are being handled by the banks, but they remain debtors of Nama.

All the developers have been told to submit business plans to Nama, outlining what assets they intend to sell and how they propose to payback their debts. If a developer’s plan is accepted, he could be paid a salary- most are being paid between e75,000 and e100,000 a year - and a cut of future profits.

If not, a receiver will be appointed over the assets behind the loans, giving Nama the right to sell the properties and recoup some of what is it owed. But what is life like in Nama for developers? And what if it decides to put them out of business?

Ray Grehan

‘It’s like a death in the family’

From his beginnings as a tiler, Ray Grehan went on to become a well-known figure in the Irish property scene, building a string of residential and commercial projects across Ireland and Britain.

In 2005, he broke Irish property records when he bought the former UCD Veterinary College site in Dublin 4 for e171 million. The two-acre site remains undeveloped to this day, and Grehan’s company, Glenkerrin Homes, has had debts of e650 million transferred to Nama.

Last March, negotiations between the agency and receivers To Grehan’s property empire. It has since taken a court case against Grehan and his brother Danny, demanding repayment of e270million-worth of loans over which they had given personal guarantees.

Despite the public falling-out with Nama, Grehan said he still did not know what went wrong.

‘‘We are still baffled to know what happened. We still have not been told why the receiver was appointed,’’ he said. ‘‘The explanation we got was that we did not sign new loan documentation that they issued us in Britain. Our advisers said it would take six weeks to go through it. Within a few days, they had appointed a receiver.’’

Nama will now sell Grehan’s assets in a bid to recoup the e650 million owed. If there is a shortfall, Grehan will be personally liable, but he believes Nama would have fared better by keeping him involved.

‘‘We have worked hard to maintain the value of our portfolio over the last few years,’’ he said.

‘‘The week they appointed the receiver, I had just done a deal for our Crowne Plaza hotel in London for e83 million. I am told now that they may not get that amount for it, and that the deal has fallen through.

‘‘We had another deal in Canary Wharf. We were to achieve e45million for apartments. I am told now that they are on the market for between e34 and e38 million. I am not sure of the rationale where Nama is coming from.’’

Grehan said his property portfolio had decreased in value by between e10 million and e150 million as a result of the receiver being appointed by Nama.

‘‘To spend 30 years in the property business and build up a portfolio, and work seven days a week and long hours, and suddenly it is taken away from you - it’s like a death in the family. It is worrying and of course we are concerned.

‘‘Thankfully, we will pick up the pieces. We are young enough to pick up the pieces, and we have the skill set, and we will go forward. Not in Ireland - we will probably have to go abroad to get the contracts and use the skills we have to the best of our ability.’’ Grehan added that Nama had taken away his incentive to return to Ireland and pay his debts.

‘‘The opportunity for us to pay back our debts has been taken away from us [when Nama appointed the receiver], at the loss of the taxpayer. Had we been left there, we would have paid off the bulk of our debts over the time period of the MOU [memorandum of understanding with Nama],’’ he said.

‘‘I am starting from scratch. I am prepared to do that. Hopefully, we will be successful wherever I end up. It will be sad if we can’t bring money back into the economy and invest here.’’

Grehan said there were major doubts among property developers about Nama’s performance and ability.‘‘ We have a civil service bank running the property portfolio in Ireland,’’ he said. ‘‘Equally, the banks have been run by the state. There is a concern that will stagnate the markets for the next two decades, until someone comes forward and tries to untangle this web.’’

Niall Mellon

‘There is nothing to be gained from being vindictive’

A household name for his charity, which builds houses for the homeless in South Africa, Niall Mellon is also a major developer, with most of his projects in Britain.

He has had loans of around e300 million transferred to Nama, and is still in negotiations with the agency about his business plan. Mellon has sold off assets and moved his family to a smaller home, but believes that Nama and the banks must write off debts on a large scale for developers and struggling home owners.

‘‘The single biggest problem in Ireland at the moment is not allowing debt forgiveness on a large scale,’’ Mellon said. ‘‘Ireland is not going to begin to heal until we draw a line in the sand.

‘‘We have had a systemic collapse, and now we need a systemic response. We can’t go around and negotiate individually every person’s loans. We need large-scale solutions and one that will incentivise people to pay back loans.’’

Mellon said it was ‘‘too one-dimensional’’ to say that developers borrowed too much money, adding that the developers had generated economic activity during the boom. ‘‘We need these companies to help rebuild out of the ashes,’’ he said.

According to Mellon, there was an early misconception that Nama was going to solve the entire property and banking crisis.

‘‘Now there is a much more mature viewpoint that the Central Bank was not doing its job. Then, in turn, the banks were not managing their own liquidity,’’ he said. ‘‘Those two things caused the collapse of the Irish property market.

‘‘People might not look at it this way, but the property development companies are as much victims as are the thousands of people who are now in negative equity.’’

Mellon said that Nama was ‘‘working damn hard’’, but needed to move more quickly on deals. Instead of negotiating with each company individually, he said, Nama should offer a ‘‘menu’’ of choices to developers to choose from.

‘‘We are dealing with private-sector development companies whose reason for being in existence was to make profit. While that has become a dirty word, you have to remember that the reason for being in business is profit,’’ he said.

‘‘And these companies really have to have some incentive to get up early in the morning, travel all over the globe and try and influence these famous private equity companies to buy distressed Irish assets.’’

Mellon also wants Nama and developers to work together, rather than against each other. ‘‘It is very hard to work in a process which starts off in a process of mistrust and private investigators and a determination to follow developers to the ends of the earth,’’ he said. ‘‘I believe, at this point, Nama realises that property developerswere decent people who were generating billions in economic activity in Ireland, employing hundreds of thousands of people.

‘‘Almost everyone in Ireland benefited in someway from the boom times. There is nothing to be gained from being vindictive. We need to sit down and figure out the best way of getting these loans paid back.’’

Michael O’Flynn

‘We’re finding a way to go forward’

Cork-based O’Flynn Construction is one of Nama’s biggest clients, with debts reported to be more than e1 billion.

It was one of the top ten borrowers to have loans transferred to Nama, and founder MichaelO’Flynn is finalising a deal to work with the agency. He said that working with Nama would involve major changes to his business, although he was confident that he would repay all his debts.

‘‘We spent a long time preparing a business plan that dealt with all aspects of our business, and in relation to every area that we operate,’’ said O’Flynn, who has agreed to sell various investment properties.

He said that dealing with Nama was extremely different from dealing with his former bankers. ‘‘Life is difficult in Nama for anybody in there - I think it’s probably meant to be difficult,’’ he said. ‘‘For those of us who are working with Nama, we’re finding a way to go forward. It’s not like being in a bank, but it’s not meant to be.’’

However, he expressed concern about Nama’s ‘‘overzealous approach’’ to paperwork, which he said often resulted in delays and undue expense.

‘‘I think Nama’s attitude is ‘Let’s redo everything in such a way that we can go forward with absolute certainty’. I think that’s a very expensive way of doing it, but Nama’s attitude is that it’s cheaper than trying to investigate every bit of everybody’s [property] title or security situation,’’ he said.

O’Flynn also called on Nama to provide increased funding to the property industry. With no banks lending for property, he said, it fell to Nama to advance finance to complete projects and start new developments.

‘‘I think Nama needs to look more at resolving a functioning property market, because if you’re not going to get a return to a functioning property market, you’re not going to get a successful Nama A successful Nama is one that allows the industry to recover, that allows capital to get into this country. The funding model in Ireland is broken.’’

O’Flynn said the funding crisis would become more marked in the next two to three years, when the economy started to recover. He said the lack of finance would dampen growth and hinder Ireland’s ability to attract investment.

‘‘You can’t just say tomorrow that we don’t need anymore developers. You always will need development, you always will need developers, we just need to do our business a little bit different,’’ he said.

In relation to his debts, O’Flynn said: ‘‘We’ve always been used to owing money. To people in my industry who’ve worked hard and grown companies, owing money is not the issue. What has become a burden for us in recent years is that there’s no market.

‘‘It’s very difficult if you owe money on the one hand, but there’s no market on the other hand - it’s like a shop where there’s nobody coming in the door.’’

via sbpost.ie

Posted via email from quirkeproperty's posterous