13/10/17: Debt Glut and Building Dublin

Just back from Ireland, a fast, work-filled trip, with some amazing meetings and discussions, largely unrelated to what is in the 'official' newsflow. Some blogposts and articles ahead to be shared.

One thing that jumps out is the continued frenzy in building activity in Dublin, predominantly (exclusively) in the commercial space (offices). Not much finished. Lots being built. For now, Irish builders (mostly strange new players backed by vultures and private equity) are still in the stage where buildings shells are being erected. The cheap stage of construction. Very few are entering the fit-out stages - the costly, skills-intensive works stage. And according to several sector specialists I spoke to, not many fit-out crews are in the market, as skilled builders have not been returning to the island, yet, from their exiles to the U.S., Canada, Australia, UAE, and further afield.

Which should make for a very interesting period ahead: with so many construction sites nearing the fit-out stages, building costs will sky rocket, just as supply glut of new offices will start hitting the letting markets. In the mean time, many multinationals - aka the only clients worth signing - have already signed leases and/or bought own buildings on the cheap. Google owns its own real estate (hello BEPS tax reforms that stress tangible activity over imaginary revenue shifting); Twitter has a refurbished home; Facebook is quite committed to a lease (although it too might take a jump into buying); and so on. Tax inversion have slowed down and Trump Administration just re-committed to Obama-era restrictions on these, while Trump tax plan aims to take a massive chunk out of this pie away from Ireland. So demand... demand is nowhere to be seen.

Will this spell a twin squeeze on office blocks currently hanging around in a pre-weather tight conditions?

The market timing for a lot of this real estate investment is looking shaky. Globally and across Europe, corporates are doing relatively well. But, despite this, there is no investment cycle on the horizon. And revenues growth rates have been sustained by a massive glut of legacy credit sloshing in the international monetary system. Courtesy of Daniel Lacalle @dlacalle_IA, here is a Deutsche Bank chart illustrating what the past monetary excesses have produced:

Three lessons are to be extracted from the above:

1. Lags in corporate investment activity imply that the current level of demand for hard assets worldwide is driven by the 2016 ultra low borrowing rates; 
2. Forward corporate investment activity is starting to show the pressure of rising rates and reduced (or even negative) assets purchases by the Central Bankers, with negative rates share of the total debt market shrinking from over USD12 trillion at the end of 2016 to USD8 trillion now; and
3. The glut of debt continues to rise through 2017, albeit at a slightly slower rate than in 2016.

These points suggest that, barring a new miracle of monetary variety, forward debt financed investment and growth is bound to slow. And the cost of debt carry is bound to rise. Which should be bad news for the European and U.S. debt-funded real estate activity. 

And it will be an even tougher pill to swallow for the crop of new (Nama-linked) Irish developers who were quick in raising hundreds of millions in funding in form of cheap (ultra cheap) debt and frothy equity. Many of these lads have nearly zero experience in building, some are backed by 'experts' from Nama's top cohorts of 'specialists' - the cohorts that were dominated by the pre-bust advisers, not developers. 

The bust is still unlikely at this stage, as majority of current sites that are in mid-stage development have a low acquisition cost, thanks to the fire sales by Nama, and still enjoy a couple of years of cheap debt carry costs. 

But inflation in construction costs will sap whatever wind the housing building sub-sector might have had in it (which is not much, as housing construction is still sitting well behind offices activity). Planning permissions for new housing are languishing sub 1,500 per quarter, comparable to 2010 levels. Planning permissions for ex-residential are at late 2007- early 2008 levels, aka stronger.

In other words, the upcoming cost squeeze is likely to do two things to the Irish market:

• Cost inflation at fit-outs will probably dent future development activity, instead of creating a large-scale bust; and
• Commercial development sector will continue pressuring house building, driving up rents and residential property prices.

23/8/17: Ireland: A Haven for SPVs?

Ireland scored another ‘first’ in the league tables relating to tax optimisation and avoidance, staying at the top of the Euro area rankings as a Special Purpose Vehicles (SPVs) destination: http://uk.reuters.com/article/uk-ireland-funds-idUKKCN1AY1AK (featuring my comment, amongst others).

As my comment in the article linked above alludes, there is a combination of factors that is driving Ireland’s ‘competitiveness’ in this area. Some are positive for the economy and non-zero-game in relation to our trading partners, e.g. 

- Ireland providing a functional access to the European markets via regulatory and markets infrastructure arrangements that facilitate trading from Dublin into the rest of the EEC;

- Ireland offering a strong platform for on-shoring human capital, a much more functional platform than any other EU nation, due to greater openness to skills-based migration, English language, common law and open culture;

- Ireland serves as a clustering centre for a range of financial services functions, making it more attractive than traditional tax havens for conducting real business.

Over the recent decades, Irish Governments and business organisations have been aggressive (or better said - active) in positioning the country as a platform for inward investment. The first waves of this strategy involved emphasis on pure tax optimisation (e.g. during the 1990s), with subsequent efforts (often less successful and slower to develop) involving building specialist niches of financial services activities in Ireland (e.g. funds management in the 2000s and focus on specialist listings, such as debt and SPVs, in the 2000s-2010s).

On the other hand, aggressive positioning achieved by Ireland in tax optimisation-driven FDI and tax-focused corporate inversions has become a significant drag on the country’s reputation as a functional (as opposed to post-box) business centre. In addition, the Financial Crisis has introduced new dimensions to this reputational erosion: in addition to the G20-initiated push for greater tax transparency and harmonisation, Ireland also - mistakenly - pursued tax-based incentives for vulture funds acquiring distressed Irish properties from the likes of Nama and IBRC. A combination of growing tax inversions, BEPS reviews and reforms, vulture funds aggressive use of the tax structures has resulted in a more recent tightening of the SPVs regulations and oversight. 

Striking a balance between real economic incentives and egregious tax optimisation is a hard target to hit for a small open economy that, like Ireland, faces very tangible and aggressive international competition. The bad news is that we are yet to find a ‘golden ratio’ for proper regulation and supervision regimes that can allow us to retain a competitive edge, while rebuilding positive reputation with our trading partners and investors as a place for doing functional/tangible business. The good news is that we are becoming more aware of the need to strike such a balance.

8/8/17: Irish Taxpayers Face a New Nama Bill

Ireland has spent tens of billions to prop up schemes, like Nama and IBRC. These organisations pursued developers with a sole purpose: to bring them down, irrespective of the optimal return strategy from the taxpayers perspective and regardless of optimal recovery strategies for asset recovery. We know as much because we have plenty of evidence - that runs contrary to Nama and IBRC relentless push for secrecy on their assets sales - that value has been destroyed during their workout and asset sales phases. We know as much, because leaders of Nama have gone on the record claiming that developers are, effectively speculators, 'good for nothing else, but attending Galway races', and add no value to construction projects.

Now, having demolished experienced developers and their professional teams, having dumped land and development sites into the hands of vulture investors, who have no expertise nor incentives to develop these sites, the State has unrolled a massive subsidy scheme to aid vultures in developing the sites they bought on the State-sponsored firesales.

As an aside, this June, Nama officially acknowledged the fact that majority of its sales of land resulted in no subsequent development. What Nama did not say is that the 'developers' hoarding land are the vulture funds that bought that land from Nama, just as Nama continued to insist that its operations are helping the construction and development markets.

Why? Because Nama was set up with an explicit mandate to 'help the economy recover' and to drive 'markets to restart functioning again', and to aid social housing crisis (remember when in 2012 - five years ago - Nama decided to 'get serious' about social housing?). And Nama has achieved its objectives so spectacularly, Ireland is now in the grips of a housing crisis, a rental market crisis and a cost-of-living crisis.

Read and weep: http://www.independent.ie/business/personal-finance/property-mortgages/taxpayer-to-fund-developers-with-no-guarantees-on-prices-36009844.html?utm_content=buffer39407&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer.
Irish taxpayers are now paying the third round of costs of the very same crisis: first round of payments went to Nama et al, second to the banks, and now to the 'developers' who were hand-picked by Nama and IBRC to do the job they failed to do, for which Nama was created in the first place.

Oh, and because you will ask me when the fourth round of payments by taxpayers will come due, why, it is already in works. That round of payments will cover emergency housing provision for people bankrupted by the banks and Nama-supported vultures. That too is on taxpayers shoulders, folks...

9/4/17: Nama's Missed Opportunities

My Sunday Business Post article on Nama and the 'value-destruction' : https://www.businesspost.ie/opinion/nama-missed-opportunity-profits-paying-price-384584.

29/1/16: And the IBRC Interest Overcharging Ship Sails On...

Just after posting the Mick Wallace video link on Nama,  a knock on my blog door left this nice little letter at the doorstep.

Now, I obviously removed the names of people involved and other identifying information. Which leaves us with the substance of the said letter: IBRC are conducting an internal review into interest overcharging...

Why that's nice.

Let's recall, however, the following facts:

1. Anglo overcharging was notified to the authorities officially at least as far back as 2013 (see link here: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html)
2. It was known since at least 2010 in the public domain (per link above).
3. It was discovered in the court in October 2014 (see here: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html)

Add to the above a simple fact: IBRC Liquidators have at their disposal the entire details of all loans issued by Anglo, with their terms and conditions. They also have the entire history of the DIBOR and all other basis rates. In other words, the Liquidators have full access to all requisite information to determine if Anglo (and subsequent to its dissolution other entities holding Anglo loans, including Nama and IBRC Special Liquidators) have continued with the practice of overcharging established by the Anglo.

When you add the above, you get something to the tune of almost 6 years that Anglo, IBRC & Nama and IBRC Special Liquidators had on their hands to address the problem. And only now are they getting to an 'internal review', more than a year after the court has smacked their snouts with it? 

Meanwhile, as it says at the bottom of the letter, "Irish Bank Resolution Corporation Limited (in Special Liquidation), trading as IBRC (in Special Liquidation), is operating with a consent, and under the supervision, of the Central Bank of Ireland."

So we have an entity, supervised and consented to by the Central Bank that is 'looking into' the little pesky tiny bitty problem of years of overcharging borrowers on a potentially systemic basis and with quite nasty implications of this having been already discovered in the courts more than a year ago... It is looking into these thing by itself. Regulators, of course, are looking at something else... while consenting to the IBRC operations all along...

Does that sound like we have a 'new era' of regulatory enforcement and oversight designed to prevent the next crisis?.. Or does it sound like everyone's happy to wait for the IBRC to find a quiet way to shove the problem under some proverbial rug, so the Ship of the Reformed Irish Banking System Sails On... unencumbered by the past and the present?

29/1/16: Nama and Value Destruction

There is a neat video circulating around that sums up Mick Wallace's questions about Nama, worth watching: https://vimeo.com/143933468?ref=tw-share.

For those who want to see a more extensive listing of Nama firesales or, as I put them, Value Destruction deals, read here:  http://trueeconomics.blogspot.com/2015/11/251115-nama-that-gift-horses-mouth.html and follow the link in my post to more.

Beyond this, on top of Wallace's questions, there is an outstanding issue of Nama involvement in continued legacy of Anglo interest overcharging http://trueeconomics.blogspot.com/2015/06/17615-mr-john-flynn-letter-to-tds-on.html (and see links at the bottom of that post).

1/1/16: Developers Questioning Banking Inquiry Report

While we do not know what is in the Banking Inquiry report signed-off this week, concerns being expressed by the two developers, namely Michael O’Flynn and Johnny Ronan, that the report is likely to be a whitewash of Nama is a legitimate one.

The inquiry basically and obviously failed to provide platform for the voices critical (or robustly critical) of Nama, opting instead to put forward testimonies of some developers who have potential coincident / congruent interest in seeing Nama escaping serious criticism.

Thus, legitimate suspicion can be (though we should wait to confirm or decline it) that the Banking Inquiry report will indeed skip over Nama's core role in creating a dysfunctional (and currently strongly legally challenged) crisis resolution environment in Ireland. And another legitimate suspicion (based on past record of coverage of the Inquiry in the media) is that most of Irish media will be unlikely to robustly challenge the report on any conclusions regarding Nama.

That said, let's wait and see the report...

25/11/15: Nama: That Gift Horse's Mouth...

Back in June this year, I posted about 10 most egregious cases of apparent mis-pricing of assets relating to Nama sales: http://trueeconomics.blogspot.ie/2015/06/17615-10-cases-worth-asking-nama-about.html

Now, we can add a new one. Per Irish Times report (http://www.irishtimes.com/business/commercial-property/blackstone-to-flip-blocks-for-43m-profit-1.2442098#.VlWtXj-TrWY.twitter):

“Blackstone, the world’s biggest private equity firm, is on track to make a profit of €43 million on two office buildings it bought in Dublin’s south docklands only two years ago. The company has agreed sale terms at €123 million for the Bloodstone Building and an adjoining block on Britain Quay – 54 per cent more than the €80 million paid for them towards the end of 2013.”

In other words, we have vulture fund that bough completed properties two years back and managed to squeeze 54% appreciation out of them by doing virtually nothing new, adding virtually no new value. And Nama added zero value to the buildings as well as it got them off Sean Dunne in fully completed form.

The cherry on the cake (for Blackstone) is that it bought the above buildings for roughly EUR100 million, along with a third building: Hume House on Pembroke Road in Ballsbridge. Blackstone is yet to sell Hume House. So Blackstone actual returns on Nama purchase will be going up and up.


The Irish Times article also references another Nama ‘deal’ for the taxpayers. “Early in 2013, King Street Capital bought the Bishop’s Square office building on Kevin Street for €65 million and last January it sold it on to Hines, the international property company, for €92.5 million – a price rise of more than 42 per cent.”

That would be the deal described here: http://costarfinance.com/2014/10/06/hines-in-pole-position-for-project-cherry-after-knockout-first-round-bid/


So between these two ‘deals’, Irish taxpayers have foregone collective EUR70 million. Thanks, Nama!

26/7/15: That Seagull Flock Model of Public Governance: The Banking Inquiry

Second, following the previous post on Nama, is the Banking Inquiry news:

The Banking Inquiry also has now adopted the Seagull Model for public transparency and governance: there are scandals and tantrums left, right and centre of the political spectrum. The gig is, of course, less of a maritime evocation as it is with Nama, and more of the landfill nature, but you get the picture.

Some chronology on the matters at hand:

• Back in mid-July there were reports that a whistleblower - someone working for the Inquiry - came forward in April 2015 with the allegations that "relate to alleged preferential treatment which the whistleblower feels was given in the workings of the investigation team to the Central Bank and the Department of Finance. It is suggested the Central Bank insisted on a whole series of redactions in documents that it supplied. It is also being suggested that the Central Bank, at a critical point, was allowed a lengthy meeting with the lead investigator." Now, for those who do not know this, the Inquiry has two teams of 'advisers' - one that goes over submitted evidence and distills it to the members of the Inquiry - as far as we know, that team is composed of the Oireachtas employees - and another that prepares questions to be put forward by the members - which includes former banks and finance sector employees. Note: this is an important bit for the subsequent link on the matter from today.
• Sunday Times a week ago also carried some details of the whistleblower allegations, specifically alleging that a number of undocumented meetings took place between the Central Bank, Nama and senior investigators on the banking inquiry. Other sources also include Department of Finance into the august list of entities allegedly granted unprecedented access to pre-brief the inquiry investigators. The same Sunday Times article also claims that: "It is understood allegations have also been made to Marc MacSharry, a Fianna Fail senator and inquiry member, that a second investigator quit the banking inquiry team on May 13 this year, citing concerns similar to those raised by the whistleblower."
• Check the timeline: April 27 whistleblower allegations filed, May 13 another Inquiry official resigns on similar concerns, July 15 whistleblower allegations are leaked to press, July 23 inquiry into allegations set up. Things become swift, in Ireland, only after the media gets the news. Never before.

• So on foot of the publicly leaked allegations, it was decided to do the most Irish of All Things and… hold and Inquiry into the Banking Inquiry.  As an aside, while the previous FF/GP/PDs governments can be collectively accused of having Leadership by Quangos fetish, the current one can be assigned a monicker of Leadership by Inquiries.
• And, in a typical Irish fashion, the Inquiry into the Inquiry (shall we call it IiI here?) will have terms of reference that will include hunting down the wrongdoing of leaking the allegations to the media. As reported here: "The Oireachtas tonight released the terms of reference for Mr Allen’s investigation. He will investigate allegations that false information was given to Oireachtas Committee members, and preferential treatment was given to certain witnesses. The investigation will also look at alleged conflicts of interest that it is claimed were not appropriately handled by the inquiry’s investigation team. Mr Allen will also be required to examine the allegations in the context of the legislation underpinning the Bank Inquiry. The leaking of information to a journalist named by the whistleblower will also form part of the investigation." We can get a good sense of where the findings will go: a new battle between politicos and journos. There will be war… 
• But, fear not: we already have one outcome of the whistle blowing scandal: the whistleblower has been punished. Per same report "The whistleblower’s pay has been suspended since last week after, it is claimed, they refused a transfer from a section within the Banking Inquiry." That should teach everyone a lesson: Ireland tolerates no whistle blowing. Never did and never will. Get over it, folks, and keep on pretending we have a modern society with all the trappings of transparency and ethics. This was confirmed in the Irish Times report here: "After the allegations were made, the whistleblower claims that their duties as an investigator were transferred on April 27th. A “false announcement of my resignation” was made during the week beginning June 1st, and their desk was cleared. Notification of their salary being suspended was received on July 15th."
• Of course the irony is that back in March, the Inquiry heard from Dr Elaine Byrne that whistleblowers need not only be protected, but rewarded for their actions. Ah, yes… back to Ireland, thus...

• Last week, the Irish Times carried some select excerpts from the whistleblower communication. These are worth reading: "The whistleblower claims that the terms of reference for a review of the allegations to be carried out for the Houses of the Oireachtas Service by Senior Counsel Senan Allen while including consideration of the claim that certain participants received favourable treatment do not detail or substantiate the allegations which include “off-the-record telephone calls and meetings” and “improper pressure on certain investigators to exclude certain relevant witnesses”.” It is also alleged that there was “significant ongoing and detailed leaking of information by a certain investigator” to a national newspaper. And the whistleblower claims that they were “routinely instructed to disregard redacted material” emanating from an unnamed institution, which “in my view could have proven to be extremely relevant to the proper processing of the investigation”. The “instructions were relayed to me by superiors and included instructions to inform the Joint Committee of Inquiry that participants had complied with matters related to compelled documentation, when in my view, participants were not compliant”. The “participants” are believed to be the Central Bank of Ireland and the Department of Finance." And further: "The whistleblower claims they were prevented from engaging in “basic investigative work and from exploring valid lines of inquiry”. “I am extremely concerned that the timeframe given to Senan Allen to conduct this investigation will ultimately lead, particularly in light of the limited terms of reference and in conjunction with the limited term period for a review, to a sub-standard and wholly inadequate review that will not broach the complexity of the allegations raised by me,” the whistleblower added. “Furthermore, the terms of reference are silent on the requirement to investigate the origin, publication and distribution of the false and defamatory statements made about me in an official report dated May 6th produced by the Houses of the Oireachtas service.”

All of this brings us to the latest round of revelations from the Banking Inquiry published today in the Indo. Ah, the pearls include:

• That "Morgan Kelly, Professor of Economics at University College Dublin, who notably predicted the property collapse, has turned down an invitation to appear before the inquiry." Frankly, why am I surprised? Why would anyone be surprised. Morgan is a serious scholar and has little time for the farcical performances. 
• And then there is the controversy over political hissy fits triggered by the offer from David Drumm to testify on the matters of his recollection of the meetings with former Taoiseach Brian Cowen. Which I covered yesterday here.
• For the last bit, the juiciest fare so far: "…the whistleblower has claimed this investigator, who was deciding what documents from the banks should be entered in evidence, secured a new job with the Bank of Ireland while working for the inquiry. The whistleblower was "shocked" when it was decided to allow the investigator work out his notice period with the same access to bank documents after he had accepted the Bank of Ireland job offer." 

Oh dear… Where does one go from this? To 2016 headlines about some Inquiry staff getting cushy jobs in the state bodies with allegedly cushy relationships with the Inquiry?.. What is next for the Cosy Planet 'Ireland'?

26/7/15: It Rains, It Pours... And Next There Can Be a Deluge ...over Nama

When it rains, it darn well pours… in the case of Nama and Irish Banking Inquiry, the rule is iron clad.

First, Nama:

Just yesterday I posted two links on most recent allegations concerning Nama in Northern Ireland. And today, we have a couple from the Republic.

Per first link, apparently, "A furious row has erupted between developer Michael O'Flynn and Nama following his appearance before the Banking Inquiry." The row is about Mr O'Flynn's claim that he was pressured to sell assets to 'preferred bidders' over the top bidders.

Nama says this is not true.

We have no idea as to who to believe, although Mr O'Flynn has nothing to gain from making up anything about Nama, given he has now existed the wretched institution and is free to return to normal life. And Mr O'Flynn appears to have more to say about Nama that seems to be pretty much in accord with what other Namaed developers are saying and what Nama seems to be denying as well. "Mr O'Flynn said while the O'Flynn Group had formulated a business plan for Nama aimed at repaying all the money it owed, this had been rejected without any discussion in relation to its content".

Which, of course, brings us back to that notion of value destruction that Nama should address before any inquiry into Nama attempts to address it.

Recall that Nama required all developers to submit Business Plans. Following their reviews by Nama, Nama issued simple 'decline' letters, requiring new plans to be re-submitted. Nama subsequently rejected a vast majority of these as well. So far - pretty bad, but it gets worse. Nama rejections came with zero specific details given as to the exact reasons for the agency decision. These plans were prepared by professional teams (not by developers personally) and contained very detailed pricings, costings, analysis etc of assets covered by the plans, based on external evaluations, existent permissions and ventures, and so on. Nama appears to have offered no substantive reasons for the rejections of substantive plans. In the case of O'Flynn the allegation is now on the record. In at least five other cases that I am familiar with  the same has been also alleged and in some formed part of submission to the courts.

The rejections of at least some plans led to Nama pursuing strategies for managing underlying assets that can be questioned in terms of their ability to deliver maximum value return to both the taxpayers and the original borrowers (Nama owes the latter the duty of care in relation to their assets). The shortfalls arising from Nama failure to execute reasonable plans was loaded, through personal guarantees, on the original borrowers. Which, effectively, means that for some reasons, undisclosed to anyone, Nama has opted to potentially dump vast amounts of risk and costs onto original borrowers. It would be damaging enough were this was done with at least a token of propriety in the form of explaining the rejection of the Business Plans. But it is doubly bad given that Nama seemed to have simply dismissed the Plans without any explanation.


The second link is more distant to Nama operations than the first, so I won't cover it in any detail here. Still do enjoy Indo's "Daly's charity role is 'private'". Hint: keep an eye out for familiar names...


No wonder the whole place at the higher reaches of the Grand Canal St is now resembling the flock of seagulls abandoned at sea by a fishing trawler: noise, feathers, chaos…

Stay tuned for the Banking Inquiry shambles post next.

25/7/15: Nama: Some Colder Winds from the North...

Ah, the Dear Nama, the outpost of taxpayers interests, the Beacon of the New Ireland (not to be confused with the financial company of the same name) reborn by the FF/GP/FG/LP efforts over the recent years, efforts yielding path-breaking reforms in transparency and governance that the Beacon exemplifies.

The shining light… that comes from the North and the South… right?…

- Newsletter story http://www.newsletter.co.uk/news/regional/dup-ministers-took-keen-interest-in-approach-by-potential-nama-bidder-1-6867233 about the [some might say unhealthy] curiosity in Nama taken by some Ministers up North. There are [comfortably, for coach spectators down South] now familiar household names, as well as now expected whig of [pungent not] airs of something going on. But all to be revealed in some hearings that "NAMA has already said that it will not attend…" Nothing is confirmed, of course, so all questions to the Newsletter, please.

- And there is a blog posting something claimed to be documents https://jamiebrysonblog.wordpress.com/2015/07/24/paddy-kearney-released-from-cerberus-loan-debt-thanks-to-robinsons-influence-nama/ with an enticing headline "Paddy Kearney released from Cerberus loan debt thanks to Robinsons ‘influence’ #NAMA". Probably about more hearings that Nama will not attend. But again peppered with the Northern names so familiarly comforting to the readers in the South. That said, as stated above, nothing is confirmed, so all questions to the Northern Irish folks, please.

Yes, yes… keep in mind, the rates of return are what matters in Nama relation to us all… rest… why, yes - a roadkill of bad publicity.

Meanwhile, talking of bad publicity [unrelated to Nama], Drummer is itching to give Brian Cowen a proverbial black eye: http://www.irishtimes.com/news/ireland/irish-news/banking-inquiry-david-drumm-to-contradict-brian-cowen-1.2296583. Which, of course, won't be allowed to happen, because the narrative of 'Bad Anglo, Good Public Servants' [including those very absent-minded and forgetful politicians... remember the horrible thing they did to Uncle Bert by dragging him into the spotlight of the Banking Inquiry? Good thing that went nowhere, fast...] must be maintained as the sole explanation for the bankrupting of the nation, done, of course, by Anglo… solely… alone… without anyone's help.


You can follow trail of Nama-related stories on the blog from here: http://trueeconomics.blogspot.ie/2015/07/16715-thinking-of-nama-dont-forget-them.html or via search facility. Enjoy. And remember, there is nothing to worry about in any of this…

16/7/15: Thinking of Nama, don't forget them IBRC junior IOUs sale...

Having just posted on Nama's latest basking in the spotlight here, I came across this good old Namawinelake analysis of yet another debacle Nama was a player in: the IBRC junior notes sale.

Yes, that is yet another EUR440 million wasted, burned through, by the exceptionally skilled (otherwise, why would they enjoy such lavish pay) business brains in Nama that are also so concerned for maximising returns to taxpayers?

16/7/15: Nama: The Gift of Giving That Keeps on Giving...

While Greece is limping to its Bailout 3.0, our national heroes at Nama are busy fighting massive (California-sized) forest fires.

The Northern Ireland story (covered on this blog here) is refusing to go away:

1. An academic legal eagle exposition from the U.S. It's in NYTimes, which is on the 'radar' of all our development agencies (the folks that do have Good Minister's ear to whisper into).
2. And Irish News is covering the statement issued by Mr. Ian Coulter, the former managing partner of Belfast law firm Tughans. Sluggerotool.com covers same with extra details. Same covered in the Journal.ie piece here.
3. A good article from the Irish Times on Cerberus (the fund in the middle of Nama's Northern Ireland's case) and its use of Irish companies as vehicles for purchasing some EUR19 billion worth of assets. "Each of the Irish companies owns hundreds of millions, or in some cases billions, of euro in assets but has no employees in Ireland and in some instances, pays no corporation tax here. Cerberus has established at least 10 such companies in Ireland since it started its European property loan shopping spree in 2013, all of which appear to be owned by Promontoria, a Dutch fund that is 100 per cent owned by Cerberus Capital Management." 
4. Another person in the middle of Norther Irish deal - Mr. Frank Cushnahan was, it appears, a 'serial director' in "over 30 companies" according to this article in the Irish Times. Which, obviously, qualified him to advise Nama.
5. Deputy Mick Wallace went on to add to the story, claiming that Nama was aware of the suspicious aspects of transaction in the North, 'since January'. Nama categorically denied this.
6. The UK National Crime Agency will investigate Deputy Wallace's claims.

Meanwhile, back at the foot of this mountain of proverbial... err... at home in Dublin, revelations that our Government appointments to Nama posts could have been... surprise-surprise... political. Who would have thought this much?

There is a documentary trail now to prove that Nama was a party to Government-related discussions about 'fixing' the land market in the Republic. In this, the State's objective of attempting to control the supply of land for development and improve saleability of assets is uncovered and Nama cooperation is identified. Nothing like manipulating the markets as a direct policy objective, folks. We had, of course, back in June this year, Deputy Mick Wallace's allegations that Nama has some unorthodox dealings with the rental sector in Ireland, allegedly "a “cartel” of big property owners had driven up rental costs in Dublin" as “A small group of players now control a large chunk of the rental market in Dublin"... He also said Nama likes to sell properties in big blocks “that only investment funds, vulture funds, mostly from America, have the money to be buying”.

A good old article from Bloomberg archives covering another Nama deal fiasco. The deal was a dodo: Morgan Stanley bought about 220 million pounds of loans to West Properties for "about 65 million pounds ($103 million), or a 70 percent discount". Nama does not sell properties to parties connected to original developers... you know...

And to top it all, we have a new load of revelations from Mick Wallace, TD on further fun-under-the-sun relating to the Holy Grail of Irish Solutions to Irish Problems: the claim made under "Dáil privilege, ... a person in construction who wanted to exit NAMA and was asked to pay €15,000 “in a bag – in cash.”

Wallace also referenced recently the Chicago Spire case (covered earlier here in my compendium of 10 worst deals on Nama's record). A quote: "I would like NAMA to explain its approach when a bidder went to buy not the loans but the debt of the Chicago Spire, which was at $78 million plus costs which brought it to approximately $93 million. An investor sought to buy the debt, and this was every penny that was owed to the bank. This was not the reduced value, but the par value. In other words, this investor was prepared to pay the debt in full but NAMA gave it to Jones Lang LaSalle in New York to sell. This was a site in Chicago. Even if NAMA thought it could get more for it, it was not in New York that it would have got it. It would have been interesting if it had marketed it in Chicago. Why could NAMA not accept the debt being bought out? It is estimated that it was sold for $35 million. NAMA refused $78 million, plus the cost, and it accepted a figure in the region of €35 million. That was claimed to be in the interests of the taxpayer."

It is worth repeating that Nama has denied any wrongdoing in any of the above cases and has now requested that Gardai investigate Deputy Wallace's claims. All other players in the Northern Ireland saga also denied allegations.

Of course, when it comes to Nama asking Gardai to investigate N. Irish deal allegations and denying any knowledge of wrongdoing, without putting their intent and their denial into question, one might recall that Nama is fully aware of another wrongdoing relating to IBRC interest rate overcharging (as detailed and documented here: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html). But so far, Nama is in no rush to address the matter it has been notified about some ages ago (see details here: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html). Lest we forget, NAMA was the biggest buyer of the IBRC loans to which the interest overcharging applied, and, it is alleged (see here: http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html), this overcharging continued for loans transferred to Nama and still continues, despite the High Court Ruling of October 2014.

11/7/15: For Nama, Karma's a generous bitch...

Refusing to go away... Nama story of Stg7 million 'set-aside' and Stg15 million fees demand off Pimco (notified by the fund to Nama and seemingly ignored by Nama, except to the point of not involving Pimco in subsequent sale) is now rolling into investigation stages in the UK and, potentially, the U.S. http://www.independent.ie/irish-news/news/nama-debtors-helped-uncover-7m-payment-31368628.html.

Just because, as someone pointed out to me in poignant terms: Karma is a bitch... Well, it may be so, but so far, Nama is sitting pretty, with average salary for an employee in excess of EUR100,000 and golden handshakes for the departing employees averaging EUR34,000 and lavish pensions entitlements... Karma might be a bitch, but when it comes to Nama, it is a generous bitch at our expense...

You can follow back a list of my posts on Nama most recent controversies starting from here: http://trueeconomics.blogspot.ie/2015/07/6715-more-nama-and-ibrc-headlines.html.

Update: FT covering the Nama story: http://www.ft.com/intl/cms/s/0/11109080-26f2-11e5-bd83-71cb60e8f08c.html#axzz3faW3h8ag. Because Irish reputational capital yields have been too low of late...

6/7/15: More Nama and IBRC headlines

More interesting 'stuff' is seeping into the public domain from Nama and IBRC:

1. Irish Times on PIMCO reporting to Nama an un-solicited approach http://www.irishnews.com/news/2015/07/04/news/-unsolicited-approach-to-pimco-to-buy-nama-loans-161616/ "...at least one informal meeting took place at Stormont in late 2013 - thought to have involved Ian Coulter, Frank Cushnahan and a senior politician - with a view to Pimco acquiring Nama’s northern portfolio in its entirety". 
2. A report in the Indo on John Flynn's letter concerning IBRC overcharging: http://www.independent.ie/business/irish/banking-inquiry/bank-inquiry-refuses-to-probe-anglo-overcharging-31352266.html

On the first topic above, see the following links: http://trueeconomics.blogspot.ie/2015/07/4715-another-nama-story-that-wont-go.html

On the second story above, see the letter and the links posted here: http://trueeconomics.blogspot.ie/2015/06/1762015-mr-john-flynns-letter-to.html and BankCheck report reprinted here: http://trueeconomics.blogspot.ie/2015/06/21615-bankcheck-report-into-anglo-ibrc.html

4/7/15: Another Nama Story That Won't Go Away...

While everyone is obsessed with Greece, our little island is quietly slipping into yet another Nama-linked scandal. Here we go - some links on that, without a comment by me (for legal reasons, of course):

1. "Nama property sale: Mick Wallace claims Belfast firm had £7m in bank after deal"  http://www.bbc.com/news/uk-northern-ireland-33372786
2. "Secret tapes stored on £7m Nama deal"  http://www.irishnews.com/news/2015/07/04/news/secret-tapes-stored-on-7m-nama-deal-162532/
3. "Nama adviser had concerns over property sale 'wall of silence'" http://www.irishnews.com/news/2015/07/04/news/nama-adviser-had-concerns-over-property-sale-wall-of-silence--162165/
4. "Ian Coulter named over disputed fees linked to Nama sale" http://www.irishtimes.com/business/commercial-property/ian-coulter-named-over-disputed-fees-linked-to-nama-sale-1.2273084
5. "Mick Wallace’s claims prompts calls for thorough PSNI inquiry" http://www.irishtimes.com/business/commercial-property/mick-wallace-s-claims-prompts-calls-for-thorough-psni-inquiry-1.2272788
6. "Profile: Who are Nama NI appointees named by Wallace?" http://www.irishtimes.com/business/commercial-property/profile-who-are-nama-ni-appointees-named-by-wallace-1.2272609
7. "Northern venture controversial from the outset: Nama's activity in the North has been plagued by questions" http://www.irishtimes.com/business/commercial-property/northern-venture-controversial-from-the-outset-1.2273900
8. "Cerberus denies improper payments or fees linked to Nama deal: Private equity firm ‘deeply troubled’ over allegations made in Dáil by Mick Wallace" http://www.irishtimes.com/business/commercial-property/cerberus-denies-improper-payments-or-fees-linked-to-nama-deal-1.2273101
9. 2006 report on the Cerberus links to a senior US politician: "The congressman & the hedge fund" http://usatoday30.usatoday.com/news/washington/2006-01-19-cerberus-cover_x.htm
10. And while some of Irish mainstream media is talking about Mick Wallace facing a 'grilling' in the Northern Ireland (e.g. http://www.independent.ie/irish-news/politics/wallace-to-face-grilling-in-north-over-nama-claim-31351195.html), much of the Northern Irish media is talking about investigating his claims: http://www.belfastlive.co.uk/news/belfast-news/psni-urged-probe-claims-belfast-9578876. Which is sort of a big difference in interpreting what is happening: grilling someone suggests they are the wrong-doer, investigating someone's claims suggests looking into the wrongdoing alleged by someone. Get the 'angle'? Back to no comment promise...

22/6/15: Of Nama and Cromwell via GAA

A nuclear commentary on Nama from GAA (of all places): http://www.independent.ie/sport/gaelic-games/gaelic-football/colm-orourke-nama-overseeing-greatest-plundering-of-irelands-land-assets-since-cromwell-31317345.html

Expect a token handout from Nama to GAA next...

17/6/2015: Mr. John Flynn’s Letter to the Banking Inquiry

Here is a letter by Mr. John Flynn informing the Banking Inquiry Chairman, Ciaran Lynch, T.D. about the issue of overcharging at the Anglo Irish Bank, subsequent extent of the problem in legacy-resolution institutions and detailing the substance of the developments in the U.S. court case relating to Anglo overcharging:

Note: I was informed by Mr. Flynn that he received no substantive reply to his communications to the Banking Inquiry.

Note: You can follow the topic of overcharging and other sharp practices and questionable strategies deployed in the post-banking crisis resolution process in Ireland here:

1. Deputy Peter Mathews June 2015 speech on the issue of overcharging by Anglo, its legacy and issues relating to Nama was covered here: http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html
2. My summary view of the Anglo’s sharp practices toxic legacy: http://trueeconomics.blogspot.ie/2015/06/11615-anglos-toxic-legacy-it-is-still.html
3. Mr. Declan Ganley’s Affidavit from 2013 concerning overcharging: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html
4. Deputy Mick Wallace’s speech in June 2015 delivered in the Dail on the subject of Nama and Anglo legacy with my introduction of the concept of value destruction: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html 
5. Mr. John Morrissey’s legal letter on overcharging: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html 
6. Nama value destruction contextualised in a sample of 10 deals concluded by the agency: http://trueeconomics.blogspot.ie/2015/06/17615-10-cases-worth-asking-nama-about.html
7. Mr. John Flynn’s letter to the members of the Dail covering Irish and U.S. evidence on overcharging: http://trueeconomics.blogspot.ie/2015/06/17615-mr-john-flynn-letter-to-tds-on.html 

17/6/15: Mr. John Flynn Letter to TDs on Anglo/IBRC/Nama Overcharging

Here are the direct exerts from the correspondence sent by Mr. John Flynn to a number of TDs in relation to the Banking Inquiry on December 22, 2014. Italics in bold are mine (for emphasis). 

“I am attaching various information …which results from BankCheck …report into overcharging at Anglo Irish Bank.  Following a three year (and ongoing) investigation, I am attaching its interim report of May 2014.  

The overcharging identified continues to fall on borrowers to this day through Anglo Irish Bank legacy loans inherited by IBRC, NAMA and the various Private Equity funds that have acquired them, because both methods of overcharging that were discovered continue to rack up excess interest.”

Note: this is aserious allegation that echoes other claims submitted on the subject. The reason is simple: investment funds acquired distressed and other loans priced based on current interest yield (at least in part). If the current yield incorporated overchraging, and this was not disclosed to the buyers of the assets, then the sale of these instruments can be of questionable validity and can be potentially contested by the buyers of these assets. Likewise, any parties that continue overcharging while holding the loans can also be subject to legal action and incur costs of such practice. Beyond continued overcharging, the legacy of this sharp practice by the Anglo is also contained in those cases where a new (legitimate) interest rate applies on past interest charges incurred under the TIBOR. The can of worms gets bigger and bigger with every day the situtation remains unresolved.

“As admitted when questioned by us in the IBRC Chapter 15 Bankruptcy proceedings in the United States Bankruptcy Court for the District of Delaware, on October 8th 2013, the IBRC Special Liquidators stated that IBRC “did realise that it had an overcharging issue”. The IBRC purportedly set up a steering committee, chaired by Mr Mike Aynsley to deal with that issue. Reports were prepared and finalised by the end of 2010. The said reports were then forwarded to the board of IBRC, the Regulator and the Central Bank for their review and comment in order to, “make sure that everybody was comfortable in the work that was undertaken, and trying to get to the bottom of the cost of funds issue, which they (sic) contractual rate of interest that was being charged was different than the actual rate of interest being charged.” That report and the report of the Special Liquidator which examined the the IBRC report has never been published and their contents are unknown to the public.”

So what we have here is the allegation that:

1) IBRC knows and recognises the problem;

2) IBRC – alongside others – have notified the problem to the authorities;

3) No action has been taken by anyone; and

4) No action has been taken identify other injured parties and to inform the public.

Draw your own conclusions what these points, taken together, amount to.

There is more when it comes to the overcharging allegations: “The attached BankCheck report mainly addresses the matter of manually altered systemic LIBOR/DIBOR/EURIBOR manipulation from 1990 to 2004 and not the 360/365 systematic computer generated overcharging from 2002 to date, whereby the bank overcharged its customers with an extra 5 days interest per annum - as held by Ms. Justice Finlay Geoghegan in her Judgment of October 2014 in Anglo Irish Bank v John Morrissey (Record No. 2011/1548). The reason for the limitation of the BankCheck investigation is that while the 360/365 "scam" could possibly be explained away as "a computer error”  the daily random manipulation of the LIBOR rate could not.  The Report is currently being updated, as further information has been made available to us since May 2014.”

This raises the second point of overcharging – on top of the original. Not only Anglo imposed false charges on its customers, it also altered the base (the duration) over which the interest accrued. By switching from 360 days contracted arrangement to 365 days basis for calculation of interest charges, while retaining the rate, Anglo de facto, it has been found, charged an extra 5-days/per annum premium on the loans. Explaining this as a computer error is a bit generous, but even if we allow for such, there is a pesky issue of compensation for an error and culpability. After all, remember an actual computer systems error in the case of the Ulster Bank for which the bank was fined heavily and paid out compensation to its clients?

Here is an interesting bit: per Mr. John Flynn, “I have not included back up data (including fallacious daily LIBOR term sheets published from within Anglo Irish Bank) with this initial email as it is voluminous, but it is available …. if you wish to pursue the matter further.”

According to Mr. Flynn, neither the banking inquiry, nor anyone else contacted in the Dail, have requested the evidence. Worse, with exception of standardised replies from two TDs, there has been no engagement with the author of the statement and the holder of the evidence.

Please note, the allegations contained in the quotes below are those of the author of the letter, and I am simply providing these clearly separate from my comments on these.

You can follow the topic of overcharging and other sharp practices and questionable strategies deployed in the post-banking crisis resolution process in Ireland here:

1) Deputy Peter Mathews June 2015 speech on the issue of overcharging by Anglo, its legacy and issues relating to Nama was covered here: http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html

2) My summary view of the Anglo’s sharp practices toxic legacy: http://trueeconomics.blogspot.ie/2015/06/11615-anglos-toxic-legacy-it-is-still.html

3) Mr. Declan Ganley’s Affidavit from 2013 concerning overcharging: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html

4) Deputy Mick Wallace’s speech in June 2015 delivered in the Dail on the subject of Nama and Anglo legacy with my introduction of the concept of value destruction: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html 

5) John Morrissey’s legal letter on overcharging: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html 

6) Nama value destruction contextualised in a sample of 10 deals concluded by the agency: http://trueeconomics.blogspot.ie/2015/06/17615-10-cases-worth-asking-nama-about.html 

17/6/15: 10 Cases Worth Asking Nama About...

So we are having an inquiry into IBRC on foot of an allegation that the 'bank' sold Siteserv asset at a loss to the taxpayers of some EUR10 million or so compared to another bid. Or you might want to hike that loss to EUR15 million if you consider a simple fact that EUR5 million gifted to the Siteserv shareholders in this deal was at best bizarre, at worst negligent.

Then again, we are not having an inquiry (yet) into the ways in which Nama has been trading.

May be we should. For one, there are questions worth asking in the context of economic value destruction concept outlined in this post: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html

Why? Because there are some, shall we say, slightly exotic things that might be happening over there.

Define: value destruction as an action or a strategy for managing assets that results in asset value realisation at sale that is below the alternative value that can be obtained by adopting different approach to managing the asset. Now, take some public domain information:

1) In late January 2014 Nama sold project Holly portfolio of Irish non-performing loans to Lone Star Funds for "around €220m and reflecting a circa 41% discount" on par value of the loans. "The nominally-valued €373m Project Holly is comprised of 28 commercial property investment and development loans all lent to Sean Reilly’s McGarrell Reilly Group, secured by around 40 assets," as reported in CostarFinance (http://costarfinance.com/2014/01/23/lone-star-wins-namas-project-holly-loan-sale-paying-around-e220m/). In March 2015 Lone Star Funds sold Project Holly portfolio to US fund Starwood Properties for €350 million. http://costarfinance.com/2015/03/12/starwoods-mortgage-reit-acquires-lone-stars-dublin-office-pool-in-e350m-debut-equity-investment/. Which means the vultures got a return of 59% over 13 months or cool annualised rate of return of 53.5%. That is doubling your money every 16 months. The portfolio included already developed and operating properties, so Lone Star did not add any value to them to make this sort of a return - it simply put up funds in early 2014 to cover the purchase and the sat on the assets for just a year before flipping them. Thus, Nama lost taxpayers a cool EUR130 million and it also wasted EUR130 million of Sean Reilly’s asset. Question is - any inquiry into this transaction by Nama forthcoming? Question two is: did Sean Reilly incur a claim from Nama due to this loss?

2) Property at One Warrington Place, Dublin 2 was sold by Nama to the US fund Northwood Investors for €27 million on 25th of April, 2012. Based on reports in the media, Nama provided 'staple finance' on the deal, whereby it took an unknown percentage of the final price paid as a deposit from the buyer, and allowed the buyer to repay the remainder of funds over some period of time. In July 2014, the building was sold for €42 million to Irish Life http://www.d2private.com/portfolio/one-warrington-place-dublin-2/. This implies an annualised rate of return of 27.2% doubling your money every 31 months. Zero value was added to the building by Northwood as it was fully leased. Given this was a staple finance deal, Northwood most likely had to put down not much more than a few million for taking charge of the asset. Again, we have no idea how the original developer was treated with respect to this loss that Nama crystallised, but we do know that taxpayers got shortchanged on some EUR15 million. As an aside, here is Namawinelake description of the 'financing' side of this deal: "the Northwood deal was NAMA’s first vendor finance deal, whereby NAMA, accepted part of the purchase price by way of a loan. The interest on the loan would have been around 3%, and repayable within five years. The property was yielding 7.25%, based on a €27m purchase price." So Nama 'gifted' Northwood a guaranteed 4.25% uplift via staple financing arrangement on the amount covered by deferred payment - a margin that could have remained taxpayers'. Reports had it, Northwood only put EUR8 million down on its EUR27 purchase.

3) The Forum Building, IFSC, Dublin 1 was sold by Nama for €28 million to Atlas Capital Group (https://namawinelake.wordpress.com/2012/12/30/nama-sells-dublin-office-block-for-e28m-with-eye-watering-10-yield/) in late December 2012. Subsequently, it was flipped for €37.8 million to Hibernia REIT (http://www.irishtimes.com/business/commercial-property/hibernia-reit-acquires-forum-building-in-ifsc-for-37-8m-1.1904874) in late August 2014. There was no value added to the building as it is fully let to Depfa Bank on an annual rent of €40 per square feet on lease which expires in 2029. So over 20 months, the return on this purely speculative holding totalled 89% with annualised rate of return of 46.5% or doubling of your money in roughly 18 months. Taxpayers lost EUR9.8 million.

4) Per Irish Independent report: "The site, at 1-6 Sir John Rogerson's Quay in Dublin's Docklands was sold by NAMA to Australia-based student accommodation firm Urbanest for €7.5m in June 2013. Property investment company Hibernia Reit then paid €17.75m for the same site in August this year - a 136pc increase." http://www.independent.ie/business/irish/nama-site-was-sold-for-double-the-price-after-barely-a-year-30680193.html The set of transactions involving the site is quite bizarre. Urbanest bought the site with a plan to develop student accommodation. It failed to secure planning permission for that and sold the site with no new value added to it for "close to EUR10 million" to "a consortium of private investors" February 2014. Four months later, with no value added to it, the site was resold once again to Hibernia Reit for €17.75m. Adding insult to the injury, the site "has planning permission for 102,000 sq ft of offices, about 5,000 sq ft of retail, two live & work units and one residential unit along with 34 parking spaces. The planning permission expires in 2018". Which means large share of the site value is already attached to it (planning permissions attached to sites carry a large share of the value of the site). At least Urbanest were trying to add more value to the site, but - here's additional farce - it couldn't. Taxpayers lost EUR10 million.

5) Dock Mills, Grand Canal Dock, Dublin 2 was sold in 2013 by Nama to the developer Chris Jones for €1.3 million. Spent €1.4 million converting to offices and then sold on for €13 million to Google in January 2014 (http://www.irishtimes.com/business/commercial-property/google-buys-former-warehouse-at-grand-canal-dock-1.2081392). At least Jones added some value to the building, raising his original investment a return of 381 percent in one year. Taxpayers loss (remember, Nama employs 'the best specialists in property markets' available in Ireland, who, in theory, should have been able to do what Jones did many times over) EUR12 million.

6) There is a big issue with Nama operations as the example of the Battersea Station in London exemplifies. Nama held a loan attached to Battersea that is 'acquired' for roughly EUR480mln. Nama sold the loan in a fire sale in June 2012 for EUR600mln, making, officially a 'profit'. The loan recovered 100% of the value. However, Battersea is expected to generate EUR9-10 billion in profit for the buyers, led by SP Setia. The site is 40-acre sized South Bank of the Thames location with a planning permission for 8.5 million sq.f. of development attached to it. At the time of sale, there were plans afoot for the Tube new northern line extension and a pedestrian bridge linking Battersea with the northern part of London. In other words, the key value points related to EUR9-10 billion in expected profit have already been in place. The sale by Nama represents a clear case of opportunity cost being generated to expedite sales of non-Irish properties under the pressure from the Troika for Nama to generate early disposals. It is also a sign of just how poor Nama development opportunity foresight is. In a joint venture as a passive participant, Nama could have expected to get around 20 percent  share of the profit. Assuming net profit of around EUR5-6 billion, that means an opportunity cost of early disposal of some EUR1.0-1.2 billion. There was virtually no cost for Nama to carry the loans into longer term development. Even if Nama were to hold off on selling the site for another 12-24 months, the likely foregone return on the site would have been some EUR120-150 million. (http://www.independent.ie/irish-news/nama-lost-a-fortune-on-power-station-sale-29950832.html)

Update: in response to some queries about Batttersea Station sale, here are couple of links: http://www.costar.co.uk/en/assets/news/2012/July/EPF-SP-Setia-and-Sime-Darby-complete-400m-Battersea-Power-Station-buy/ and http://www.irishtimes.com/business/commercial-property/nama-lloyds-to-seek-buyer-for-battersea-power-station-1.10783. Contrary to the arguments presented to me by some readers, Nama was in the driving seat of the process, at least Nama is the one that ended up facing the risk of defending the sale: https://namawinelake.wordpress.com/2012/05/01/treasury-holdings-sues-nama-for-hundreds-of-millions/. 

7) Nama sale of the Chicago Spire was a massive miss. Chicago Spire is a large development project located in the U.S. city of Chicago, on 2.53 acre site located immediately north of the Chicago River and bisected by the Lake Shore Drive. The site is zoned as a planned development with present zoning allowing for FAR of 25:1, which means the site can sustain 2.75 million sq.ft. of improvements. Nama-held liabilities associated with the Chicago Spire totalling US$93 million, including rolled up interest. Liabilities to the contractors added some USD22 million but were not held by Nama. CBRE estimated in January 2014 the value of the Chicago Spire site and associated assets at US$327 million at the upper envelope of valuations and with lower applied density at the lower envelope of US$255 million. Nama refused to fund further development of the project or to allow such funding to be raised by the developer in the markets. Nama sold USD93 million (EUR68.4 million) of its loans at close to 40 cents on the dollar, for USD37.2 million (EUR27.4 million). Many turns and twists in this saga aside, the loss to taxpayers on this transaction by Nama can be computed, at lower end, as the loss on the fact that the original developer had a connected party willing to bid some USD110 million on the project and that CBRE's lower end estimate is at USD255 million. Which means a conservative loss of some USD70-USD185 million. This disregards the fact that the Spire had pre-sold a large share of properties to be developed, and Nama actions on the Spire forced these pre-sales to be cancelled.

8) There is an issue of Nama interest rate hedging, which was costing the agency, at around 2012-2014, some 1% of the interest-paying bonds, or roughly EUR200 million per annum. Not exactly cheap pennies when one considers that the rates have been declining, not rising. Here's a living example: in 2013 Annual Report, Nama shows that it made gross profit of EUR6 million on its underwriting the IBRC. But Nama hedging of the interest vis-à-vis IBRC cost the agency EUR8 million. Net result - a loss of interest of EUR2 million. Nama also rung in administrative expenses relating to IBRC of some EUR6 million in 2013, which means total net loss for Nama from its dealings with IBRC stood at EUR8 million in that year. Total cost of dealing with IBRC for Nama was, therefore, greater than the total cost charged by IBRC liquidators.

9) In CAG report looking at Nama operations over 2010-2012, the agency was shown to be net yield of 5% on its holdings of rented properties. Net of funding cost, the yield was around 4% pa. At the same time, Nama was aggressively disposing of rented properties. The only way that strategy made sense was if Nama expected declining capital values in the markets where it was selling properties: U.S., UK and (smaller segment) Ireland. Nama was, during that time, of a view that property prices will rise in all three markets, directly contradicting the logic for accelerated disposal. Namawinelake provided an example of "the madness of NAMA’s strategy to dispose of rent-producing properties. Take a €100m commercial property which is generating €5m per annum. NAMA’s cost of funding is 1% or €1m. So,NAMA is generating a profit of €4m. In addition, the likelihood is that the value of the underly-ing property is increasing. Commercial prices are up 7.7% in the UK in the 12 months to April 2014, commercial prices in Ireland are up 14.1% in the four quarters to Q1,2014. So, by selling the property at the start of 2013, NAMA will have foregone €4m in profit in 2013, [and] the benefit of the capital appreciation of €7.7-14.1m." Chop change this ain't: hold a rent-yielding asset for an extra year, get a return of EUR11.7-18.1 million on each EUR100 million, net of all costs. Speculation aside, actual numbers: Nama's interest income was down 20% in 2013, but Nama's non-disposal income (primarily income from rents) was down €400m or 33% in 2013, having declined b EUR300 million annually in 2010-2012. That's cool EUR1 billion foregone in just 3 years in rental income alone, and capital gains lost of some 21% - estimating very conservatively.

10) Small, but visible, Booterstown Marsh site was sold by Nama for EUR400K and resold less than two years after that for over EUR1 million.

You can follow the topic of overcharging and other sharp practices and questionable strategies deployed in the post-banking crisis resolution process in Ireland here:

1. Deputy Peter Mathews June 2015 speech on the issue of overcharging by Anglo, its legacy and issues relating to Nama was covered here: http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html
2. My summary view of the Anglo’s sharp practices toxic legacy: http://trueeconomics.blogspot.ie/2015/06/11615-anglos-toxic-legacy-it-is-still.html
3. Mr. Declan Ganley’s Affidavit from 2013 concerning overcharging: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html
4. Deputy Mick Wallace’s speech in June 2015 delivered in the Dail on the subject of Nama and Anglo legacy with my introduction of the concept of value destruction: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html 
5. John Morrissey’s legal letter on overcharging: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html