Letting Developers Off The Hook

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And much more besides.

Yesterday NAMA chairman Frank Daly (above) spoke to Vincent Browne (top) on foot of the release of NAMA’s 2011 annual report in which NAMA said it made a profit of €247million for 2011.

Vincent Browne: “Properties originally valued at €74billion were transferred to NAMA and NAMA paid €31.8billion for those loans and assets. What are they worth now?”

Frank Daly: “What they’re worth now, on our books, is probably about €27-€28billion. That takes account of properties that we have sold obviously in the past two and a half years. Put it also takes account of impairment charge provisioning that we have done over the last two years. We’ve done the impairment charge simply because property prices have continued to deteriorate and it’s only correct that we should actually make provision for that. Our approach to that has been quite conservative, quite prudent because we want to be as objective as we can about the figures that are in our accounts. And, you know we operate under IFRS and those accounts are audited. The impairment provision is rigorously evaluated by ourselves, by our own auditors and by our external auditors.”

Browne: “So there’s a loss of about €4 billion. At least. According to your figures.”

Daly: “On the books there is a loss of about €4billion.”

….later

Browne: “We were told that when NAMA was set up that developers would be pursued for every last penny. That we’d get back the €70 billion that we owed or as close to it as possible – not just the €31.4 billion or whatever or €31.8billion that NAMA paid for the properties but the whole lot. Now we hear that ‘No, no, NAMA isn’t bothered about going after every last penny. It merely wants to cover the funds that it paid for these properties. And let the banks, which are largely owned by the people of Ireland, let them suffer the losses.”

Daly: “No, NAMA is realistic, right? We have never said that we would not pursue everything and we still say that to the greatest extent that we can, that we will pursue every penny. But we’re also realistic enough to know that at the end of the day, you know, we pay 31.8 billion for those loans on the basis that that’s the value of the assets backing them up, the securities backing them up. So that’s the sort of bottom line figure. That’s the one we are very definite we’ll collect and is realistic to collect.”

Browne: “You mean that you’re hoping to collect.”

Daly: “Well it’s more than hope.”

Browne: “As of now you’re saying there’s a deficit of about €4 billion?”

Daly: “This is based on analysis, this is based on our strategic planning. This is based on the very rigorous granular evaluation of our portfolio that I just talked about. Will we get more than the €31.8billion? Will we pursue the whole €74? It’s our intention to pursue as much as we can but I mean it would be disingenuous for me to sit here and say to you, or say to anybody, that we’re going to get back the €74 figure, we’re not.”

Browne: “Frank, you’ve given the impression to several of the developers who lost a fortune on these things that you’re really only looking for the amount that NAMA paid.”

Daly: “No, no, sorry.”

Browne: “I got that impression.”

Daly: “No, if you were in here at meetings with developers…”

Browne: “I’d love to. Are you inviting us in, wha’?”

Daly: “I’m not inviting third parties yet. We don’t need a referee right now. They would tell you that all our focus is still on getting as much as we possibly can. But I have to be realistic. NAMA has to be realistic, you know. If the €74 billion were recoverable, you know, there wouldn’t really be a need for NAMA in the first place. You could have just left the whole thing out there with the banks and eventually it would come back. We’re realistic, but rigorous. We’ll chase what we possibly can.”

Browne: “How many of the developers, in respect of the people you’ve been dealing with. How many have you forced to redress property transfers? In other words a lot of them have transferred property to their spouses..And how many of them have you gone after and insisted properties be transferred back?”

Daly: “It’s one of the main focuses of every, of discussion of every business plan of every debtor, you know? What did you transfer in the last five years, seven years, eight years? Was it transferred with a view to taking it away from NAMA? And, if so, bring it back, right. We have brought back between, actual returns of property and charges we have got over property, something like half a billion to date. And I expect that there is a bit more to come there yet. And that’s from a variety of developers because we won’t do business with them. We won’t do business with them unless they bring back assets they transferred.”

Browne: “But you’re doing business with a lot of developers and you’re paying them a lot of money – in some instances up to €200,000 a year, you’re promising them bonuses, there’s a chance they might get their properties back – this isn’t what we were told would happen.”

Daly: “Well, first of all, we’re not, we’re paying three people or indeed, we’re allowing three people out of the overheads of their businesses to take salaries of €200,000 a year. In each of those cases, those individuals are managing now for NAMA, for the taxpayer portfolios worth a billion, a billion and a half, two billion.”

Browne: “Why should we be paying someone €200,000 – people who contributed to the wrecking of the economy. What are we doing paying them €200,000 a year?”

Daly: “It’s a very valid question. And I, and my colleagues in NAMA, would ask ourselves the same question. But, you know, at the end of the day, we’re a commercial organisation. We have to get the best financial return we can for the taxpayer. And we, everyday, have to ask ourselves what decision do we make that actually does that, that gets that. And in the case of these developers who are managing their businesses, who know their business, grew up with the business, made some spectacular mistakes along the way. But if we take the view that they are in the best place to work it out to the benefit of the taxpayer and if we take the view that they will cooperate with us then we allow them to take a salary. I don’t think anybody likes it, you don’t like it, I don’t think the public likes it, I don’t particularly like it but it’s a practical, commercial decision.”

Browne: “Somebody has said that NAMA has become the train driver of the greatest gravy train ever in terms of the fees you’re paying accountants, many of them whom were accountants and auditors of the banks. The fees you’re paying solicitor firms, many of which were also advising many of the developers and some of the banks. The fees you’re paying barristers, estate agents and all of that. What do you say to that?”

Daly: “I say two things. First of all we pay fees because we have to pay fees. We need legal advice, we need accounting advice, we need taxation advice. The alternative is that we create a massive quango in NAMA by employing loads of people in those disciplines. And in a lot of those areas, we only need those skills on a temporary basis. So certainly while last year and the year before, as we were bringing the loans across and doing legal due diligence, we would have paid out a lot in fees for legal and accountancy services. That is in some way non-recurring costs and some of it will not be there in the future. As to who we employ, you know, we go through a public procurement exercise, we get the best competitive rates we can. At the end of the day though we need the best advice we can get.”

Daly later admitted the average pay for 214 NAMA staff members is €103,000.

Previously: So You Saw Harry Crosbie On The Saturday Night Show, Right?

Nama’s Blind Side

Suspicion Lingers Over The True Financial Condition Of Nama (NamaWineLake)