NAMA “not interested in keeping Zombie Hotels on life-support”
One year into its life, the National Assets Management Agency has acquired €72.3 billion in loans from the five participating institutions in return for some €30.5 billion in government-guarantee securities for use as collateral with the ECB, stated NAMA Chairman Frank Daly at this year’s Licensed Vintners Association Annual Members’ Lunch in Bewleys Hotel, Ballsbridge.
29 March 2011
NAMA now has some 850 debtors on its books and it expects to acquire another €3.5 billion in additional loans (currently in litigation) over the coming months.
Between them, the largest 30 debtors account for around €27 billion of the loans acquired, representing around 40 per cent of NAMA’s property portfolio.
Of the 30 debtor reviews completed to date by NAMA, 11 have completed Memoranda of Understanding agreements, six are at the final stage of agreement, another 11 are still in negotiation and two have been wound up.
“Each of the Memoranda of Understanding agreed with debtors includes a schedule for the orderly disposal of properties over a number of years. This disposal process will commence very soon and we expect that it will provide significant momentum to the property market,” he told the vintners, adding, “The very real difficulty and market reality, however, is the lack of finance available from the banking sector to potential purchasers and this presents a serious challenge to achieving NAMA’s objectives”.
This lack of finance from the banks, which took money from NAMA and opted to repay the Eurpean Central Bank rather than lend it out to businesses here, “represents a serious challenge to get money moving again,” he added.
In the year or so to the end of February, NAMA paid out nearly €730 million to fund the completion of nearly-completed structures and set 41 receiverships in motion.
In the hospitality sector, while there are few loans involving pubs on NAMA’s books (who’s brief is to deal with land and development loans only) Frank Daly is aware that the hotel sector is suffering from overcapacity and he speculated on NAMA’s role in reducing this, especially as the increase in capacity has co-incided with tourism numbers falling from 7.7 million in 2007 to 5.6 million in 2010.
NAMA has 83 hotels on its books, three of which have closed “… with more likely to close”.
But the number of hotels on its books represents less than10 per cent of hotels in the country, he pointed out.
The Agency’s only interest here is in an operation’s ability to service debt. It is not interested in keeping ‘Zombie Hotels’ on life-support and believes that “much of the so-called predatory pricing” is driven by non-NAMA hotels.
The Agency divides hotels into those impacted by cyclical factors such as the current recession and falls in tourism and those with permanent factors such as those that have been badly sited or have no realistic prospects.
Frank Daly summed up by pointing out that as NAMA did not set the base rate for valuation in the domestic market until November 2009, at a time when property values had already fallen by 50 per cent, the outlook was not as pessimistic as some had suggested.
NAMA has offloaded some €2.7 billion of property assets so far and expects to be in existence seven to 10 years.