Thursday, 5 July 2012

Questions (73, 74)

Bernard J. Durkan

Question:

73 Deputy Bernard J. Durkan asked the Minister for Finance the degree to which the National Asset Management Agency owned properties are expected to realise by way of sale or other methodology a price above or below that paid by NAMA originally; and if he will make a statement on the matter. [32945/12]

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Bernard J. Durkan

Question:

74 Deputy Bernard J. Durkan asked the Minister for Finance if there are any recent indicator to the effect that properties held by the National Asset Management Agency in the short, medium and long term are likely to achieve a profit for the organisation in accordance with expectations as set out during the passage of relevant legislation to the effect that property price inflation over a ten-year period would result in a profit for the organisation; and if he will make a statement on the matter. [32946/12]

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Written answers (Question to Minister for Finance)

I propose to take Questions Nos. 73 and 74 together.

I have advised the House previously that the NAMA Board has recently completed a review of its strategy in light of developments in the Irish economy and in the property markets since it published its first business plan in July 2010. Key factors considered by the Board as part of its strategic review include the performance of the various economies in which its debtors' assets are located, the timing and sustainability of any recovery in the property market in Ireland, the sustainability of the UK property market, the availability of finance and the extent to which it can maximise the level of income produced by the property assets securing its loans. On the basis of this review, NAMA has re-affirmed to me its expectation that it will at least break even over its projected ten-year lifetime. This means that it is on course to recoup for the taxpayer, at minimum, the Senior Bonds issued as consideration for acquired loans, the working and development capital expenditure advanced to debtors and the recovery of its operating costs.

Whilst it is difficult, in the middle of 2012, to take a definitive perspective on what will happen in the property markets over a ten year period, I concur with the view taken by the NAMA Board and would ask the Deputy to consider the following factors, which provide a sound basis for concurring with the Board's assessment.

Having completed due diligence and having had the opportunity to fully assess its property portfolio in more detail, NAMA advises over 70% of its portfolio comprises completed investment and residential properties; and that the vast bulk of assets are in or close to the main urban centres in Ireland and in Britain. In Ireland, over 90% of properties are located in the key growth centres of Dublin and surrounding counties, Cork, Limerick and Galway. The same pattern is evident in Northern Ireland, where NAMA assets are primarily located in Belfast and in contiguous centres, and in Britain where NAMA's portfolio is characterised by a pronounced London bias.

NAMA's strategy, which is predicated on a taking a longer-term view of its property portfolio, is tailored to the specific circumstances of the markets in which it operate. NAMA advises that over the short-term it is selling in those markets where there is demand and liquidity, which accounts for the fact that over 80% of completed sales since inception relate to assets located in Britain, and is otherwise developing and enhancing assets under the control of its debtors and receivers, particularly in Ireland, to optimise the value of these assets over the medium and long term.

The Deputy will note for instance the Agency's recent announcement of its intention to invest up to €2 billion in development capital over the period to 2016 to preserve, enhance and complete residential and commercial projects in Ireland and to develop greenfield sites to meet foreseeable demand. The Agency is also working to otherwise increase the attractiveness of its assets and also working to address outstanding legal, title, planning and construction deficiencies where these exist. Its objective is to add and create value across its portfolio to ensure the maximum obtainable realised proceeds from the ultimate disposal of each asset. Furthermore NAMA is addressing the lack of credit available by making up to €2 billion in of vendor finance available for sales of commercial property. NAMA is not immune to what is occurring in the wider national and international economies.

On the basis of these factors I reiterate my confidence in the NAMA Board's assessment that it will, at minimum, achieve a break even outcome over its lifetime by ensuring the maximum achievable value from its property portfolio.