NAMA to face Public Accounts Committee on recently published progress report

Chairman of the Committee John McGuinness TD said: “On a positive note, the report observes that unless there is a further significant economic downturn in the next few years, NAMA will generate sufficient cash to meet its minimum key objective of redeeming the senior debt with a margin of comfort of 7%, by 2020. The C&AG was also satisfied that NAMA should achieve its projected level of non-disposal receipts from debtors from 2014 on. Nevertheless, NAMA faces a significant challenge in achieving a balance between generating cash from early disposals and holding properties until prices reach what NAMA considers to be their stable market value. There is also a continuing challenge in maximising the income producing potential of assets balanced against the optimum disposal value, which can be obtained.

“The report highlights a number of key issues, which the Committee may wish to explore further. NAMA is required to obtain the best achievable financial return for the State. A key performance measure for investments is the rate of return and therefore the C&AG has recommended that NAMA set an expected or target rate of return, a metric which to date had not been set. The CEO did not accept this recommendation as he is of the opinion that it would act as an unnecessary constraint on NAMA’s flexibility. The Committee may wish to examine the merits of this recommendation and discuss the reasons why NAMA have rejected it.

“The Board does not set benchmarks against which to measure NAMA’s performance in respect of rental yields that its debtors' assets are achieving and therefore the C&AG has recommended that NAMA set a benchmark.
 
“The extent to which amounts approved for retention by debtors to develop or enhance properties is not known. This is because NAMA does not maintain a central record of actual retentions. This means that NAMA does not know how retentions have been applied or to what extent. NAMA has agreed to compile this information.

“The C&AG noted an inverse relationship between the level of debt for an individual debtor and the relative impairment charges for each category. NAMA has agreed to review the bank-managed portfolio and so progress on this will be of interest and how any outcome has effected impairment.

“NAMA has projected that sales proceeds between 2013 and 2016 will be in order of €22.9 billion. Actual receipts in 2013 were €3.7 billion, leaving a figure of €19.2 billion for the period 2014 to 2016. Given the high level of disposals in the lucrative London market up to now, this means that the majority of sales will have to come from the Irish market. The C&AG has noted that this is an ambitious timeframe for such a high level of sales. The Committee will be keen to examine the basis for NAMA’s projections in this regard and scrutinise the values and locations of the underlying assets earmarked for disposal within this timeframe.”

This meeting will start in Committee Room 1 at 10am on Thursday, 29th May 2014.

Committee proceedings can be followed live here here. 

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