NAMA - Three years on• REITs – Real Estate Investment Funds – another vehicle for attracting...
Transcript of NAMA - Three years on• REITs – Real Estate Investment Funds – another vehicle for attracting...
NAMA - Three years on
Brendan McDonagh
Chief Executive Officer
Wednesday 17 April 2013
www.nama.ie
Seminar organised by the Embassy of Ireland in Madrid together with the SIBN
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Response to Irish banking crisis
1 • Irish Government guarantee for banks liabilities of €440 bn - September 2008.
2 • External examination of loan books of all institutions which partook in the
guarantee scheme in October/November 2008.
3 • Recapitalisation of certain financial institutions – December 2008 onwards.
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• Nationalisation of Anglo Irish Bank - January 2009
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• Review of options on how to deal with impaired assets – February/March 2009
• Plan to establish NAMA as Asset Management Agency – April 2009
Key milestones
April 2009: Plan to establish NAMA announced
July 2009: Draft Legislation published
September 2009: Legislation introduced into Parliament
November 2009: NAMA Act passed into law
December 2009: Board and CEO appointed
February 2010: EU Commission approval for NAMA scheme under State Aid regime
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EU Approval of NAMA
February 2010
Transfer of the initial largest borrower exposures across
all institutions commenced March 2010
Minister’s decision to exclude sub
€20m loans in AIB and BOI and to
expedite transfers September 2010
Total of €74bn assets
transferred at a cost of €31.8bn (57% discount) October 2011
The NAMA Timetable 2010 / 2011
Preparatory work
• Appointed a firm to advise on loan valuation methodology
• Set up panel of legal firms – legal due diligence on loans
• Set up panel of property firms to audit and review property valuations
• Set up panel of firms to carry out loan valuations
• Appointed a firm to carry out valuation of derivative transactions
• Appointed a firm to act as Audit Co-ordinator – assurance of consistency and rigour.
NAMA Loan valuation and due diligence
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Preparatory work (contd.)
• Discussions about eligibility criteria and their implications for the volume of transfers – Autumn 2009. (A debtor eligible by reference to Bank A only but NAMA acquires Bank B and Bank C exposures also)
• Lists of loans likely to be eligible – December 2009
• Five loan valuers assigned to five PIs – January 2010
• Discussions about valuation methodology and due diligence arrangements – early 2010
• Policy guidelines on valuation issues
• First transfers – March 2010.
• Discussions on loan administration arrangements – Master Servicer selected in late 2009.
NAMA engagement
with Participating Institutions
(PI’s)
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Preparatory work (contd.)
• EU Commission (with D/Finance)
• Eurostat/Central Statistics Office
• UK Treasury/Bank of England/UK FSA
• Non-NAMA banks
• Various lobby groups – banking, construction, etc.
• Potential advisors and other service providers
• Potential investors
• Prospective debtors
NAMA engagement with other
stakeholders
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NAMA €31.8bn
NAMA €32bn
Liquidity to 5 Banks
Total Loss of Liquidity by Irish NAMA banks
since 2008 est. €100bn
NAMA €31.8bn
NAMA provided €31.8bn liquidity to Irish Banking System – it could only ever solve part of the estimated €100bn liquidity lost by banking system since 2008 – ECB reliance now less than €60bn
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NAMA’s Liquidity Injection into Banks
50% Act Like a Bank
50% Intensive
Asset Management
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NAMA: What is it?
NAMA Board
Minister For Finance
CEO NAMA
Audit Committee
Risk Committee
Finance and Operating Committee
Credit Committee
Northern Ireland Advisory Committee
Planning Advisory Committee
NTMA Services: IT/Treasury/Market Risk/HR/Office
Services
Head of Asset Management
Head of Asset
Recovery
CFO
Head of Strategy and Communication
Head of Legal
NAMA Organisation Structure
Head of Audit and Risk Head of Treasury Tax Financial
Control Operations
Systems
Board Chairman
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NAMA Recruitment Over 2,000 CVs received within six months of announcement
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189 Debtors
€61bn Par debt
Intensively managed by NAMA
Key credit decisions and relationship management
carried out by NAMA multi-disciplinary teams
Loan administration performed by Participating
Institutions
586 Debtors
€13bn Par debt
Relationship management performed by the Participating Institutions NAMA Units through NAMA
Delegated Authority
NAMA has a presence in each of the bank units overseeing the management of the portfolio
Relationship management and loan administration carried out by Participating Institutions within NAMA
policy & procedures
NAMA paid €31.8bn to acquire 12,000 loans to 775 debtor groups. These loans were secured by more than 10,000 properties containing over 56,000 units
NAMA Portfolio
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Location of Irish Property – end 2012
94% in Dublin and contiguous counties plus Cork, Galway and Limerick
Dublin 67%
Dublin Commuter Belt
11%
Cork 10%
Galway 4%
Limerick 2% Rest of ROI
6%
0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70%
Sligo
Waterford
Wexford
Westmeath
Carlow
Clare
Laois
Tipperary
Kerry
Donegal
Mayo
Kilkenny
Offaly
Roscommon
Cavan
Leitrim
Longford
Monaghan
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Location of UK Property end 2012
London 64%
Midlands 13%
Wales & South West 3%
Scotland & North 11%
South East 9%
0%
UK Portfolio split by Region
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Midlands
South East
North West
Scotland
West Midlands
South West
North East
Wales
Rest of UK Portfolio split by Locality
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1 • Each borrower was asked to prepare a realistic and concise Business Plan
2 • NAMA assessed each Business Plan to evaluate whether it is realistic
3 • NAMA met major borrowers to discuss proposed plans
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• If no agreement reached, or the debtor does not wish to cooperate with NAMA, they were asked to repay debts in full and, failing this, enforcement action was considered. NAMA has declined to appoint in a significant number of other cases
5 • Focus now is on actively implementing the approved strategy for each debtor
Debtor Business Plan Process – Work Completed
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Consensual Connection
Non - Consensual Connection
Borrower sells real estate assets in accordance with
Business Plan
Enforce
No Enforcement
Sell single assets
Create portfolios of assets (sector /
location) for sale /refinance
Sell entire connection’s loans as a portfolio
Sell standalone, non recourse loans
Complete value add strategies then sell
Fixed Charge Receiver /
Administrator Holds
NAMA Owns
NAMA’s Approach to Debtor Management
NAMA Debtor Loan Restructure
NAMA pursues one of five restructure options with debtors: (i) Full restructuring (new security and loan documentation) (ii) Limited Restructuring (existing security and legal documentation) (iii) Letter of support (iv) Disposal (v) Enforcement Full restructuring is typically progressed with compliant debtors and increases the potential monetising options for future recovery/disposal.
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Debtor Debt Restructuring
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Cash Generation to 28/02/2013
Disposals €7bn & Non-Disposals €4bn since inception (35 MONTHS)
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Cash Generation vs. Bond Repayment Target
• Total cash inflows of €11bn generated since inception
• 2010: €1.0bn
• 2011: €5.1bn
• 2012: €4.5bn
• 2013: €0.4bn
• Bond redemption target of €7.5bn by end 2013 – Troika target
• To date Bond Redemptions of €4.75bn
• Remaining redemptions
• 2013: €2.75bn
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Location Value €Bn
Dublin 0.5
Rest of ROI 0.3
London 4.3
Rest of UK 1.1
N.I 0.1
EU, USA and Other 0.7
Total 7.0
Disposals since Inception to end 2012
Dublin 0.5 7%
Rest of ROI 0.3 4%
London 4.3
62%
Rest of UK 1.1
16%
N.I 0.1 1%
EU, USA and Other 0.7
10%
Sales Proceeds Received by Asset Location
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A significant amount of work is done behind the scenes to deliver these results involving day to day
intensive management
• 775 Business Plan reviews completed by end 2012 which are reviewed quarterly by NAMA
• 3,900 asset sales transactions
• €100m per month recurring income on portfolio despite €7bn of asset sales
• 20,000 credit decisions made since inception. €1bn new money drawdowns
• Response times improved despite increasing volumes
4.6 4.3 4.7 4.7 4.9 4.6 4.4
1.00
3.00
5.00
7.00
June July Aug Sept Oct Nov Dec
Average Turnaround Working Days in NAMA
How the €11bn cash was achieved
• NAMA has €780m of enforced property listed for sale on its website and is pursuing sales in all markets
• There is a further €750m of property for sale in the Irish Market by NAMA debtors
• Significant individual transactions in recent months e.g. Millennium Park in Naas for Kerry Group creating 1,000 jobs, promoting SDZ in Dublin Docklands, finish off 2 large apartment blocks in South Dublin €25m capex – strong proven rental market.
• As the economy picks up and as finance becomes available NAMA will increase the flow of Irish property to the market
• It does not make sense for NAMA to flood the market – we were established with a ten year horizon – orderly and phased disposal
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NAMA Actively Selling - But Responsibly
• Cautious optimism for the medium term
• Irish property market will probably not recover in a homogeneous way
• Recovery will be in main urban centres first and investment grade properties
• Good for NAMA given the urban centric location(94%) and quality of the Irish portfolio
• Renewed interest in NAMA’s Irish property portfolio – perception the country is improving. Emerging demand in some key areas, interest in NAMA Vendor Finance and take up of NAMA Deferred Mortgage offerings
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Market Outlook
• Deferred Residential Mortgage Payment Initiative – Offers price protection to residential buyers. Extended in March 2013 to include 400 family homes nationally. Sales agreed to date of €21m on 115 units. Extending on a phased basis up to a maximum of 750 units
• Social Housing - Offers long-term leasing options to local authorities. More than 4,000 units identified (local authorities determine suitability). NAMA facilitates direct engagement between Local Authorities and Debtors (or Receivers) and Housing Agency.
• NAMA Development capital – Investing in assets to enhance value. NAMA committed to €2bn investment in Irish assets in May 2012 - planning resolution takes time everywhere!
• NAMA Vendor Finance - Offers medium-term finance to purchasers of commercial assets or loans with €2bn in vendor finance available to prospective purchasers
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NAMA Strategic Initiatives
• REITs – Real Estate Investment Funds – another vehicle for attracting capital to the Irish market. NAMA considering its role.
• Asset Management – NAMA established a dedicated team whose brief includes the appraisal, financing and delivery of development projects in Ireland and Britain. Delivery mechanisms will include joint ventures.
• Rent Abatements – 212 applications for rent abatement approved (97%) with an aggregate value of €13.5m per annum
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Strategic Initiatives (continued)
• NAMA Debtors have an interest in less than 15% of hotels in Ireland, i.e. in 118 of approximately 900 hotels
• NAMA Debtors have an interest in less than 5% of golf courses in Ireland, i.e. in 20 of approximately 400 golf clubs (17 golf courses are attached to 4/5 star hotels)
• NAMA Debtors have an interest in about 10% of unfinished housing estates in Ireland, i.e. in 160 out of the 1,500 worst unfinished estates
• NAMA actively engages with local authorities and is committed to resolving the issues caused by unfinished housing estates, development levies, planning etc
• NAMA supports debtors who directly employ an estimated 10,000 people, providing for appropriate current and capital expenditure
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Debunking the NAMA Myths
• NAMA Senior Debt redemption is on target. Cumulative redemptions €4.75bn have been made to date and an additional €2.75bn will be repaid by the end of 2013 – meeting the €7.5bn target that is key for Troika
• Total cash flows of €11bn have been generated since March 2010, and NAMA currently
has €4bn of cash on hand • Non-disposal cash flows of approximately €100m per month are being generated, in
addition to sales proceeds
• NAMA has a low cost base
• The €4bn in funding between development capital and vendor financing has to come from NAMA resources
• NAMA continues to generate Operating Profits after Impairment charges, despite unfavourable property price market movements since end 2009
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Financial KPI’s
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• Continue to build significant organisational capability, while running a business that
has delivered outstanding results
• Work-out strategy and platform in place for debtor connections
• Strategy implementation and delivering key asset management enhancement and
completion of projects
• Property Portfolio is relatively well located which in time should facilitate orderly
disposal of assets
• NAMA has independent funding availability
NAMA – 2013 and Beyond
• Continuing difficult Irish market with other institutions deleveraging
• Market liquidity
• Recent IBRC liquidation
• Status as a public body means less flexibility than banks
• Staff retention
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NAMA faces a number of key challenges
Commercial Book Consumer Book
While the initial portfolio data shows 5 different loan type segments, when considering portfolio management options there are 2 distinct categories
evident:-
Commercial Book:- 85% of the NEW portfolio.
Commercial – Leisure is likely to be hotels & pubs, remainder a mixture of development & investment of offices/shopping centres/industrial
Residential - development and commercial investment activities.
Business Banking - SME/cashflow business
Consumer Book:- 15% of the NEW portfolio.
Mortgage & Personal loans grouped together as both personal lending products governed by Central Bank codes of conducts.
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€bn Commercial Residential
Business
Banking Mortgages Other
Leisure Industrial Mixed Retail Office Other
Sub
Total Development Investment Sub Total PDH Buy to Let Personal
Fund
Investment
Portfolio
Total
RoI 2.16 0.24 0.70 3.20 2.98 1.10 0.33 0.51 2.85 1.42 0.41 2.07 0.37
UK 3.19 0.41 0.77 1.98 1.28 0.30 0.13 0.36 0 0 0 0.02 0
US 0 0 0.10 0.08 0.20 0 0.11 0 0 0 0 0.003 0
Total 5.35 0.65 1.57 5.26 4.46 1.40 18.70 0.57 0.87 1.64 2.85 1.42 0.41 2.09 0.37 27.1
Impairment -6.4 -0.70 -1.78 -0.38 -0.12 -1.19 -0.21 -10.78
Net 12.3 0.94 1.07 1.04 0.30 0.9 0.16 16.71
Provision % 34% 43% 62% 28% 28% 57% 57% 39%
Non NAMA Portfolio @ 30th June 2012
IBRC Portfolio at 30/06/2012
• NAMA is financially robust meeting every key target - cash, profitability
• We are part of the solution in the property market and tailoring strategies
• NAMA will make funding available for development projects with commercial
rationale
• A tremendous amount achieved in less than 3 years
• Next part – IBRC loan book integration?
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Summary – 3 years on