NAMA - How can it be profitable for Irish tax payer?

20goto10 · 17-09-2009 1:15pm #1

If 2/3 of the bad assets are Irish then how does the goverment expect to make a profit? I mean they will be selling the assets to mostly Irish taxpayers so in actual fact it's a lose lose situation for us. Does anyone know if they have specified how they plan on selling the assets and at the same time protect the tax payer? Because the only possible way as I can see it is to sell the assets outside of the state which makes no sense.

TheInquisitor · 17-09-2009 1:23pm

First can i just say LOL

It will make a profit when prices recover in the next ten years. It doesn't make a difference if they sell them to irish people or not. The money ends up in government coffers taken from someone's personal bank account etc and that is how they will make a profit!

Riskymove · 17-09-2009 1:25pm

20goto10 wrote: »

I mean they will be selling the assets to mostly Irish taxpayers so in actual fact it's a lose lose situation for us.

say what now?

LostinBlanch · 17-09-2009 1:29pm

Profit???????? For the Irish taxpayer????????

What a f*cking joke.

There is a profit to be made, but only if you're a bank shareholder or bondholder / friend of FF / bank executive responsible for the mess in the first place.

Anyone else can go and f*ck themselves. Oh and leave your wallet at the door on your way out.

20goto10 · 17-09-2009 1:49pm

Ok so the answer is no they haven't specified.

SLUSK · 17-09-2009 1:56pm

20goto10 wrote: »

If 2/3 of the bad assets are Irish then how does the goverment expect to make a profit? I mean they will be selling the assets to mostly Irish taxpayers so in actual fact it's a lose lose situation for us. Does anyone know if they have specified how they plan on selling the assets and at the same time protect the tax payer? Because the only possible way as I can see it is to sell the assets outside of the state which makes no sense.

Since it is only government who is willing to by these assets for this price, clearly the chance of any profits are very small. If there were any good chances for profits private investors would have been queing to by these assets.

SLUSK · 17-09-2009 1:57pm

TheInquisitor wrote: »

First can i just say LOL

It will make a profit when prices recover in the next ten years. It doesn't make a difference if they sell them to irish people or not. The money ends up in government coffers taken from someone's personal bank account etc and that is how they will make a profit!

why would prices recover for these assets? Why would their value magically appreciate in the future?

hobochris · 17-09-2009 2:01pm

SLUSK wrote: »

why would prices recover for these assets? Why would their value magically appreciate in the future?

My guess is the government plan to stimulate another property bubble.

is_that_so · 17-09-2009 2:15pm

LostinBlanch wrote: »

Profit???????? For the Irish taxpayer????????

What a f*cking joke.

There is a profit to be made, but only if you're a bank shareholder or bondholder / friend of FF / bank executive responsible for the mess in the first place.

Anyone else can go and f*ck themselves. Oh and leave your wallet at the door on your way out.

We are shareholders.

AS I've said before I am not huge fan of NAMA although I do see how it could logically work. Like everyone else I am extremely nervous about the risk. As none of the other "plans" seemed to gather traction or support it's ended up as the only game in town.

The very basic idea is this

40% of loans going into NAMA are generating cash. It is believed/hoped/expected that this cash will help NAMA fund the interest on the money borrowed.

They are also proposing to split the types of bonds going to banks into two groups. Simply put the good ones and the bad ones. How this will happen is still unclear.

The discount on all of the loans is supposed to reflect a "fair" valuation of what the loans and properties are worth. The properties have been assessed at €48 billion or so.

Meanwhile they'll try to figure out what to do with the rest. There is an argument at present to hang onto some sites as a firesale will deliver very little at present. There's €5 billion available for "project completion" which as far I understand it could be used with some sites to finish and sell them off. Developers will still have to pay off the loans or where they can't the original bank may have to cough up more for it.

Incidentally we the taxpayers will benefit from this anyway as we own Anglo and will get money back through bonds for the €28 billion or so they have.

So if, and this is a real guess but they claim historical evidence for it, property prices increase by 10% over the lifetime of NAMA it will break even. If it's more then there's your profit. What seems to be pushing that logic is that fact that a lot of the property is not in Ireland. Property in the US and UK might be expected to recover in price better.

If and only if the historical evidence is proven correct and we are close to the bottom, which is why there is so much concern about NAMA, then there'll be loadsa money. If not then it's that children's children speech.

20goto10 · 17-09-2009 3:06pm

The problem I have is let's say they do break even or make a profit, that does not mean the tax payer wins. Simply because they will be selling most of the assets to us, so Nama wins on paper but it is us who ultimately pay.

I think lenihan has been taking tips from Darren Brown! And yes I'm aware Darren Brown is ****!

LostinBlanch · 17-09-2009 3:07pm

IS that so. Nice try attempting to make it look like we're paying ourselves. To quote from one of the tribunals "are we f*ck!"

As for property prices, we're nowhere near bottom, and the only way that NAMA can actually "make money" is by reinflating another property bubble. So thats a bit like pouring more petrol onto a fire in order to put the fire out.

We're deliberately overpaying to bail out bank bondholders / shareholders / FF friends et al. If you want historical evidence for seeing property prices rising to pre bubble prices I suggest you look at Japanese property prices after the property bubble of the late 80's or the prices paid for agricultural land from the early 70's after we joined the EEC. There was a good article about it in the Times a couple of days ago.

jmayo · 17-09-2009 3:18pm

20goto10 wrote: »

If 2/3 of the bad assets are Irish then how does the goverment expect to make a profit? I mean they will be selling the assets to mostly Irish taxpayers so in actual fact it's a lose lose situation for us. Does anyone know if they have specified how they plan on selling the assets and at the same time protect the tax payer? Because the only possible way as I can see it is to sell the assets outside of the state which makes no sense.

20goto10 nice to see you have left the conforts of the Accomodation and Property forum.
Sadly you have brought your over optimistic outlook on Irish property with you to this forum and to this topic.

Profit ?
Oh yes if we return to the glory days of the peak of the bubble and people are dumb enough to fall for the same tricks.

As for is_that_so posts about 47 billion being a fair valuaiton then why are we paying 7/8 billion over that amount for the loans.

I also take huge issue with the way RTE are offloading the news thius morning on the news.
According to them, NAMA will involve us spending 54 billion to buy loans with a book value of approx. 71 billion, a 30% discount.
They failed to lead with NAMA paying 7 billion too much for loans of 71 billion book value, that are now really only secured by less than 47 billion worth of assets.

is_that_so · 17-09-2009 3:35pm

LostinBlanch wrote: »

IS that so. Nice try attempting to make it look like we're paying ourselves. To quote from one of the tribunals "are we f*ck!"

As for property prices, we're nowhere near bottom, and the only way that NAMA can actually "make money" is by reinflating another property bubble. So thats a bit like pouring more petrol onto a fire in order to put the fire out.

We're deliberately overpaying to bail out bank bondholders / shareholders / FF friends et al. If you want historical evidence for seeing property prices rising to pre bubble prices I suggest you look at Japanese property prices after the property bubble of the late 80's or the prices paid for agricultural land from the early 70's after we joined the EEC. There was a good article about it in the Times a couple of days ago.

Well we will be for the all the use it is.

My comments were in answer to the original poster's question.

I am not 100% convinced by the pricing but I am also unconvinced by anyone who claims they know what will happen. This is where the real debate lies amid all the hysteria. I certainly don't know who to believe on the valuations or the price movements but 10% over 10 years could hardly be called a property bubble and at the very least sounds like a reasonable gamble. But this is really the NAMA risk. The only part of NAMA that does give comfort and IMO can be believed is the use of the performing loans, which at €1 billion should pay some if not all of the cost of the bonds.

Development/Agricultural land on the other hand I agree is a completely different story and is 36% of the total. This is where the individual loan valuations are supposed to come in. The discount will be an average of 30%. That implies that for some it will probably far more an for others less.

Also I don't think Japan is relevant as properties are not all caught up in our property mess. Japan was also almost wholly responsible for its own mess by denying they even had a problem.

whatnext · 17-09-2009 3:39pm

Firstly. NAMA are buying the Debt, and taking the asset as security on the dept the same as any mortgage? So the Developer will still owe the same amount of money before and after NAMA?

Secondly. If (and I appreciate its a big if) the developer does somehow manage to repay the whole debt then NAMA is 30% on that debt?

Thirdly. If a Developer defaults on a loan and NAMA takes over control of the Asset then they have 10 years to achieve 70% of the loan value to break even? Would any rent earned in this period belong to NAMA?

Do NAMA earn interest on these Debts?

And finally could the people on here that say it will definitely fail or definitely succeed PM the lotto numbers to me while they have their crystal ball out:)

is_that_so · 17-09-2009 3:40pm

jmayo wrote: »

20goto10 nice to see you have left the conforts of the Accomodation and Property forum.
Sadly you have brought your over optimistic outlook on Irish property with you to this forum and to this topic.

Profit ?
Oh yes if we return to the glory days of the peak of the bubble and people are dumb enough to fall for the same tricks.

As for is_that_so posts about 47 billion being a fair valuaiton then why are we paying 7/8 billion over that amount for the loans.

I also take huge issue with the way RTE are offloading the news thius morning on the news.
According to them, NAMA will involve us spending 54 billion to buy loans with a book value of approx. 71 billion, a 30% discount.
They failed to lead with NAMA paying 7 billion too much for loans of 71 billion book value, that are now really only secured by less than 47 billion worth of assets.

I used "fair" in an attempt to describe how NAMA might view a price for them. Announcing 30% makes sense to allow both the market and the affected institutions to look at funding needs. However Lenihan did repeatedly use the word "estimated" in his speech. The only crumb of comfort I think is the review of each loan individually.

is_that_so · 17-09-2009 3:47pm

whatnext wrote: »

Firstly. NAMA are buying the Debt, and taking the asset as security on the dept the same as any mortgage? So the Developer will still owe the same amount of money before and after NAMA?

Secondly. If (and I appreciate its a big if) the developer does somehow manage to repay the whole debt then NAMA is 30% on that debt?

Thirdly. If a Developer defaults on a loan and NAMA takes over control of the Asset then they have 10 years to achieve 70% of the loan value to break even? Would any rent earned in this period belong to NAMA?

Do NAMA earn interest on these Debts?

And finally could the people on here that say it will definitely fail or definitely succeed PM the lotto numbers to me while they have their crystal ball out:)

NAMA will replace the developer's bank so anything in relation to the loans a developer will now have to deal with NAMA. They will have to fully repay the loan and NAMA will operate as any bank which may involve acquiring assets. If there's still a shortfall on what NAMA pays at the end, the original bank pays.

20goto10 · 17-09-2009 3:55pm

jmayo wrote: »

20goto10 nice to see you have left the conforts of the Accomodation and Property forum.
Sadly you have brought your over optimistic outlook on Irish property with you to this forum and to this topic..

Eh? Sadly you once again misinterpret what I'm saying. And I'm asking a question not stating an opinion.

population · 17-09-2009 4:18pm

is_that_so wrote: »

NAMA will replace the developer's bank so anything in relation to the loans a developer will now have to deal with NAMA.

Ugh "deal with NAMA"........I am sure they are quaking at the prospect of having a state agency founded by their mates asking them for money.

Far more likely they will say "cant you get my gambling debts paid by some other schmuck, or I don't know....say 6 million schmucks???"

"Of course we can!!! Remember this is Ireland and you are untouchable!!! Life is great!!!"

population · 17-09-2009 4:22pm

whatnext wrote: »

Firstly. NAMA are buying the Debt, and taking the asset as security on the dept the same as any mortgage? So the Developer will still owe the same amount of money before and after NAMA?

Secondly. If (and I appreciate its a big if) the developer does somehow manage to repay the whole debt then NAMA is 30% on that debt?

Thirdly. If a Developer defaults on a loan and NAMA takes over control of the Asset then they have 10 years to achieve 70% of the loan value to break even? Would any rent earned in this period belong to NAMA?

Do NAMA earn interest on these Debts?

And finally could the people on here that say it will definitely fail or definitely succeed PM the lotto numbers to me while they have their crystal ball out:)

Well dont know the lotto numbers, but I know NAMA is a FF creation. The party that embodies every single aspect of cute hoorism and crimnal economic mismanagement known to man. It will fail US not them and their mates

is_that_so · 17-09-2009 4:34pm

population wrote: »

Ugh "deal with NAMA"........I am sure they are quaking at the prospect of having a state agency founded by their mates asking them for money.

Far more likely they will say "cant you get my gambling debts paid by some other schmuck, or I don't know....say 6 million schmucks???"

"Of course we can!!! Remember this is Ireland and you are untouchable!!! Life is great!!!"

Suspect that NAMA will be more like Revenue than Fás.

It'll be a criminal offence to lobby NAMA.

population · 17-09-2009 4:39pm

is_that_so wrote: »

Suspect that NAMA will be more like Revenue than Fás. It'll be a criminal offence to lobby NAMA.

They dont HAVE to lobby NAMA!!!

For fcuk sake NAMA will be paying them to finish their own developments!!!

population · 17-09-2009 4:48pm

is_that_so wrote: »

Suspect that NAMA will be more like Revenue than Fás. It'll be a criminal offence to lobby NAMA.

Red herrings for all

bangersandmash · 17-09-2009 5:31pm

is_that_so wrote: »

I certainly don't know who to believe on the valuations or the price movements but 10% over 10 years could hardly be called a property bubble and at the very least sounds like a reasonable gamble.

Is the 10% figure not based on the assumption that the properties connected to the loans really are worth €47bn in the current market, and not considerably less?

Clare_Guy · 17-09-2009 5:42pm

There are a couple of things that I think people are not discussing.

1. The 54 billion estimate includes at least 9 billion of unpaid interest that has been rolled up into it. When you take this into account, the "haircut" or discount on the book value is less than 20% Does anyone here believe that property has "only" dropped in value by less than 20%?

2. When NAMA comes to selling on the assets, who will be financing the purchases? The very banks that have received the original bailout. These banks will know exactly how much the properties owe to NAMA, do you think they'll finance for more than that? Will they f*ck?!!!

Amhran Nua · 17-09-2009 5:54pm

is_that_so wrote: »

As none of the other "plans" seemed to gather traction or support it's ended up as the only game in town.

There were no other plans put forward, they robbed the idea from the Scandinavians and twisted it until it could be used to start another property bubble, losing all other merit in the process.

is_that_so wrote: »

If there's still a shortfall on what NAMA pays at the end, the original bank pays.

Aha, no this is not the case. It is not in the legislation, not written down anywhere, only a muttered gesture from a minister who will have retired by the time his promises come due. The idea that it can't be included in the legislation because it would represent a future liability that would discourage investment is nonsensical.

thebman · 17-09-2009 9:32pm

Clare_Guy wrote: »

There are a couple of things that I think people are not discussing.

1. The 54 billion estimate includes at least 9 billion of unpaid interest that has been rolled up into it. When you take this into account, the "haircut" or discount on the book value is less than 20% Does anyone here believe that property has "only" dropped in value by less than 20%?

2. When NAMA comes to selling on the assets, who will be financing the purchases? The very banks that have received the original bailout. These banks will know exactly how much the properties owe to NAMA, do you think they'll finance for more than that? Will they f*ck?!!!

Very good points TBH.

limerickman95 · 17-09-2009 10:02pm

OK this NAMA thing is a little confusing me so can people help me understand it better.

So am i correct in saying this bank NAMA will purchase bad loans off the regular banks for a negotiated price, and the developers will repay there loans to NAMA.

So if these developers go bust NAMA will then own the collateral for these bad loans(such as land, builders etc?)

So any replies will be fantastic?

is_that_so · 17-09-2009 10:33pm

Amhran Nua wrote: »

There were no other plans put forward, they robbed the idea from the Scandinavians and twisted it until it could be used to start another property bubble, losing all other merit in the process.

Most plans of this type are based on previous successful ones anyway. NAMA is what we ended up with.

Amhran Nua wrote: »

Aha, no this is not the case. It is not in the legislation, not written down anywhere, only a muttered gesture from a minister who will have retired by the time his promises come due. The idea that it can't be included in the legislation because it would represent a future liability that would discourage investment is nonsensical.

Indeed but there is plenty of precedent and bank levies will be the order of the day to resolve issues of this nature as with ICI. If the NAMA plans work it won't be needed and even if there are shortfalls no-one can even guess at them so a muttered gesture is as good as it gets for now.

is_that_so · 17-09-2009 10:38pm

limerickman95 wrote: »

OK this NAMA thing is a little confusing me so can people help me understand it better.

So am i correct in saying this bank NAMA will purchase bad loans off the regular banks for a negotiated price, and the developers will repay there loans to NAMA.

So if these developers go bust NAMA will then own the collateral for these bad loans(such as land, builders etc?)

So any replies will be fantastic?

Yes in answer to your questions but NAMA will buy both good and bad loans.
If a developer goes bust the collateral will be exposed. NAMA, will in theory acquire it and sell it off to get the best possible price. If there's still a shortfall there will most likely be a mechanism whereby NAMA can go after the original bank for it. I reckon as I posted above that will a levy of some sort.

is_that_so · 17-09-2009 10:40pm

bangersandmash wrote: »

Is the 10% figure not based on the assumption that the properties connected to the loans really are worth €47bn in the current market, and not considerably less?

Yep it is but Lenihan has been using the word "estimated" about all of it to cover the fact that they really don't seem to know. He was also claiming that yields are very high which in his words "is a signal that we are near the bottom of the market".

SkepticOne · 17-09-2009 10:42pm

is_that_so wrote: »

Yes in answer to your questions but NAMA will buy both good and bad loans.
If a developer goes bust the collateral will be exposed. NAMA, will in theory acquire it and sell it off to get the best possible price. If there's still a shortfall there will most likely be a mechanism whereby NAMA can go after the original bank for it. I reckon as I posted above that will a levy of some sort.

I think in reality what will happen will be that further credit will be extended to keep the developer going in some form so that this does not happen for the same reasons that the banks (except ACC of course) are falling over themselves to keep Zoe going.

NAMA - How can it be profitable for Irish tax payer?

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