Investigative journo needed for NAMA story!

jimmmy

SkepticOne wrote: »

It is worth remembering that at at this stage it is still a hypothetical developer we are talking about. We don't yet know how aggressively NAMA will go after developers once the loans are on its books. The indications are that it is unlikely to do so with the same vigour as properly run banks would and in this way NAMA will act as a developer bailout in addition to a bank shareholder and bondholder bailout.

In this scenario the developer has lost his total investment and is left with nothing : so how could " in this way NAMA will act as a developer bailout" ? Do you really think Namo will give the developer back some or all of the money he lost ?

MrMicra

P. Breathnach wrote: »

Yup. I would have favoured NAMA + nationalisation.

I would also have favoured NAMA and nationalisation. In theory at any rate.

Also Sceptic One if Fine Gael and Labour are in power they might use NAMA as the visible expression of public anger and have it act more aggressively than an ordinary bank.

SkepticOne

MrMicra wrote: »

I would also have favoured NAMA and nationalisation. In theory at any rate.

Also Sceptic One if Fine Gael and Labour are in power they might use NAMA as the visible expression of public anger and have it act more aggressively than an ordinary bank.

Interesting blog post by Karl Whelan

Now, however, we find out how vigorous this pursuit will be. In its draft business plan, NAMA has told the public, and thus property developers, that it expects this vigorous pursuit of the €77 billion that NAMA will be owed to yield principal repayments of €1 billion in 2010 and 2011 and €2.5 billion in 2012. Only in 2013 does NAMA expect the vigorous pursuit to start making real inroads because, at that point, as if by magic, €7.5 billion per year in principal repayments start to pour in.

ifconfig

jimmmy wrote: »

In this scenario the developer has lost his total investment and is left with nothing : so how could " in this way NAMA will act as a developer bailout" ? Do you really think Namo will give the developer back some or all of the money he lost ?

I question in a lot of cases whether the 77% Loan-to-equity ratio denominator represents hard-cash. Most commentators believe that there is vast amounts of phantom equity in the original collateral used to secure these developer loans.

I am not arguing strongly that this is a developer bailout but we need to be a little bit more realistic in terms of the real losses the developer has incurred.

jimmmy

ifconfig wrote: »

Most commentators believe that there is vast amounts of phantom equity in the original collateral used to secure these developer loans.

The banks were fools but not big enough fools to give 100% loans on multi-million euro projects, without any collateral. Would you lend 80 million based on someones phoney equity if / when they had profits from previous projects?

Stark

Dannyboy83 wrote: »

I heard recently that a massive development in Cork City was being emptied and tenants were being offered higher value houses in Blackrock and Rochestown.
Reason being the same as the OP has given.

I didn't believe it, so I asked for a brochure/price guide.
Never even got a reply.

I don't know what the truth is, but they certainly don't seem to be eager to sell the apartments.

From what I heard, they had to empty out the apartment block as they couldn't afford to pay the ESB standing charge.

ifconfig

In the climate where Anglo was the pied piper of property developer loan banks in the country I wouldn't make any safe assumptions about how smart the banks were in what they accept as security for loans.
The dogs in the street seem convinced that a large amount of cross collateralization of loans was common practice and cross institution also.. which is probably one of the reasons why Anglo was seen as systemic risk.

I am not suggesting that the collateral has evaporated to zero worth.
In some, maybe most cases there is a significant cash component.
However, if a lot of the loan collateral used was of the same asset class of the assets being borrowed against then you can see that the loans weren't anywhere near the 75 or 77percent loan-to-value ratios being estimated in the NAMA literature to date.

jimmmy wrote: »

The banks were fools but not big enough fools to give 100% loans on multi-million euro projects, without any collateral. Would you lend 80 million based on someones phoney equity if / when they had profits from previous projects?

mikep

We obviously have no journo's here...ah well, it is clear that others have heard the same story...

I thought some one could do some digging and see what they could find...

I'm sure some of the tenants would have said something as they are believed to have refused what was offered.

Sponge Bob

It may have been that there were 100 apartments, 0 sold or only a few and 10 tenanted units , it makes perfect sense to mothball the thing as it cannot wash its face on insurance/bins/electricity etc .

The problem with Nama is that there is no demand for property in a country which has a vast overhang of complete and near complete properties on the market . Preparation for NAMA , to my mind , would involve mothballing as much as 10% of the national housing stock to take it off the market and stabilise what remains.

Look at this recent tale from Galway ....where there is demand as indeed there is in Cork .

Imagine if that person were in Gorey or Galmoy ...the only inhabitant of a ghost estate of 100 houses ???

Seth Brundle

Hootanany wrote: »

Why

Its the kind of thing the deal with

Dob74

P. Breathnach wrote: »

I don't disagree too strongly with your definition, although I suspect that Judge Kelly's assessment is a bit extreme. The cases that make it to his court are probably not fully representative of the market: I suspect they are the worst ones.

Imagine a scenario:
- a developer during the height of the boom puts together a package costing €100m.
- He borrows €85m, and funds the rest himself.
- The expected sale value of the development is €110m.
- NAMA buys the bank loan for €70m.
- The developer's business collapses, and NAMA becomes the owner of the development.

To cover itself, NAMA would need to sell the development for €70m, which is about 65% of the original expected price. The expected profit is gone; the developer has lost €15m, and the bank has lost €15m.

Okay, you can complicate the scenario (making it a bit worse for NAMA) by bringing in the questions of time, expenses, and interest, and against that you can set the hope that things get a bit better for NAMA through some increase in property values.

Good point.
But I am sure that there are going to be alot of cases where the developers 15%(15mil) didnt exist or was used for several loans.
Thats going to be the problem with NAMA. We dont have a record of enforceing and punishing white collar crime.
So all of this will be swiped under the carpet. And anyone guilty of doing so will not be punished.

Never mind if we sign up to NAMA every decision made by a public and private body will to ensure that NAMA makes money.
Not planning what in the best interest of the country.

Dob74

Dannyboy83 wrote: »

I heard recently that a massive development in Cork City was being emptied and tenants were being offered higher value houses in Blackrock and Rochestown.
Reason being the same as the OP has given.

I didn't believe it, so I asked for a brochure/price guide.
Never even got a reply.

I don't know what the truth is, but they certainly don't seem to be eager to sell the apartments.

Heard the same thing myself.
Developers(being controlled by the banks) wont drop there prices so they can hand everything they cant sale to NAMA for top dollar.

P. Breathnach

Dob74 wrote: »

... But I am sure that there are going to be alot of cases where the developers 15%(15mil) didnt exist or was used for several loans...

I think that is true. The interesting question is how many such cases emerge. Of course, my €15m was an arbitrary figure simply for the sake of an example. What really matters is the amount actually put up as risk capital by developers. I haven't a clue; neither, I suspect, do you; I have a fear that the banks don't know either.

Thats going to be the problem with NAMA. We dont have a record of enforceing and punishing white collar crime...

We have not been very good at it. But there is another problem: some of what the developers did might not be criminal at all, even if it places a disproportionate burden of risk on the banks. It might be sharp practice, but legal.

Never mind if we sign up to NAMA every decision made by a public and private body will to ensure that NAMA makes money.
Not planning what in the best interest of the country.

It might be in our best interest if, to some extent, steps were taken to improve the chances of NAMA making money, or minimising its losses.

ifconfig

I think this is a common misunderstanding of NAMA.
NAMA acquires the loans from the banks using those inflated valuations to determine what they are paying for the loan.

The terms of the loan are not rewritten for the developer.
The developer is still on the hook for what he has borrowed plus any rolled up interest which has accrued in recent times (if a non performing loan).

So, there is no "top-dollar material" benefit to the developer by having his loan NAMAed. Even if the developer goes bust and NAMA needs to get court orders to acquire the assets backing the loans they will most likely hold the asset for a long time because selling the asset now would be into a depressed market and as such it would fetch very little.
NAMA is all based on very risky hope that the asset will , in time, realise
some gains from where the market is now. NAMA has hedged that the property market will recover and that in 80% of the cases the developers will make good on their loans in the coming decade.

So, to recap - as currently defined NAMA does a transaction with the bank based on an inflated loan valuation and hopes that the assets backing the loan will appreciate and the developers will stay solvent and will repay the loans *at the original terms of the loan and not at some new renegotiated terms based on what NAMA payed the banks for the loans*!!!

Now, if NAMA was meddled with so as to change the terms of reference to include mechanisms whereby NAMA could purchase the assets from day one from developers at inflated prices then that changes the equation.

Dob74 wrote: »

Heard the same thing myself.
Developers(being controlled by the banks) wont drop there prices so they can hand everything they cant sale to NAMA for top dollar.

Dob74

ifconfig wrote: »

I think this is a common misunderstanding of NAMA.
NAMA acquires the loans from the banks using those inflated valuations to determine what they are paying for the loan.

The terms of the loan are not rewritten for the developer.
The developer is still on the hook for what he has borrowed plus any rolled up interest which has accrued in recent times (if a non performing loan).

So, there is no "top-dollar material" benefit to the developer by having his loan NAMAed. Even if the developer goes bust and NAMA needs to get court orders to acquire the assets backing the loans they will most likely hold the asset for a long time because selling the asset now would be into a depressed market and as such it would fetch very little.
NAMA is all based on very risky hope that the asset will , in time, realise
some gains from where the market is now. NAMA has hedged that the property market will recover and that in 80% of the cases the developers will make good on their loans in the coming decade.

So, to recap - as currently defined NAMA does a transaction with the bank based on an inflated loan valuation and hopes that the assets backing the loan will appreciate and the developers will stay solvent and will repay the loans *at the original terms of the loan and not at some new renegotiated terms based on what NAMA payed the banks for the loans*!!!

Now, if NAMA was meddled with so as to change the terms of reference to include mechanisms whereby NAMA could purchase the assets from day one from developers at inflated prices then that changes the equation.

The benefit is to the BANKS not the developer. The developer will probably let his company go bankrupt.
And in a few years emerge with a new company with the banks who the government saved, bank rolling the developer again.
The main problem is our banks not the developers. Who cares if some developer goes bankrupt? except for his creditors(ie the banks).

The government haven't even looked at any of the loans in detail.
Most of which where made at 100%. The banks will walk away and the taxpayer will be left with the bill.

ART6

OK, let's say NAMA has taken on the debt on a block of flats in Cork (although why anyone should want to live there.....) for €35 millions. The current value of those flats is €20 millions, being optimistic. So NAMA hope that in a few years time the properties will have increased in value to €40 millions. By when? 2020? A 12.5% rate of return total when the financial industry looks for anything up to 30% per year. Not a good deal.

Now. I have some big bucks to speculate. Should I offer NAMA their €35 mill or the true valuation of €20 mill? Why should I hurry? Let 'em stew for a while as the national debt rises like something out of bomfire night then offer them €15 mill or even €10 mill.

I have a suspicion that all NAMA is going to do is depress property values for a generation.

Dob74

ART6 wrote: »

OK, let's say NAMA has taken on the debt on a block of flats in Cork (although why anyone should want to live there.....) for €35 millions. The current value of those flats is €20 millions, being optimistic. So NAMA hope that in a few years time the properties will have increased in value to €40 millions. By when? 2020? A 12.5% rate of return total when the financial industry looks for anything up to 30% per year. Not a good deal.

Now. I have some big bucks to speculate. Should I offer NAMA their €35 mill or the true valuation of €20 mill? Why should I hurry? Let 'em stew for a while as the national debt rises like something out of bomfire night then offer them €15 mill or even €10 mill.

I have a suspicion that all NAMA is going to do is depress property values for a generation.

But of course the big question is what price they are going to transfer them over?
Seeing how this government does deals with the Unions, Doctors and anyone else they do business with, I would think they are going to overpay the banks.
The gov didnt care when young couples where being screwed when buying houses.
It's amazing to see there reaction now that the Banks are in trouble.
They run in with 55 billion

SkepticOne

Dob74 wrote: »

Seeing how this government does deals with the Unions, Doctors and anyone else they do business with, I would think they.

They are going to pay the long term economic value of the assets and not a penny more!

yes they are going to overpay