NAMA bosses brief PAC on latest developments in agency

Thursday 29 May 2014 14.38
NAMA chairman Frank Daly and CEO Brendan McDonagh before PAC today
NAMA chairman Frank Daly and CEO Brendan McDonagh before PAC today

NAMA chief executive Brendan McDonagh has told the Public Accounts Committee that the agency had an operating profit for 2013 before impairment of €1.2 billion, a 45% increase on 2012.  

Mr McDonagh was presenting the National Asset Management Agency's annual report to the Committee. 

He also said that at one stage, the taxpayer was faced with a contingent liability of over €43 billion relating to NAMA, but this had now been reduced to €15 billion.
 
The NAMA CEO said that current indications are that the proceeds of the IBRC sales process would enable NAMA to redeem all of the €12.9 billion in senior bonds issued by the Central Bank.  

He added that the stronger performance of the Irish market over the past year had enabled NAMA to accelerate the sale of Irish assets.   

However, the Controller and Auditor General Seamus McCarthy made recommendations on measuring the target rate of return by NAMA. 

His report stated that the focus had been on cash generation in order to meet debt redemption targets and to meet costs but that this of itself did not indicate whether the best achievable financial return has been obtained by NAMA.  

The C&AG's report recommended that the board set an overall expected or target rate of return taking into account property types, locations, disposal values and rental income and a target return on disposal of property held by debtors and insolvency practitioners. 

Sinn Fein Deputy Mary Lou McDonald told NAMA chairman Frank Daly and CEO Brendan McDonagh that the C&AG did not make recommendations lightly and queried why they had not accepted them.  

The NAMA boss told the Public Accounts Committe today that auctioneers and valuers have earned roughly €144m from property sales n behalf of the agency. The fee rate is 1.1% of the €14 billion euro in sales made to date by NAMA, Mr McDonagh noted.

Deputy McDonald also asked CEO Brendan McDonagh about units offered for social housing. 

Mr McDonagh said the agency had offered 4,653 units out of its estimated portfolio of 16,000 units for social housing.  

Deputy McDonald asked why so few had been taken up by the local authorities, adding it was lamentable that only 684 of the units were complete. She asked if the local authorities were dragging their heels on taking the units. 

Mr McDonagh said everything within their control was being delivered in this area. Chairman Frank Daly also said the agency had done everything possible to expedite the process. 

NAMA having trouble retaining staff - Daly

NAMA chairman Frank Daly has told the PAC that the board of the agency will ask the Minister for Finance to consider the authorisation of the payment of "some sort of" retention and performance payment to staff in NAMA.  

Mr Daly said the agency is losing staff at the moment - 15 have left this year so far - and that staff retention is a serious issue for the board.  

He noted that in the context of an agency that has a specific end point, and where staff are on fixed purpose contracts with no right to redundancy, it is a practical problem for the agency to retain top level staff to complete its work.  

The average pay of staff at NAMA is €90,000, Mr Daly said.  

Asked by Deputy Shane Ross if that meant bonuses were back at NAMA, Mr Daly said no, but staff retention is an issue for the agency, particularly in the context of the current review of NAMA's activities that could lead to a much faster winding up of the agency than originally envisaged.  

"The last thing we want is to be unable to match the A-teams in hedge funds and private equity houses when we negotiate with them," Mr Daly stated.  

He said NAMA has a problem retaining staff, especially now as market conditions are improving, and he said it was a situation that will continue "unless we can make it attractive to stay with us until the job is done".

Meanwhile, the chief executive of NAMA told today's committee meeting that the the agency lost a net €200m in the sale of its portfolio of property in Northern Ireland earlier this year.

Brendan McDonagh said the banks had advanced loans worth €5.7 billion to developers.  NAMA acquired the underlying loans for €2 billion - resulting in a loss of €3.7 billion to the banks.

NAMA sold €100m of property relating to this portfolio during the period it held it, and collected €100m in rental income.
It then sold the portfolio for €1.6 billion, leaving the agency with a net loss of €200m on the transaction.

Mr McDonagh said the value of property had declined further in Northern Ireland since NAMA had acquired the underlying loans, and this was the chief cause of the loss on the transaction.

Earlier Mr McDonagh confirmed that the agency has sold loans or associated property at a loss to their acquisition cost, but had also sold loans or property at a profit to their acquisition costs.