VALUING ASSETS BIG NAMA CHALLENGE - How do we value assets for which there is no market? This is one of the main problems facing the National Asset Management Agency, or NAMA, which is due to take over all of the land and development loans at Irish banks to the tune of €60 billion, as well as loans linked to property development of about €20 billion to €30 billion.
Maureen O'Hara, professor of finance at Cornell University, agreed that valuing assets was a challenge, and was more difficult in Ireland as most of the assets were linked to property. Professor O'Hara is speaking today at the Global Finance Academy Conference at UCD's Michael Smurfit Business School.
She said there are a number of ways of valuing property assets, such as mark to market, which looks at what prices properties are fetching on the market. But, since nothing is selling, this does not work at the moment.
Professor O'Hara said there were reasons to think NAMA would be successful, following similar examples in Japan and the US. Professor O'Hara says the Resolution Trust Corporation - set up in the US to cope with the Savings & Loan crisis - managed to liquidate a massive amount of property assets in its eight years. The RTC set up a securitised market for assets, which brought in outside institutional money.
Asked about better US consumer confidence figures, Professor O'Hara said there was a general feeling that things were better after a tough January and February, and the US government's stress tests on banks had helped to restore confidence.
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