The Comptroller and Auditor General says NAMA faces considerable challenges in achieving its goal of recovering the amount of money it has paid for developer loans.
In its first review of the asset management agency, The C and AG says that even after a writedown of 57% on the average purchase price of assets, the price paid still represented a 20% subsidy to the financial institutions.
It says that by the end of 2011 NAMA had received around €6.2 billion in cash. €2.9 billion of this had come from selling properties, while another 0.9 billion came from selling loan assets to investors. The rest came from loan servicing.
However a sample of properties examined by the Comptroller showed that rental incomes were 26% lower than projected at the time of the acquisition by NAMA, and that most rents reviewed by the comptroller were showing lower than projected levels.
The Comptroller says the gross receipts for property sales in Britain were 2.5% higher than market value, while for Irish properties there was a shortfall of 5%.
It says NAMA is persuing restructuring plans for 28% of the directly managed debt it has acquired, a further 34% of these loans are subject to disposal or enforcement actions, with a further 33% subject to an interim letter of support. No restructuring has occurred of loans managed on NAMA's behalf by the banks.
The bulk of NAMA's loan assets continue to be managed by debtors. The agency uses part of the loan repayment money it gets to fund new advances to developers to finish out projects. Over the course of its lifetime NAMA plans to advance some €3.5 billion to developers, the bulk of it - €2.6 billion - between now and 2015. NAMA anticipates it will recover the bulk of the funds it advances for capital and development.
One of the major costs NAMA incurrs can arise from the use of insolvency practitioners. In the case of receivers, NAMA is moving to a process of payments based on budgets that are submitted in advance, and requiring receivers to set out a strategy for the assets they have been appointed to.
