Media Release - NAMA: progress on achievement of objectives as at end 2021
12 July 2023
The Comptroller and Auditor General has completed an assessment of the progress that the National Asset Management Agency (NAMA) has made towards achieving its overall objectives, covering the period from the establishment of NAMA to end 2021. This is the fourth such progress report, and it has been presented to the Houses of the Oireachtas today.
Loan management and disposal
NAMA’s primary purpose is to manage property-related loans and related collateral acquired from financial institutions, and ultimately to dispose of those assets in a manner that obtains the best achievable financial return for the State.
NAMA acquired loans with a combined par value of €74.4 billion from the participating financial institutions. NAMA paid €31.8 billion for the loans, based on its own projections of the loan cash flows. This represented a discount of 57% on the par value, and resulted in the participating financial institutions incurring very substantial losses.
NAMA has disposed of most of the assets it acquired as a result of loan sales or the sales of collateral assets. The carrying value of NAMA debtors’ loan balances had reduced to around €715 million by the end of 2021.
Loss on loan sale in 2021
In the course of the audit of the financial statements for 2021, it was noted that NAMA had finalised a sale of loans for a consideration of €265,000, resulting in NAMA incurring a loss of just under €6 million. The loans had not been openly marketed prior to the sale, as normally required under NAMA’s loan sale policy.
An examination of the loan sale records found that the debtors had strongly resisted enforcement proceedings. A receiver appointed by NAMA resigned after a proposed sale of some of the collateral assets fell through. NAMA commissioned an independent desktop valuation of the remaining assets, which attributed a market value of €1.3 million to them but stated that ‘these values are unlikely to ever be achieved or the lands disposed of while the threats and intimidation continue’. No specific instances of alleged threats and intimidation were described in the valuation report.
Following an offer from the debtors, NAMA agreed to a sale of the loans to a newly-incorporated company that it understood to be promoted and funded by a family relative of the debtors.
NAMA Board approval was sought and obtained in respect of the proposed sale terms. The paper to the Board set out the rationale for recommending the proposed loan sale, stating that it was superior to alternative options available to NAMA.
Rate of return
NAMA has a statutory objective to obtain the best achievable financial return for the State. The internal rate of return(IRR)is a standard measure of financial return for property-related (and other) investments. NAMA has not set a target IRR for its operations.
When NAMA was acquiring the loans from the financial institutions, the amounts it paid for the loans were based on NAMA achieving an implied IRR of 5%. At the end of 2021, the projected IRR on NAMA’s overall operations was calculated to be around 6.7%.
As at end 2021, the NAMA Board projected it would return a surplus of €4.3 billion upon completion of the Agency’s work. In June 2022, NAMA increased the projected life-time surplus to €4.5 billion.
Secondary objectives
The NAMA Board adopted as secondary objectives the facilitation of the development of office accommodation in Dublin, and the delivery of housing, subject to commercial viability.
Commercial development in Dublin
NAMA had an interest in a substantial proportion of the undeveloped land in the Dublin Docklands strategic development zone (SDZ). The Agency prepared a business plan setting out proposals for the development of the land in question, but this did not include formal targets. At the end of 2021, 84% of the site area that NAMA had an interest in was classified as ‘development completed’ and/or sold. By the end of 2022, only one site in the SDZ in which NAMA still had an interest remained undeveloped. That site accounted for 3% of the original NAMA target area for development.
At end 2021, NAMA held a 20% shareholding in a company it set up to hold land in the Poolbeg West SDZ that has the potential for significant commercial and residential development.
Social housing delivery
NAMA set a target of delivering 2,000 social housing units by the end of 2015, and this target was met. By the end of 2021, NAMA had provided a total of 2,621 units for social housing to local authorities or approved housing bodies with a further 66 units at contract stage. Just over half of all social housing delivered by NAMA is through its own subsidiary company, National Asset Residential Property Services DAC (NARPS). It is intended that the Land Development Agency will assume responsibility for NARPS as part of the wind down of NAMA.
Commercial residential delivery
NAMA set itself a challenging target to deliver 20,000 commercial residential units on sites in which it had an interest over the five-year period 2016 to 2020. NAMA did not achieve that target. As at the end of 2021, it had delivered 11,049 units on sites in which it has an interest. This represents delivery of 55% of the target, a year later than originally projected.
NAMA considers that, in monitoring the achievement of its residential target of 20,000 units, it is appropriate to also take account of 9,971 units constructed on sites sold by NAMA debtors/receivers. However, this is not a ‘like for like’ comparison, because such units were not included when the original target was set.
Notes for Editors
The Comptroller and Auditor General is an independent constitutional officer with responsibility for the audit of public funds. He reports to Dáil Éireann.
The full text of the report is available here.
Enquiries about the report should be directed to Patricia Devlin (01) 8638634 or at patricia.devlin@audit.gov.ie
