The National Asset Management Agency (Nama) incurred a €6 million loss two years ago on the sale of loans on a portfolio of residential units and land in provincial locations in the State, after agreeing to sell the debt to a relative of the borrowers for a deep discount after an alleged campaign of intimidation.
The unusual case was highlighted in a progress update report on Nama prepared by the Comptroller and Auditor General (C&AG), published on Wednesday. The loans were sold at a 97.5 per cent discount to their original value, plus interest.
The C&AG noted in its audit of Nama’s 2021 accounts that the so-called bad bank had sold the loans – backed by collateral on 14 occupied rental homes, 28 unfinished units and seven plots of land totalling 20.9 hectares (51.6 acres) – for €265,000. The loans had not been openly marketed before the sale, as normally required under Nama’s own loan sale policy.
A spokesman for Nama declined to comment on the identity or location of the parties or properties involved.
Nama paid €4.37 million for the loans in 2010 – representing a 49 per cent discount to their original €8.58 million value – as part of a bigger portfolio linked to the borrowers. Some €1.9 million of unpaid interest was subsequently racked up on the loans.
In late 2018, Nama appointed receivers over assets held as collateral. However, the borrowers “strongly resisted” the appointment, alleging the agency had previously forced – through a receiver – the sale of a large apartment complex held as collateral against another loan at below its market value.
“They argued that had the property been sold by the receiver at market value the proceeds would have cleared all the [borrowers’] companies’ loans,” the C&AG report said.
The receiver resigned in May 2020, after a planned sale of 18 unfinished houses and 3.2 hectares to a local authority fell through “and he could not find a sales agent to market the properties”, the report said.
Nama subsequently commissioned a valuation on the remaining assets, which came up with a figure of €1.3 million, but warned that “these valuations are unlikely to be achieved, or the lands disposed of while the threats and intimidation continue”. The valuation report, however, did not describe specific instances of alleged threats and intimidation. The Nama spokesman also declined to comment on this.
An offer by a “family relative”, who was not a Nama debtor, to purchase the loans for €265,000 in 2020 ended up being brought before the agency’s board because of the exceptional circumstances of the case.
Nama chief executive Brendan McDonagh and another senior official recommended the board agree to the deal on grounds of expediency, the fact that the loans were not considered marketable “due to alleged debtor intimidation of sales agents and potential litigation involving the assets”, and a view that it was “superior” to other alternatives.
The relative signed a form to say they were not a connected party within the definition of laws governing Nama. Section 172 of the Nama Act bars the agency from selling loans or assets to a defaulting debtor or persons acting on their behalf. However, this does not prohibit family members from buying loans or assets, as long as they are not a nominee or trustee of the borrower.
“As is stated in the report, the relevant local authority declined to proceed with its offer to buy the assets, a valuer indicated that the assets were not marketable, no sales agent approached by the receiver would agree to sell the assets and the receiver subsequently resigned,” a spokesman for Nama said.
“On this basis, the Nama board approved the transaction as it represented a better financial outcome than was available from alternative options at the time and matched the gross figure previously agreed with the local authority.”
The C&AG, Seamus McCarthy, does not offer a view on the transaction in the report. He has previously been critical of certain transactions. These include the price achieved by Nama on the £1.3 billion (€1.17 billion) sale of its Northern Ireland portfolio, known as Project Eagle, to US private-equity giant Cerberus in 2014, as well as what the agency received for the sale of debts of boom-era property player Quinlan Private.
A spokeswoman for the C&AG declined to comment beyond the report.
Nama, which was set up in 2009 to take over risky commercial property loans from the State’s banks, said last month that its remaining portfolio had a carrying value of about €500 million at the end of 2022. That equates to less than 2 per cent of the €32 billion price it paid to acquire the loans. The agency estimates it will have made a lifetime surplus of €4.5 billion by the time it is wound down in 2025.
