Ireland's state-run National Asset Management Agency (NAMA) has started offering financing to commercial property buyers and expects to ramp up such lending next year, its chief executive said on Wednesday.
Created to purge Irish banks of nearly 75 billion euros' (65 billion pounds) worth of risky land and development loans, NAMA is one of the world's largest property groups and needs to revive Ireland's moribund commercial property sector to avoid further writedowns to its portfolio.
The agency lost 1.18 billion euros last year on the back of a 1.5 billion euro impairment charge.
NAMA is willing to provide up to 70 percent vendor debt finance to purchasers of commercial property which is either under the control of its debtors or of NAMA receivers, Brendan McDonagh told a parliamentary committee.
Purchasers, such as pension funds, insurance companies, private equity firms and sovereign wealth funds, will be expected to be in a position to inject significant equity capital up front.
McDonagh said NAMA had sold over 4.6 billion euros' worth of assets so far this year. As part of an EU-IMF bailout, NAMA is committed to selling 25 percent of its loan book by the end of 2013 to help it meet a target of repaying 7.5 billion euros' worth of debt by that date.
NAMA is under pressure to produce a profit at the end of its 10-year lifetime after its heavy discounting of the loans it acquired triggered huge holes on the banks' balance sheets that the taxpayer was forced to plug.
So far, NAMA has repaid 1.55 billion euros in debt, and McDonagh said the agency expected to make a substantial additional redemption of securities before the end of the year.
With a portfolio that ranges from London skyscrapers to farmland in the Irish midlands, NAMA has recently acquired an additional 2 billion euros' worth of loans, completing its purchase of badly impaired property loans and bringing the nominal value of its portfolio to 74.2 billion euros.
The price for the 2 billion euro transfer has yet to be finalised but it is expected to be subject to an average discount of around 58 percent, McDonagh said, meaning that NAMA will have shelled out close to 33 billion euros for all loans.
In addition to offering potential investors debt finance to attract interest in its commercial property portfolio, NAMA is also looking at packaging property assets based on type of property or geography for sale to investors.
NAMA is selling loans as well as properties, and McDonagh said the agency was looking at appointing a panel of loan sale advisers in the U.S. and Europe, where the market for loan sales is expected to expand as banks shed assets to meet tough capital requirements.
In the Irish residential property market, where prices are more than 40 percent below their 2007 peak, NAMA is in talks with the government about offering potential purchasers a guarantee against negative equity.
If a decision is made to proceed with the initiative, it will first be offered on a pilot basis for a small number of properties, and further rollout will depend on the response to the pilot project, McDonagh said.
We also see a possible synergy between NAMA housing stock and the potential demand for social housing, he added.
McDonagh said NAMA was considering offering incentives to some of its 850 debtors, including some of the country's most high-profile property developers, to encourage them to beat the financial targets set by NAMA.
(Writing by Carmel Crimmins; Editing by Will Waterman)