The sale of Project Eagle — the codename for the 2014 auction of €5.7bn in distressed property loans in the North — has sparked a furore amid allegations in the Dáil that a Northern Irish politician and “fixers” were to benefit from fees paid to external advisers employed by the winning bidder.
Cerberus Capital used the same US legal advisers, Brown Rudnick, and local Belfast solicitors, Tughans, as rival bidder Pimco before Pimco exited the bidding a few weeks before it ended in April 2014. The bidding has also been controversial because Cerberus, which separately controls another large part of the North’s distressed property, appears to have benefited from a huge uplift in the value of Belfast properties.
The rate of price increases in the commercial property market underpinning the Project Eagle loans was hotly disputed when Nama chiefs met with the Dáil’s Public Accounts Committee.
However, property experts have confirmed prices of prime commercial properties in Belfast have soared by up to 20% in the last 12 months. The leading MSCI Northern Ireland Investment Review, published in recent days, shows property values in the North’s commercial property market grew 10.9% in 2014, having risen by 7% in the previous 12-month period.
The Northern market in the first six months of 2015 has likely increased further over the first half of the year.
Marie Hunt, executive director and Ireland head of research at CBRE for Belfast and Dublin, said commercial prices have risen exceptionally strongly in Belfast in the past year, by up to 20%.
“We expect that this will continue to be the case in 2015, with investors focused on retail investment opportunities in the main,” said Ms Hunt. “We also anticipate a considerable volume of refinancing activity to occur during 2015.”
Nama chairman Frank Daly and chief executive Brendan McDonagh strongly defended the agency’s handling of the sale. They told the PAC there was no reason to cancel or postpone the “competitive” bidding process.
In a statement to the Irish Examiner, Nama said it had achieved the best achievable sales price.
“The rationale for selling the portfolio in 2014 instead of continuing to hold it was set out in detail by the Nama chairman and chief executive to the PAC last week,” said the Nama statement. “This included the portfolio’s heavy concentration in provincial and secondary property markets and the limited evidence at the time of the sale of any prospect of a sustained recovery in those markets over the medium term.
“The Nama CEO stated that the asset portfolio securing Nama loans was very granular and had few major assets which might have been of interest to purchasers if Nama had decided to proceed to sell the assets on an asset-by-asset basis.
“Taking these factors into account, Nama set a reserve minimum sales price, which equated to the net present value of its projected cash flows from this portfolio over the medium term, and only agreed to sell the portfolio when that minimum price was obtained. The portfolio sold for what it was worth at the time.”