‘Bad bank’ will try to avoid fire sale of property

THE Government’s new “bad bank” will do everything its power to prevent a fire sale in the Irish property market, but it will only act in the interests of taxpayers.

Unveiling legislation to set up the National Asset Management Agency (NAMA), Finance Minister Brian Lenihan said, first and foremost, it is responsible for getting the best financial return.

It will be given all the necessary assistance to hold, manage and improve assets and dispose of them, however its sees fit – starting with British-based assets if practical.

The amount paid for individual properties dumped on NAMA will not be made public, despite some speculative sites now only being worth the same as agricultural land.

Mr Lenihan said the morning the bill is brought into the Dáil on September 16, he will publish the mathematical theory behind his valuation exercise.

The same day he will give a precise estimate on how much NAMA will cost. He said the Government had a responsibility to reveal what taxpayers were expected to pay for the policy.

In the meantime the Government would not feed speculation on the price it is willing to pay for the banks’ riskiest assets.

“I think you should draw no conclusion on the size of the haircut involved,” he said.

The Government has identified €90 billion worth of assets on the banks’ books which are destined for NAMA:

* €30bn is in undeveloped land.

* €30bn is work in progress, some sites finalised or close to completion.

* €30bn is in completed commercial assets.

Three-quarters of the sites are in Ireland and the remainder overseas, the majority in Britain and Northern Ireland.

Mr Lenihan said, following on from the PricewaterhouseCoopers review of late 2009, the Government was continuing to dig deep into the banks’ asset base.

He said he appreciated the question of value was of concern to the public and promised NAMA would not pay the inflated prices developers forked out during the boom.

Instead NAMA will plot trends going back 35 years to try to strike on how much land in Ireland is actually worth.

“NAMA will not be paying based on recent bubble property prices and they won’t be used to determine long-term economic value.

Other policy options will be considered over the life span of NAMA to see if decisions can assist the maximum recovery of the state’s investment.

However, second secretary at the Department of Finance’s financial services section Kevin Cardiff said this did not mean the state would be manipulating the market with investments to suit NAMA’s holdings.

Mr Lenihan said in some cases full return may not be achieved for years, depending on the growth prospects around certain sites and other developments.

The ability to match certain sites to a true open market was complicated by the flimsy collateral banks had accepted. This included race horses and bank shares which had no value any more.