Nama IT system led to errors in €352m property portfolio valuation

Nama IT system led to errors in €352m property portfolio valuation

Nama chief executive Brendan McDonagh will discuss the aforementioned Project Nantes loan sale before the Public Accounts Committee. Photo: Gareth Chaney Collins

Errors in valuations of a €352 million property portfolio by the National Asset Management Agency (Nama) happened because the agency had no proper IT systems in place at the time.

Brendan McDonagh, the agency’s chief executive, is due to appear before the Public Accounts Committee tomorrow morning to discuss the aforementioned Project Nantes loan sale, together with Nama’s 2019 accounts, and is expected to say that he “fully accepts and regrets” the fact that the valuations were in error.

“This transaction occurred early in Nama’s lifecycle when we had no central IT systems and relied on multiple spreadsheets with volumes of data,” Mr McDonagh will say in his opening statement to the committee, a situation which led to some of the loans being “inadvertently misclassified” by an accounting firm which reviewed the property two years later in 2011.

Nama itself was first set up in December 2009 amid the property crisis.

“Since then, our internal controls and IT systems have evolved and improved and are significantly more robust as well as being subject to rigorous control testing by our auditors,” the statement reads.

Separately, Mr McDonagh is set to assert that it is “increasingly likely that Nama may be left with a larger residual portfolio by end-2021 than the circa €300 million previously envisaged” due to the impact of the coronavirus crisis.

“Nama is not immune to the effects of the economic crisis created by Covid-19,” he will say with regard to the state of the agency’s finances. “The impact of Covid-19 can already be seen in our Q1 2020 financials where we reported a loss of €49 million.”

The original valuations for the Project Nantes suite of loans were performed in 2009 before being acquired by Nama, and led to the agency setting a sale price target of €125.5 million for the portfolio. In the end, the portfolio was sold to a Luxembourg-based company, Clairvue-Nantes, for just €26.6 million in February of 2012.

The Comptroller and Auditor General (C&AG), in considering the entire sale of eight loan portfolios connected to Irish developer Derek Quinlan as managed by Avestus Capital Partners, concluded that the Nantes properties could have been sold for €56 million in a report published in March of this year.

That equated to a net loss on the Nantes properties - located in multiple European countries, but primarily within Ireland and Britain - of €10 million once the acquisition costs of the deal were taken into account, the C&AG said.

Nonetheless, Mr McDonagh will tell the committee that Project Nantes “cannot be viewed in isolation”, saying it needs to be taken in the context of Nama’s “global connection exit strategy”.

“Nama achieved profits of €78 million on six out of the seven connection loan bundles but made a €10 million loss on Nantes,” his statement reads.

As regards why the sale was made privately via a targeted sale “to credible specialist buyers”, something previously queried by former TD and current MEP Mick Wallace, Mr McDonagh will assert that “open marketing does not always result in the best possible outcome”.

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