When the Irish economy began to wobble and eventually collapse, the government of the time was forced to create the National Asset Management Agency (NAMA) which effectively took on the toxic liabilities of various Irish banking operations. The agency was initially set up with a ten-year lifespan although with six years still to go it was revealed this week that 850 properties had been sold for a fraction of their £4.5 billion face value.
While there is no doubt that many people will be glad to see the back of the toxic bank property portfolio there are concerns about the price that the authorities agreed. While the deal itself is said to be commercially sensitive, which is a valid point, perhaps we need a little more transparency with taxpayer’s money at stake?
Who acquired the portfolio?
The portfolio was acquired by US investment operation Cerberus Capital Management which is said to have paid around £1.3 billion for a portfolio with a face value of £4.5 billion. The portfolio consists mainly of properties within Northern Ireland but there are also others in the UK, the Republic of Ireland and Europe. In total it is believed that 850 properties changed hands making the US investment operation the largest landlord in Northern Ireland.
While there are concerns being expressed that the authorities failed to get the best price for the portfolio, the process was transparent, it was marketed across the world with a minimum price of £1.3 billion. While officially there is no confirmation of the exact price for the property portfolio it is believed to be around about the £1.3 billion level. It will be interesting to see the level of rental increases in the short, medium and longer term and indeed how this impacts the local property market.
Will this help stabilise the property market in Northern Ireland?
While Ireland itself has had a very troubled time over the last few years, in light of various financial collapses and political scandals, this portfolio of so-called toxic properties has been hanging over the market for some time. If you look at this from a pure investment angle, the spectre of this 850 property portfolio now falling into private hands and no longer “for sale” should be fairly positive for the market in the short-term.
Quote from PropertyForum.com : “While the UK government is in the headlines of late looking to introduce more taxes to raise money from those with expensive property assets, should governments around the world be allowed to penalised those with valuable real estate to cover government budgets?”
Perhaps the only problem may occur as and when the property market in Northern Ireland recovers and whether indeed the US investors, who have acquired these properties at a fraction of their face value, decide to drip feed their properties into the market. This seems to be unlikely in the short to medium term as there are not many experts predicting a significant improvement at this moment in time. There are still concerns about the political scene in Ireland and austerity measures even though emergency funding from the European Union has been repaid early.
Conclusion
If we look at this from a pure investment point of view the disposal of this 850 property portfolio eliminates one of the depressing factors on the market. However, selling a portfolio of properties with a face value of £4.5 billion at somewhere in the region of £1.3 billion does not necessarily look good value? Did the authorities rush the sale of this property portfolio? Or is there worse to come for the Irish economy?