Since the 2008 U.S. led mortgage crash there have been a number of countries around the world which have required financial assistance from the European Union and other supporting bodies. Ireland is one such country with the property collapse occurring in tandem with a complete disintegration of the financial sector amidst a number of scandals. In the midst of this turmoil the “National Asset Management Agency” was set up as Ireland’s “bad bank”.
NAMA took on a phenomenal €74 billion of property related loans which it acquired for the knockdown price of €32 billion from troubled banking groups. So, why is there more confidence in the Irish commercial real estate sector despite the benign performance of the worldwide economy?
NAMA in large sell-off
FTSE 100 group Hammerson and German insurance Allianz have acquired the loans attached to an array of commercial real estate assets being sold by the NAMA. For the pricey sum of €1.85 billion the joint venture has purchased an array of properties in the Dundrum Town Centre as well as stakes in an additional two of Ireland’s well-known shopping centres. This is the largest transaction in the Irish real estate market and many are now suggesting it could prompt a significant turn in fortunes.
It is common knowledge that NAMA has been looking to sell off an array of loans and assets which were required at the bottom of the financial crisis. While there has been some criticism about this constant overhang of properties for sale it is worth noting that without the assistance of the NAMA set up the problem would have been far worse. True, this was a difficult pill to swallow for many troubled property and construction companies but it was something which needed to be done to finally draw a line under what could have been the bankruptcy of Ireland.
What next for the Irish real estate market?
It was interesting to see that the €1.85 billion loan transaction actually had a face value of €2.6 billion. While this is still a significant discount it is not in the realms of massive distress and when you balance the fact it has taken a significant overhang from the market this could well be a turning point. It is also known that a number of other property investors were looking at the transaction and as we all know, competition breeds competition.
There is still some concern regarding the state of the Irish construction industry although there have been signs of life of late. Many construction companies have complained directly to the authorities suggesting that NAMA took over their assets far too quickly in an attempt to at least support the marketplace. However, there is hope that recent transactions by the NAMA will reduce the drag on prices and what many believe to have been a distortion of the underlying value of Irish commercial real estate assets.
While there is still anger regarding the role which NAMA took in the collapse of the Irish economy there is no doubt the situation would have been much worse today without the introduction of the National Asset Management Agency. Not only was the property market collapsing but a number of financial scandals led to investors fleeing the region with the reputation of Ireland under significant pressure. There are hopes that the recent €1.85 billion transaction, which saw a number of commercial properties change hands, could lift some of the dark clouds from the region.