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Ireland to Sell UK Commercial Property to Get Cash

Neil Callanan, Financial Times
Thursday, 21 Apr 2011 | 2:38 AM ET

Ireland’s National Asset Management Agency, the “bad bank” set up to take over the toxic property loans of the country’s banks, intends to aggressively step up sales of property backed by bad Irish debt in the UK.

Dublin, Ireland
Firecrest Picture | Robert Harding | Getty Images
Dublin, Ireland

As part of an ambitious strategy to reduce its €77 billion (£68 billion) loan book by a quarter by the end of 2013, Brendan McDonagh, Nama chief executive, told the Financial Times he would push through the sale of at least €2.5 billion of UK commercial property in the next three years.

Irish banks were among the most profligate lenders that helped fuel the UK property boom.

The UK is a focus for future forced sales given the rebound in property values. Some of London’s best-known buildings are backed by debt bought by Nama, including the Citigroup tower in Canary Wharf, which was recently put up for sale, as well as the Rothschild headquarters in the City and Claridges hotel.

Much of the debt in Nama was lent at high loan-to-values, and is in breach of debt terms after the crash in prices in 2008. Nama became the largest lender to UK property after Royal Bank of Scotland and Lloyds when it was set up by the Irish government to take about €77 billion of loans to property developers.

These came from Allied Irish Banks, Anglo Irish Bank, Bank of Ireland, EBS and Irish Nationwide.

It has paid about €30 billion for those loans, with €3.5 billion more to transfer because of legal actions. It paid €10 billion to buy property loans in the UK from Irish banks.

The group is working with developers and owners, including lending new money to help complete developments where that would maximise values.

The agency has advanced €780 millio to complete projects, including in the UK. These had “turned out to be very profitable for us”, Mr McDonagh said.

Developers need to submit details of how they intend to repay debts. About 10 of the top 30 customers – who owe a combined €27 billion – are not expected to have their plan approved and some will face bankruptcy.

“It’s a business decision as to whether we can work with them or not ...or whether they want to work with us,” said Frank Daly, Nama chairman.

“We’re funding some developments in the UK where the projects have been presold,” Mr McDonagh added.

“Rather than somebody else making a huge profit on that, we’ll fund that development to completion on the basis that we know that the people who will pay for them will be there to deliver.”

The agency is also advancing money to developers to allow them to secure planning permission or development licences in the UK. Nama controls several thousand apartments around Dublin and has looked at setting up a real estate investment trust (REIT) to move them off their books.

“The reality is the UK introduced REIT legislation in a rush and it hasn’t worked, so we want to actually use what international investors want in terms of REITs,” Mr McDonagh said.

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