Nama plan is challenged by five developers
O'Flynn and McKillen lead fight, claiming breach of State aid rules
Five of the country's biggest and most experienced property developers have filed a formal complaint with the European Commission, objecting to the Government's plans to use Nama as part of its efforts to address the housing crisis.
The Sunday Independent can reveal that Michael O'Flynn, Paddy McKillen, David Daly, New Generation Homes CEO Patrick Crean and MKN Group director Brian McKeown have called on the Commission's competition directorate to investigate the State's provision of funding for property development through Nama, claiming that it may be in breach of Europe's rules on State aid.
Lawyers acting on behalf of the five developers wrote to the Commission last Friday, seeking an investigation into the matter, described it as "extremely urgent" in the light of Nama's announcement of plans to engage in large-scale property development.
Last Thursday, the State agency's chiefs were joined by Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin at the Aviva stadium for the launch of Nama's proposal to deliver a €7.5bn development programme involving 20,000 new homes in Dublin and elsewhere and 3.8 million square feet of office space in Dublin.
Expressing their concerns, Mr O'Flynn and his fellow developers state: "The Nama scheme favours Nama and Nama-supported developers over non-supported developers."
Noting that the proposals have not been "notified nor approved" by the European Commission, they refer to the Nama's changing role as amounting to a "misapplication of [the] State aid" which was approved for Nama following its establishment.
According to the terms of its original approval, the Commission concluded that while the Nama scheme did amount to State aid, it would permit it on the basis that it was necessary "to restore stability to the Irish banking system in the context of the financial crisis".
The developers state: "The [original] Nama decision was concerned with the granting of State aid to the participating financial institutions [banks], not the granting of State aid to Nama and Nama-supported developers, which is the subject of this complaint".
While Mr Noonan has insisted that Nama's new role in property development complies with its mandate to intervene where there is "market failure", the decision by five of the country's foremost developers to challenge the plan could stop it in its tracks.
Pointing to the significant financial advantage Nama and the developers it supports will enjoy, the complaint outlines the huge differences in the State agency's cost of borrowing, compared to that experienced by those operating in the absence of any State supports. Based on an analysis conducted on their behalf by the economist Jim Power, the developers estimate Nama's current cost of capital (borrowing) to be approximately 2.5pc. Nama-supported developers pay an aggregate interest rate of around 6pc, they estimate.
The complaint notes that these rates are far lower than the 14pc and 15pc "non-[Nama] supported developers" can expect to avail of".