NAMA tries to entice developers with 'deals'
Agency seeks to ensure that management adheres to business plans by offering a possible share in any sell-off of firm's assets
Published 02/06/2011 | 05:00
NAMA is offering a financial incentive to developers to get them to stick with targets set down in business plans agreed with the agency, the Irish Independent has learned.
The agency describes the idea as "management incentivisation", with developers getting a share in any upside when they sell off their assets to pay down debt -- but only if proceeds exceed targets set by NAMA.
If a developer manages to pay down debt beyond the targets set down by NAMA, the agency is prepared to release a portion of this money, subject to meeting several conditions.
When proceeds of sales exceed NAMA targets, the money is placed in an escrow account and accumulates until the developer has reached all of targets set by NAMA.
There are no guarantees about the arrangements, but they are put in place to entice developers to work with the agency over the long term.
It is understood the developers would be in line for between 6pc and 9pc of the additional proceeds generated by assets sales. For large companies the incentive, if paid, could amount to a big sum.
The developer Niall Mellon called for such an idea in December, when he argued that developers should be allowed share in the upside of asset sales or they would see little point in working with NAMA.
Agreements reached with a range of developers refer to "surplus proceeds'' generated from assets sales. These surplus proceeds would only be released when all assets are sold and developers have disclosed all their liabilities and assets.
However, some developers are not convinced by the idea, pointing out that the arrangements are not guaranteed in law, but simply fall under voluntary agreements, knowns as memorandums of understanding (MOUs), that were reached with NAMA.
The agency was not in a position to comment yesterday on such arrangements when asked about them by this newspaper.
The agency has spoken on several occasions about working closely with developers, while taking enforcement action against those who are deemed to be unco-operative.
Frank Daly, chairman of NAMA, said recently: "Most debtors have faced up to the scale of their losses, realise that there is a bumpy road ahead and are willing to make the necessary sacrifices and work their way out of difficulty and we want to help them to survive.
"Regrettably, in a total of 57 cases to date, we have been left with no choice but to enforce against debtors."
The agency first asks developers to produce a full statement of affairs, listing all their assets and liabilities.
The developers also have to list any assets they have transferred in the years before dealing with NAMA. They are obliged to give all details about their tax affairs.
Once NAMA is happy with this list, it consolidates developer's varous loans into one loan. This is regarded as a more tax-efficient structure than developers retaining a number of separate loans.