Nama: 'It was never personal and will never be political'
Nama chairman Frank Daly is strident in his defence of its operation, writes Ronald Quinlan
CONCEIVED in the midst of the worst economic crisis ever faced by this country, Nama's existence has been a difficult one right from the beginning.
With billions of euro of taxpayers' money riding on its success or failure and with its insistence on absolute secrecy in its affairs, the agency has rightly been the subject of relentless scrutiny by the media, and by this newspaper particularly.
Last Thursday, Nama chairman Frank Daly sat down with Ronald Quinlan in an effort to address the most controversial questions facing his agency.
RONALD QUINLAN: "When Nama was first established, you were talking about recovering the €74bn face value of the loans you took over, now we're down to the €31.8bn you paid. How can you be confident that you will even recover that?"
FRANK DALY: "We're now at the stage where we have all the loans across, we have done the diligence on all of them. We have also been through every business plan so we know exactly what our portfolio is. We have a very good idea of what the capability of our debtors is.
"Some 71 per cent of our portfolio is in what you might call investment property. It has everything from houses, to hotels, to developed commercial premises, offices and all of that -- and that is probably the least challenging part of our portfolio.
"The vast bulk of that is in very good locations around Dublin, Cork, Galway, Limerick, in areas where the demographics are right and the potential for growth is good.
"Nama is very well-positioned on the periphery of Dublin. We have a lot of land there, so if Dublin is to expand, Nama is in the right place to benefit from that.
"We have taken a portfolio of €74bn dead weight off the banks, we paid €31.8bn so we have already discounted that, so we're fairly sure that what came across is very properly valued by us. Now remember, it was valued at November 2009 prices and I fully acknowledge that there has been a deterioration."
RQ: "How much of a deterioration?"
FD: "It varies whether you're talking about residential property or commercial property but that deterioration and the analysis of the business plans has given us what I would say are very, very solid figures.
"We've gone through every single one of the business plans and looked at the cash flows and the potential for asset realisation of each one of our 174 biggest debtors that covers 82 per cent or maybe a bit more of the Nama book, and we applied a collective impairment provision based on that individual one to the rest of the book, so it's a confidence that we are very, very sure about our figures now."
RQ: "Brendan McDonagh [Nama CEO] and the finance minister Michael Noonan have said property prices are stabilising. What's your view?"
FD: "You're not going to have a V-shaped recovery, it's something that's going to go up and down for several months.
"Last month the indications were a bit negative, the previous month positive, and I think you will have that probably for a few months but what we're seeing in different areas, in prime office spaces, there is definitely going to be a shortage of that space within two to three years and that's not just our opinion, it's the IDA, who are very close to FDI requirements. They've been talking to us and working with us to provide that.
"In the residential area, we have invested over the last few months in some residential developments in the Dublin area, invested on the basis that there is demand there. I'm pointing to a particular one in Dun Laoghaire, where our analysis of potential demand, and indeed the developer's analysis of potential demand, has been justified by results."
RQ: "How many of those 173 units in Honey Park, the Cosgrave development you are talking about, have been sold?"
FD: "I don't have the figure to hand but we'll certainly get it to you, but the indication of interest in that development in Dun Laoghaire Golf Course -- the one you're talking about -- is very positive, there are other pockets of Dublin where there is demand. Dublin is going to lead the recovery."
RQ: "You announced a €2bn investment plan a couple of months ago. Is this just another Nama announcement?"
FD: "When do I see something actually happening on that? In fact, within two months our asset management unit, a new unit set up specifically to actually develop out the assets, to look at opportunities and indeed create opportunities, will be back to the board with their initial proposals for spending some of that €2bn."
RQ: "At the outset, Nama didn't trust developers as far as it could throw them. Now you appear to trust two-thirds of them. Why?"
FD: "I think what we have shown probably in the last two years is that we are a business-like organisation ... I don't think we're ever going to be bosom buddies, much less boozing buddies with debtors, but I think we have a good healthy relationship, a challenging relationship. Maybe that's as it should be with our debtors."
RQ: "Weren't there always some developers whom Nama just couldn't stomach working with, the ones who would have featured heavily in the gossip columns and social diaries during the boom?"
FD: "I'm not going to categorise any particular debtor as being in the gossip columns or anywhere else. It has never, ever been personal and never would be personal, it has never, ever been political and it never would be political.
"I say that here absolutely, no doubt about it. We go through people on the basis of their business plans, their level of cooperation, not what clothes they wear, not what clubs they go to, and not where they dine or anything like that. It's a purely business relationship. It's never personal."
RQ: "So you've no problem with the lifestyles many of them continue to lead?"
FD: "No, I've just said that. Nama has made it very clear -- there are views on lifestyles all right, but we're not policemen in the sense of checking up on what they're at.
"There are people who would say why should so-and-so's children be going to a private school, why should so-and-so be driving this car rather than a Mondeo or a Cortina or whatever. You know, if we go down into that level of sort of policing in detail, then it becomes personal and then you will lose the focus on the business and then you lose the focus on the absolute objective here, which is to get the best commercial return for the Irish people."
RQ: "What about the massive salaries numerous developers are drawing down? There are 28 on €150,000 and three on €200,000 -- the same as the Taoiseach."
FD: "I can understand how people feel strongly about this. There are times that I feel strongly about it myself but again we're back to choices.
"The choice here is: do we exploit their expertise, exploit their knowledge of the portfolio and do we have to allow them to extract €200,000 or €150,000 and in some cases €50k to actually do that for us or is the alternative that we appoint a receiver? Or is the alternative that we set up a massive quango in Nama? Each time it's down to a commercial decision."
RQ: "As chairman of the Revenue Commissioners, you presided over the biggest tax settlement in the history of the State with the Bailey brothers of Bovale. Do you find it difficult to deal with people who have a history of cheating the taxpayer?"
FD: "I'm not going to talk about any particular case. Let me talk in general terms. Of course, I would have met some of the people who were in Nama in my previous life. Again it's back to an assessment, where are they now, in their minds, in their attitudes, their level of cooperation.
"Do I find it difficult? It's not personal, it's never personal."
RQ: "A dedicated email address was set up recently for TDs to contact Nama with their queries. How many queries have there been to date?"
FD: "Close to 400. I come from a somewhat traditional public servant's view that Nama at the end of the day is a State body and the members of the Oireachtas are the elected representatives of the people. I could never envisage a situation where elected representatives would not be able to talk to a State body or should not be able to articulate the general concerns of their constituency or their communities to a State body."
RQ: "How many ministers have made contact with Nama with queries?"
FD: "I don't know but I don't think there would be very many. I see them all because they're all copied to me but I don't have any recollection."
RQ: "People say Nama is a bailout for developers. Isn't it also a bailout for professionals such as lawyers and accountants?"
FD: "We were a bailout for developers and now it's professionals. The suggestion is wrong. There's always going to be that need for expertise in tax, in accountancy, in legal in particular.
"Over the past two years we have employed people and we will continue to need them in the future, but I think to a far lesser extent. Last year we spent €9.5m on legal fees and we reckon we saved at least half a billion in terms of value in the loans because of deficiencies that were identified by our legal people."
RQ: "Didn't some of the legal firms now employed by Nama to tidy up the mess work previously for the banks and developers who created it in the first place?"
FD: "It's quite possible that some of them would be ... but all I know is that the legal firms that we employed, we recruit them through the public procurement process we look at their skill set and we absolutely oversee every piece of work that they actually do for us and make sure that they are doing it assiduously."
RQ: "What about the hundreds of millions worth of judgements Nama has obtained? How much of that money have you actually recovered?"
FD: "I don't know if we have a figure for what has come in but I would say in relation to judgements, in the nature of the way we have evolved, most of those have been pretty recent... You register your judgement, it can take some time before you actually get a yield from it, the important thing is to get in there and register your judgement."
RQ: "What about the developers who slipped the net and went to the UK to avail of its more lenient bankruptcy regime?"
FD: "Well, I don't believe that they have slipped the net. We're pretty neutral on whether people apply for bankruptcy here or in the UK. The reality is that the UK has a very sophisticated bankruptcy regime and we have worked very, very successfully with the bankruptcy trustees there."
RQ: "What about a developer whose wife takes over the business and starts to make money? What can you do there?"
FD: "If the spouse is totally disconnected, if there's no cross collateralisation, if there's no personal guarantee, then there's probably not a huge amount we can actually do but the number of cases where I think that is likely to happen is very, very limited."
RQ: "You spoke recently of the disadvantage Nama faces compared to other institutions who can sell back assets to defaulting debtors."
FD: "Nama is precluded in the legislation from selling back to defaulting debtors, and that is not an issue and may well never become an issue -- the point I was making is that's not a constraint on, let's say, other banks who might be deleveraging and not a constraint on any sort of private body. In receiverships, very often it would happen that sometimes the only person interested in the asset is the defaulting debtor. The only point I was making is that it's not a problem for us now.
"I can't rule it out in the future but I have to say that I don't see it as a real issue, not least because remember, these debtors are under our control and the very first question I would ask any defaulting debtor who purported to come in and buy an asset is: 'Where did you get the money?'"
RQ: "Nama's 214 staff are on an average pay package of €103k and enjoy a defined benefit pension scheme. How can you justify that?"
FD: "Don't forget that everybody coming in here by definition has to work themselves out of a job; the more successful they are, the quicker they lose their job.
"We've probably built from scratch an organisation who's been charged with, I would say, one of the more difficult tasks to emerge from this country. The type of staff you need in there are people who are professional with expertise. Now it's all very well to say that €103k is a good salary; I'm not denying that it is, but it's a salary paid to professionals with a lot of experience, most of who, by the way, are highly marketable."
RQ: "How many have been 'poached' off you to date?"
FD: "In the past few months, we have certainly lost half a dozen key people, simply because they are being poached -- that is a concern for us."
RQ: "Brendan McDonagh has said Nama doesn't offer debt forgiveness to developers but has reserved the agency's position on the matter for the future. What's your view?"
FD: "If it made sense for us to have a debtor who has worked assiduously with Nama for five or six years and there is nothing out there that we can get back from that debtor, all the assets have been sold, there are no other personal resources; we're very certain that if they came to us and said, 'Look can you release me from this guarantee or whatever it is' and there is nothing to be gained from pursuing the guarantee, why would we hold on to it? But this is stuff six to seven years down the road and right now I don't see any case like that."
RQ: "You can't rule it out?"
FD: "In the case there is absolutely nothing there to be got from that developer... you have to make a decision as to whether you keep him on the books just for the sake of keeping him on the books."
RQ: "During the general election campaign last year, Taoiseach Enda Kenny accused Nama of being a 'secret society'. What is your view on Nama being brought under the scope of the FOI Act?"
FD: "I personally agree with the principle of FOI but the main concern here has always been about commercial sensitivity. Let's be realistic, what they really want to know under FOI or any other, is who are our debtors, what did you pay for the properties, where are all the properties and glean out of that what you think you might now sell those properties for -- it's all personal information and that type of information is information that would be absolutely golddust to our competitors."
RQ: "The Information Commissioner Emily O'Reilly rules on issues of commercial sensitivity all the time. You don't trust her judgement?"
FD: "No, no, I absolutely trust the judgement and I know Emily O'Reilly quite well. I had quite a lot of dealings with her in my time with Revenue. What I am saying is that there are confidentiality restrictions in the Nama legislation and in banker confidentiality and if you decide to over-rule those or to override those, I should say, you need to be extremely careful of the way in which you do it."
RQ: "The Minister for Finance recently disclosed that €40,000 is being set aside for the costs of the Nama Advisory Group this year. Where does that money go?"
FD: "Well I think it's a little bit like your credit card limit."
RQ: "It's not like my credit card limit."
FD: "I certainly don't expect that the advisory group would cost anything like that, in fact I'm a member of it. The only expenses incurred would be for travel and accommodation."
RQ: "In terms of developers whom you have put into receivership, do you know where they are now?"
FD: "Just because you put them into receivership, that's not the end. It tends to be a long, drawn-out process in which we very much keep a close eye on what they're doing, where they are and whether there is anything more we can get out of them."
RQ: "Anglo is in the same space as Nama, managing and selling off assets. Do you not think it would have been better to leave Anglo's loans with it, given that it's being wound down?"
FD: "I think you have to go back to one of the very important points in relation to Nama in terms of dealing with debtors, which is our capacity to look right across their indebtedness, across all of the banks in a holistic way. I don't think you would have had that if you had elected to [leave the loans] with Anglo.
"We've got two and a half years of very solid work, no great hiccup, no mess up, no scandal along the way -- full knowledge now of our portfolio, very good results in the first two years and I'm not just talking about a profit of €247m, although it's great to show a profit."
RQ: "Didn't €235m of that come from a tax credit?"
FD: "A lot of it comes from the tax credit but that's no different, we're all the time told to be entrepreneurial, be commercial, be of the private sector, it's no different to any other business that's entitled to a tax credit."
RQ: "We've been blaming bankers and developers for four years now for the crisis. You were chairman of the Revenue Commissioners during the boom and reported record Stamp Duty and Capital Gains Tax receipts.
"Did you ever drop a note to anyone in government to say the profile of the tax intake was a bit skewed?"
FD: "By the way, during that period as well, we were also getting significant yields and billions indeed from the investigations..."
RQ: "Fully accepted."
FD: "...Revenue can only draw attention to trends and breakdown in terms of the different tax tables and at the end of the day, it's a matter for government policy. I think we're actually getting out of [the crisis]. There's a lot of positives in this country at the moment and I think Nama is part of the positive. I wouldn't be big into the blame game."
RQ: "Well, not if you're being lumped in as being part of it."
FD: "I would say in terms of Revenue doing what it is required to do and drawing attention to excessive stamp duty, we would certainly have done that, so I don't accept being lumped in there."
RQ: "In terms of Nama and its insistence on confidentiality, the agency recently engaged in mediation with the Sunday Independent through the office of the Press Ombudsman. While that process was supposed to be confidential, a detailed -- albeit inaccurate -- account subsequently appeared in the Phoenix magazine. What were your feelings when you saw that article?"
FD: "The same feelings that I expressed to your editor Anne Harris -- we had been through a process and I thought the outcome was good for both sides, I hope it was good for the Sunday Independent as well as ourselves and as far as I was concerned that was done and dusted.
"The Sunday Independent for a period continued to challenge us, continued to ask questions and that's absolutely fine, we should be challenged, we should be asked questions, so I would always be upset that something like that, a confidential process, that yielded a result is now potentially re-opened and I said to Anne Harris and I say again today we have made extensive enquiries.
"Nobody in it or nobody connected with Nama made contact with the Phoenix, we had nothing to gain from that story."
RQ: "It's just the account that was given in the Phoenix appeared to depict Nama in a particular light and it depicted our newspaper in a particular light, and we have to say we were portrayed in a very negative light so I couldn't see how it came from ..."
FD: "By the way, I don't think it came from the Sunday Independent but Nama did not benefit from that because whatever about the Phoenix, it's much more important for us to have a good relationship with the Sunday Independent -- I actually got extremely annoyed and I would hope that we're back on track."
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