Monday 11 December 2017

NAMA rentals plc -- now there's a thought

Enda Farrell at his home,
The Motte, Knockuddery,
Dunboyne Co Meath.
Enda Farrell at his home, The Motte, Knockuddery, Dunboyne Co Meath.

Yesterday's grilling of Frank Daly and Brendan McDonagh included a heavy concentration on the Enda Farrell saga, an embarrassment that Frank Daly in particular opted to face head on.

The focus on what has gone wrong at Nama threatened to overshadow questions about what exactly is going on at Nama.

On that score the committee hearing provided some striking insights into the agency, confirming in particular that the "bad bank" is reinventing itself as a vast rental agency.

The figures are striking. Three years after it came into being, the popular image of Nama is still of an agency left to clean up ghost estates and abandoned, half-built urban developments, scouring the world for vulture funds willing to take blighted projects off its hands.

However, Brendan McDonagh and Frank Daly went to the Dail to talk about the €100m-a-year rent roll now coming in from 10,000 apartments that have been let to meet the surge in demand for rental property.

One in every 25 rented homes in the country is now a Nama property.

The rent roll, as well as income from its equally impressive commercial property portfolio, is changing the face of Nama, not least by easing the pressure to put property on the market to meet debt repayment targets.

Nama has raised €9bn since it was set up, more than a third of the cash raised -- €3.3bn -- is so-called "recurring income", mainly rental payments.

The focus on rents could be a game-changer for Nama. A strategy of winding itself down over 10 years has always left the agency's long-term prospects at the mercy of the wider property market.

With €28bn of assets to realise, Nama needs an army of well-financed buyers constantly gobbling up assets to have any chance of breaking even through disposals, even if it resists fire sales.

A rental strategy is by definition a more sustainable option.

In theory it should mean a rental strategy -- Nama likes to think of it as "asset management".

There is a question of how that fits with the duty on Nama to eventually wind itself up, though if it really can become commercially viable that may be more a question of selling itself on, or a stock market floatation, than closing itself down.

FTSE listed Nama plc, now there's a thought.

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