Can’t make it on their own

Judging from a recent to visit to Dublin, it is clear that private equity managers are sometimes viewed with suspicion in Ireland.

PERE was in town last Friday to interview Ireland’s National Asset Management Agency (NAMA) and, just the day before, there was speculation it had pulled the sale of a €300 million portfolio of real estate loans related to a borrower called Eamon Duignan. The rumor came amid concerns that selling portfolios of ‘single-borrower’ loans is a bad idea per se and made NAMA vulnerable to suspect bidding tactics if private equity firms seek to team up with a debtor to make a bid. This could lead to the competition from other potential bidders melting away and/or bids becoming less robust than they otherwise might have been.

Whether that is the case is a moot point. The bigger point is that Ireland needs private equity to aide with its recovery and is actively embracing it, which makes this issue of debtor/private equity relationships more like a sideshow.

As an example, look no further than Ireland’s National Pensions Reserve Fund (NPRF). It is in the process of striking up partnerships with private equity firms to pump around €6 billion into the economy. So far, three separate partnerships have been set up with The Carlyle Group, Jon Moulton’s Better Capital and AMP Capital. The Better Capital vehicle is a €100 million small and medium-sized turnaround fund, and the Carlyle fund is a €300 million vehicle for healthy companies. With AMP, the opportunity is in infrastructure. A fourth venture is due to be signed off soon with Blue Bay Asset Management to create a €450 million corporate lending fund.

NPRF is the cornerstone investor in these funds just like in a traditional limited partner fund structure. On the real estate side, however, NPRF will not set up similar structures because it is part of the same umbrella group that owns NAMA and does not want more real estate.

That said, NAMA has begun entering into partnerships with private equity real estate firms, so there also is a part for them to play. Earlier this month, it created an €800 million joint venture with Starwood Capital Group in which the state division retained a 20 percent stake. It has outsourced the management of the loans, supplied vendor finance and will profit from any upside.

In PERE’s interview with NAMA, its chief executive, Brendan McDonagh, made it abundantly clear how the agency wants to continue to attract private capital by selling to private equity real estate firms via structures such as this. To borrow from a song by U2, Ireland’s most famous band, NAMA and the rest of Ireland know that: “Sometimes you can’t make it on your own.”