PERE Europe: NAMA welcomes private equity

Ireland’s National Asset Management Agency (NAMA) is keen to strike more deals with private equity firms and says it will probably try to become more innovative in terms of the structure of transactions it engages in, delegates at the annual PERE Summit Europe heard today.

Speaking in a pre-recorded interview broadcast at the event, NAMA’s chief executive Brendan McDonagh responded to a question whether he had one message to private equity: “I would encourage private equity firms to keep coming to us and to engage with us. If people have suggestions in terms of innovations in the market, we are willing to listen. If there are ways to eliminate aspects of (our realization process) that aren’t quite right, then I am all for performance enhancement.”

McDonagh was speaking in the wake of an €800 million deal – due for completion soon – to sell a package of loans to a consortium led by Greenwich, Connecticut-based Starwood Capital Group. Unusually, the state organization is acting as both the provider of a senior secured loan – otherwise known as vendor financing – to the buyers and is keeping a 20 percent stake in the assets.

“It is a new structure for us,” said McDonagh. “We felt that we achieved a good price from Starwood, but we also felt there might be potential upside so decided to keep 20 percent.” He added that he hoped to conclude the transaction by the middle of this month.

McDonagh also said that, for the rest of the year and into 2014, NAMA would continue to bring a significant amount of assets to the market and continue to invest in assets where it “made sense.” He added: “We will probably try to do more innovative things to get the assets realized.”

NAMA finished taking on a nominal €74 billion of property liabilities from Ireland’s banks at the end of 2010, paying €32 billion for the collection of assets totalling more than 56,000 properties and more than 12,000 loans. So far, some €7 billion of those assets had been sold, McDonagh noted. He added that the organization still had €10 billion of assets outside of Ireland, having started off with 45 percent of the portfolio overseas.

In the interview, McDonagh refuted suggestions that NAMA had been slow out of the blocks in selling assets, arguing that, although the state asset management agency was created in 2009, it hadn’t fully completed the task of transferring and valuing assets until late 2010. He also denied there was any political interference as it goes about the job of realizing all assets by 2020 and insisted staff – whose numbers have mushroomed from just seven at the beginning of 2010 to 260 people currently – were “self-motivated” and “determined to do the job.”

“People here are committed to the cause,” said McDonagh. “Ireland got itself into a very difficult situation, and they want to be part of the solution.”

McDonagh also said NAMA was preparing for its balance sheet to swell further, potentially by up to €16 billion of impairment assets, after the Irish government liquidated IBRC (formerly Anglo Irish Bank) earlier this year. Any assets not sold by administrator KPMG will go to NAMA as the reserve buyer.

Returning to the theme of private equity, McDonagh told delegates at the two-day event at the London Marriott Grosvenor Square hotel: “We will work with anyone that can write a cheque. Our main objective is to get assets onto the market. We have an open, competitive process and give everyone a chance.”

NAMA’s chief executive did have one warning, however, regarding price chipping. “We accept that we have competing objectives, generally speaking. We are trying to get the best price and private equity firms are trying to get the best price. Hopefully, we can meet in the middle. The thing we have no tolerance for is people that have agreed to a deal and then try to price chip. We have had a number of times where people have tried that, and we have said to them ‘No, we are not selling to you'.”