NAMA to demolish developments that will never be viable
NAMA, the toxic loans agency, is prepared to demolish half-completed buildings which it believes have no value as commercial or residential developments.
The move comes as banks today receive their first notification of the kind of 'discounts' to be imposed on soured property loans. The banks due to receive notifications are Bank of Ireland, Irish Nationwide and EBS.
NAMA is open to US-style demolitions of sites on the western seaboard, the Irish Independent has confirmed.
The agency will have to deal with €21bn of work-in-progress assets and make decisions about the long-term potential of each project.
Demolition of some sites and returning them to strict agricultural use is among options being considered, a senior source said.
The bulldozing of half-finished developments has been taking place in California and Texas over the past year, particularly on stock which has been foreclosed on by banks. NAMA planners said that in extreme cases similar exercises would have to be carried out here.
The overhang of residential stock in some counties will persist for decades, according to NAMA planners.
While the agency is prepared to sit on assets for several years, it believes that some are more likely to return value to NAMA as agricultural sites.
The agency's business plan, released late last year, said of development loans and work in progress: "Some of the projects originally envisaged under these loans will not proceed as they no longer make commercial sense."
Other projects will be advanced, however, with NAMA seeking out partners in joint-venture arrangements.
It has powers to borrow up to €5bn for this purpose, although this limit can be increased once a resolution to this effect has been passed by the Dail.
A large number of the work-in-progress sites are currently on interest roll-up, meaning that the owners are not meeting their interest payments.
In some cases, this means they are in arrears, while in others, it means the borrower is not due to pay any interest until the asset starts producing an income stream.
NAMA will effectively take a large swathe of land and development assets out of the property market.
However, at some point it will need a strong economic recovery in order for it to be able to release these assets back onto the market.
NAMA planners accept in private that the success or failure of the entire project rests on a strong economic recovery.
Meanwhile, ISME, the group which supports SMEs, said its members had no faith that NAMA would increase lending to cash-starved businesses.
It said only one in 10 of them believed NAMA would make a positive difference to bank lending to increase lending to SMEs. ISME called on the Government to force banks to honour their previous commitments.
[Source: By Emmet Oliver Deputy Business Editor, Irish Independent, 16Mar10]
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