NAMA have today revealed a bit more of a detailed breakdown of the NAMA loan book in Northern Ireland and its geography. NAMA NI loans total £3.35bn (c. €4bn) and relate to 180 individuals and companies. The loan book is 5% of NAMA’s portfolio. Undeveloped land accounts for £2bn (60%), investment properties £1bn (29%), and land and property under development, £350m (10%). Just 1% relates to residential development. With respect to Geography: 32% of the loan portfolio is located in Belfast, 21% in County Down, 19% in County Antrim, 8% in County Londonderry, 7% in County Tyrone, 7% in County Armagh, 4% in County Fermanagh and 2% in the city of Derry.
What is striking here is the amount of land in the portfolio. I’m assuming that the £2bn figure is after the haircut is applied and using Nov 2009 prices. Of course the market has fallen since Nov 2009 and £2bn in today’s market will buy an enormous amount of acreage, so one presumes the NAMA holding constitutes a very sizeable landbank. Given the geographical spread of the loans, much of it has to be located in rural areas and around small towns and villages, and one presumes that it’s main commercial usage over the short term is agriculture. It would be very interesting to get a further breakdown of the size of the landbanks, where they are, and how much was paid by NAMA for the loans on them, so as to get some idea as to how they view the long term use of the land – I’m working on the principle that much larger haircuts will have been applied to land that has limited development potential and is more suited to agriculture.
The size of the land holding in the portfolio is what troubles me. It is the part of the portfolio that has fallen most in value and will be more difficult to sell on, unless an investor is prepared to sit on it for a while to let it appreciate in value. Most developers seek to turn land over quickly because it’s a sunk cost with no working return. Clearly NAMA has time to wait for the market to stabilise and recover before selling on, but even so that’s a lot of land to be managed, sold on or developed.
Clearly, one of the concerns for the Northern Ireland property market is for NAMA to destabilize it through firesales, and Ronnie Hanna, Head of Risk and Credit, who released the figures today, went on to try and reassure that this would not happen and that NAMA will act responsibly. To quote him, he said that NAMA would: “assist in the stabilisation of the property market in Northern Ireland, by providing liquidity to the market and by being able to take a longer-term approach where necessary”. That’s all well and good, but what I would like to see is a more detailed business plan as to how NAMA intends to try and realise its assets over the long term in NI given the nature and geography of the portfolio. This is likely to provide more reassurance to the property market there. At the minute we’ll still at very broad brush generalities, though at least it’s a small step in the right direction.