The Irish Times - Front Page - 29/09/10

 

One of the headlines of the Irish Times today (29 September 2010) reads: “Ireland will not need emergency funding, says EU commissioner.” That’s according to Olli Rehn, European Economics commissioner, who does not foresee the need for the Irish government to seek emergency financial aid from supranational institutions such as the EU or the IMF to rebuild the international investors’ confidence in the country.  An optimism shared by Taoiseach Brian Cowen who also dismissed the idea yesterday that Ireland will need to resort to external financial help to sort out its economy. So Ireland does not appear in such a bad situation from the EU standpoint, compared to, say, Greece or Spain, for example.

That may not be the case for long if we are to judge by another headline of today’s Irish Times (ironically placed right next to the other one cited above on the printed edition – see on the right-hand side) which warns that “Anglo Irish ‘worst case’ bill may top €30bn.” I thought the ‘worst case’ scenario was a €20bn bill, or maybe it was €25bn? My confusion probably comes from the fact this figure (and others) keeps changing, and seems to be always on the rise. So can we take that €30bn seriously? In the same Irish Times article, financial correspondent Simon Carswell points out that “this will meet minimum capital rules up to the end of 2012 but the banks may need more capital beyond this date should losses rise.” How and where would we find more capitalat that point? More bonds? But how can we afford issuing more government bonds when interest rates on 10-year bonds have already risen close to 7%? So, I wonder, can we completely dismiss the idea that Ireland may need to seek help from the EU and/or the IMF at some point?

Delphine Ancien

The Irish Times has reported today that several financial institutions that are having their (bad) loans transferred to NAMA are asking for the state agency to reduce the amount of documents and data required for the transfer to be processed. As it stands at the moment, the institutions are requested to provide over 1,000 pieces of info for each loan facility (The Irish Times, 24/03/10), including key valuation data. The amount of paperwork to be produced is quite huge, and some lending institutions have expressed a concern with the time and staff that it takes to collect the information and to report back to NAMA in order for the loan to be transferred to the state agency’s portfolio. What makes the gathering of data even more complex is the fact that many of the required information were not on the original loans’ paperwork. This is maybe for this very reason that the financial institutions’ request to cut the amount of data required by NAMA and to fast-track the transfer of their loans to the state agency comes as a bit of a surprise: didn’t we end up in this situation as the result of a lack of rigor, proper procedures, and transparency in the lending process by the very financial institutions that are asking for a sped-up (expedited?) process?

Delphine Ancien

One of the aims of this blog has been to animate the geographies of the NAMA portfolio.  There has been a lot of discussion here recently about the Ghost Estates that will be brought into NAMA.  Of course, such property parcels do not comprise the entirety of the NAMA book, and in terms of ‘market potential’ some sites will no doubt hold more hope than others.  One of the sites being heralded as a potential ‘winner’ is the Battersea Power Station site in London, at the heart of the well-connected Nine Elms area along the Thames River, a prime (re-)development site in a city which horizontal expansion is highly constrained by strict planning regulations that protect London’s so-called ‘greenbelt’.  The site is currently owned by REO, a firm majority owned by Irish company Treasury Holdings (who coincidently are also NAMA’s landlord).  REO bought the 40-acre site in 2006 for £400 million (€532 million), using loans from a variety of banks, of which Bank of Ireland forms the majority share, with plans to develop the site into seven million square feet of mixed-use residential, retail and office space.  As such, this emblem of British industrial heritage has found its way into the auspices of NAMA, serving as indication of the reach of Irish capital into international markets, and of the relational production of urban landscapes in the post-industrial period.

The Battersea Power Station started producing electricity in 1937 and progressively ceased its activities during the 1970s and 1980s.  Since then, the future of the site has been the object of much quarrel and struggle between near-by residents, the local authorities, developers and various people and groups with an interest in preserving the power station and its surroundings for its cultural value.  From the 1980s onwards a campaign has been in place to try to save the building as part of British national heritage.  Seen as an important cultural icon in London, the power station was used on the cover art for the 1977 Pink Floyd album Animals, in addition to albums by a number of other groups, and as an emblem of Twentieth Century industrialism, it has taken its place within the vocabulary of popular cultureOver the years a number of development plans have commenced for the site, including an early plan to turn it into a theme park around Britain’s industrial history.  Current owners REO hired architect Rafael Viñoly to draw up an ambitious master plan for the site, the biggest ever seen in London.  Central to this plan was the division of the site into ‘character areas’ each with different functions, to utilise part of the power station to produce energy through biomass and waste, and to develop the “first zero carbon office space in Central London”.  Having been refused planning permission on the first go-around, a scaled back application is currently in the consultation phase.

As previously highlighted here 21% of the NAMA portfolio is made up from properties in the UK.   Of this, the Battersea site is certainly one of the most significant.  Speaking of the site’s induction into NAMA, Treasury managing director John Bruder was resolutely positive:

“The good, the bad and the ugly will be going in…There is no shame in being a Nama client no matter how good or how modest your property development loan is, once it is over €5 million…. Essentially Nama will be the only game in town for a period of time. The Irish banks had too much property development loans on their books – they will soon have no development loans.”

NAMA, for its part, will presumably be only too happy to have an iconic development such as this in a portfolio that must contain much in the line of hyper-inflated (and deflated) farmland.  The Battersea site is not devoid of its own set of problems, however.  Since late last year REO have been looking for a partner to invest with them in the site.  While the London market will recover quicker then most, it is likely that investor confidence is still likely to be waning.  The existing infrastructure (mainly made of steel) requires very significant investments to refurbish it owing to damages caused by 20 years of both flooding and vandalism following the removal of large chunks of the roof in the late 1980s when the British industrial history theme park redevelopment project started and quickly came to halt.  Furthermore, the developers face opposition from a strong community group who seek alternative actions for the site.  As a commentator in the Londonist recently stated, after the first REO application was refused:

“Over 25 years since it breathed its last fumes into the London fog, Battersea Power Station remains a blot in the copybook of countless developers and architects, and as yet another scheme is run through and rejected, the building’s gradual decomposition will continue. Perhaps it should be this way, a symbol of the flaws and fallacies of our developmental strategies.”

At the moment, despite its prime location in Central London, Battersea looks much more like an emblem of urban degeneration rather than regeneration.  This is not to say that REO’s plans for the site will never come to fruition.  However, as one of the jewels in the crown of NAMA’s property portfolio, perhaps the Battersea Power Station site is still a long way from realising substantial returns for the Irish taxpayer.

Delphine Ancien and Cian O’ Callaghan

Simon Carswell, the Finance Correspondant of The Irish Times, published a piece on “The Anatomy of NAMA” on Friday November 13th, 2009. There are some basic facts and figures about NAMA in it. It is available as a PDF document here.

"The Anatomy of NAMA" by Simon Carswell in The Irish Times (13/11/09)

Delphine Ancien