Last week's announcement by the British government that it is looking at selling its property portfolio to reduce the country's deficit will not have been welcomed by Nama. Any major property sale in the UK will attract interest from the same property investors that the agency will be keen to persuade to buy some of its own huge property debt portfolio.
The British government has to come up with ways to reduce its £149bn (€170bn) deficit. The Office of National Statistics estimates that state property is worth £370bn. But, according to sources, there is no comprehensive list of the entire portfolio so the actual value could be much more, with some City analysts estimating a value of more than £500bn.
The Shareholder Executive, the body which looks after the government's business holdings, has the task of maximising returns from the state property portfolio. Its work in this area is being led by John McCready, the Ernst & Young senior partner hired last December to head a new property unit at the executive.
McCready was immediately charged by the then chancellor, Alistair Darling, with a strategic review of the government's real estate assets, including central government offices, hospitals, military bases and local authority offices. At that time, the QEII conference centre had already been earmarked for sale with a potential value of £200m. As well as identifying other disposal possibilities, McCready was also asked to look at managing properties more efficiently, a move that may include new financing structures. It is understood that McCready has recently been told by the office of the Prime Minister, David Cameron, to look at moving more quickly.
In March McCready gave his first speech as head of the property unit. At that time he said that asset sales were not the priority. In the speech he said that the deficit was best addressed by "reducing and making more efficient the government's utilisation of space". However, it is understood that due to the size of the deficit the new coalition government is keen to look at all money making opportunities including quick asset sales.
One senior property investor said the British government's move would not alter his interest in the Irish property market because he has little or no interest in the Irish market.
"We met with Nama recently to look at buying some of the debt or even some property which is expected to be repossessed," he said. "But we were so appalled at the lending practices and valuations put on developments that we think Ireland is a no-go area for the long-term."
He added that there were many cases where the entire cost of a project, down to the application for planning permission, was lent by the bank so the level of debt was much more than the value of the project. "We're never going to buy that kind of debt", he said.
However, senior commercial property investors say that any property sale by the British government would be keenly watched, especially where government departments are tenants. And it is worth remembering that the government owns some extremely valuable and sought-after central London sites.
This is further bad news for Nama which will also be trying to offload some of the UK property assets of Irish developers. According to Brian O'Reilly, head of research at UBS Private Banking: "If there is a fire-sale from the UK government the additional supply coming onto the market will keep prices contained. So it is important that Nama tries to mitigate this risk."
In reality, however, any property sales by the British government are at least a year away. The Shareholder Executive must first put together a master list of the portfolio. The previous government commissioned a report which found that the government could expect to make £20bn from disposals over a 10-year period.