Nama is considering grouping thousands of residential properties it will seize from insolvent developers into a Real Estate Investment Trust (REIT) which could then be offered to the public as an investment opportunity.
REITs are used by property companies to eliminate the prospect of double taxation on investments from retail investments. In return they typically have to distribute 90% of their income, which may be taxable, to investors.
At a speech to the Association of Property Bankers in Britain last week, Nama head of lending Graham Emmett said that if the agency seizes apartment blocks, it will look to use the REIT structure to move them off the Nama balance sheet and use the cash flow to pay down debt.
The agency could end up with 16,000 properties in and around Dublin, some of which have yet to be developed but many of which are lying vacant or incomplete.
REITs are currently not allowed in Ireland but Nama is understood to have an interest in having such legislation introduced.
Emmett's presentation slides, which have been seen by the Sunday Tribune, show that borrowers who have ended up in Nama had loans with all the participating institutions but that the Financial
Regulator had "no measure of total name exposure". He also said lending had been carried out in haste with inadequate security and documentation.
Property Week reported last week that borrowers in Ireland were able to secure loans by speaking just to the personal assistants of their banker contacts. The Sunday Tribune previously revealed that Anglo approved loans without any valuation and that documentation used by some banks was unsecured and could have been fraudulently changed without the bank being aware.
Emmett reiterated that Nama plans to write down its debt by a quarter by 2013. Developers have criticised this, saying it will force more properties onto the market, driving prices down.
The transfer of the third tranche of loans to Nama began last week, with €12bn due to be transferred in the current tranche. This is expected to be completed by early October. At that stage half of all the loans due for transfer to Nama will have been moved into the loans agency.
Emmett said the quality of business plans from developers has improved. "As it turned out, the business plan from most borrowers in the first tranche... was 'you forgive interest for the next nine years and then we will refinance in year 10 and give you your money back'. That wasn't really what we had in mind," Emmett said, according to Property Week. "It took a lot of education with the borrowers – maybe, we should have called it a liquidation plan, not a business plan."