THE STATE’s main banks have pressed developers to take advantage of an uplift in the UK property market to sell land and investment assets to recoup loans before they are sold to the National Asset Management Agency (Nama) over the coming months.
A number of developers have been encouraged to put land in the UK, including some prime sites in London, on the market as the banks believe they will receive a better deal than if they were to sell the loans at a discount to Nama.
One high-profile property developer who expects to be among the second or third wave of top borrowers moving to Nama said he had been encouraged to sell a prime UK site in advance of the Nama loan transfers.
“The banks are cherrypicking assets – they believe they can get a better price on the open market than from Nama,” he said.
Another prominent developer, who will be among the top borrowers moving to Nama, said the banks were concerned by the potential discount to be applied.
This was leading to greater pressure on developers to sell certain lands, he said, which would result in their equity being wiped out.
Developers were instead choosing to wait for Nama in the belief that they may recover some of their equity by developing and selling assets over time, he said.
“The banks want it all [the proceeds from the sale of lands] – so there is nothing in it for the developers to sell right now,” he said.
He warned that Nama had legislative power to reverse land sales but said this could prove difficult with transactions in the UK.
Both AIB and Bank of Ireland said there was no formal strategy being pursued where they were urging developers to sell land and investment assets to recover loans before Nama.
“There is no sense that there is an overarching strategy going on,” said a spokesman for AIB.
“I don’t think there is any broad strategy,” said a Bank of Ireland spokesman. This was “normal business activity”, he said, and there was nothing to stop banks pressing customers to sell property to recoup loans as an alternative to selling them to Nama.
The UK property sector has enjoyed a bounce in values and activity since last summer.
British commercial property accounted for the largest share of new investment across Europe, according to property consultancy CB Richard Ellis.
Property investment in the UK rose 64 per cent in the second half of last year compared with the first six months of the year.
Nama chief executive Brendan McDonagh said this month that there was no reason to change the Government’s 30 per cent estimate on the average discount to be applied by the agency on loans, as recovery in UK and US property prices was offsetting declines in Ireland.
One banking source outside the two large banks said lenders were following “an understandable desire to take advantage of an increase in prices”, but warned that sales may lead to increased concentration of assets for Nama.
“It may not suit Nama because these assets may be generating income,” he said.
Some 20 per cent of the €80 billion in loans to be acquired by Nama are located in Britain.
