National Asset Management Agency (Nama) errors prompted a €29 million miscalculation on the sale of debts due from boom-era property player Quinlan Private to a company whose directors included one of that firm's former employees, TDs heard on Thursday.
Seamus McCarthy, Comptroller & Auditor General (C&AG), told the Dáil Public Accounts Committee (PAC) that it was "difficult to conclude" that Nama got the best possible price when it sold some of Quinlan's loans to Luxembourg-registered Clarevue-Nantes for €26.7 million in February 2012.
The loans, dubbed Project Nantes, included debts secured on hotels, offices and homes in the Republic, UK and Europe, along with some of the Quinlan partners' personal liabilities, which were tied to properties or equities.
Mr McCarthy’s report to the committee states that errors by Nama, including understating the value of one of the loans by €16.1 million, left the target price for the Project Nantes loans about €29 million lower than it should have been.
The comptroller calculates that had Nama not made those mistakes, it would have set a target of €56 million. However, Mr McCarthy acknowledges that a higher target would not necessarily have resulted in a better price.
The deal gave the buyer the right to take control of the properties if the debts were not repaid.
Nama sold the loans to Clarevue-Nantes after Avestus, the company that took over Quinlan's business in 2010, introduced the pair in August 2011. San Francisco-based Clarevue Capital Partners owned the Luxembourg company.
One of Clarevue-Nantes directors, Mark Donnelly,was a former Quinlan Private employee and a senior figure in Avestus.
Mr Donnelly had not been a partner in Quinlan Private so had no personal interest in the loans. He was not one of the personal borrowers involved and neither did he owe any money to Nama.
Clarevue-Nantes documents show that he was appointed a director in February 2012. None of those at Thursday’s meeting named Mr Donnelly.
Mistakes acknowledged
Mr McCarthy told the committee that Nama dealt solely with the buyer and did not put Project Nantes up for sale on the open market. Nor did the agency get current valuations for the properties before doing the deal, he said.
The C&AG confirmed that the sale was not a breach of section 172 of the Nama Act, which bars the agency from selling properties to any of its debtors that are in default.
Brendan McDonagh, Nama chief executive, acknowledged the mistakes in the sale, but pointed out that the agency did not have a single IT system at the time, as it was at an early stage in its life.
He stressed he was “angry and unhappy” with Avestus for not telling Nama that one of its staff was a Clarevue director, saying it would have been better if the firm had been upfront about this.
“The loans were independently valued in 2009 and reassessed in 2011,” he told TDs, adding that by the time the deal was done, Irish asset values had fallen by a third.
According to the C&AG’s report, Nama made an overall €67.8 million profit on the loans it took over from Avestus, which included Project Nantes along with other liabilities. The debts cost the agency a total of €136.3 million, while they realised €204.1 million.
Nama paid Avestus €123.6 and advanced a further €12.7 million to some of the developments involved. Avestus had taken on the loans from Quinlan Private in 2010. Four principals of the five-person Quinlan Private partnership founded Avestus in March 2010.
