Shay Brennan: NAMA sites, LDA handovers and €5.2bn surplus

Mr. McDonough, you're very welcome here today. Thank you for your time. Several questions related to NAMA, but obviously we'll come back to those. Maybe when you go back into that organisation, you'll do so in a senior role and you can convey the imperative of NAMA to respect the Oireachtas and the Oireachtas Finance Committee in particular. The NTM. The NTMA. The NTMA. NTMA? Yes. Yes, what did I say? NAMA, but it's okay. I knew you meant the NTMA and I wanted to... Yeah, I think there is. So I've been listening to you being questioned there for the last while. This is my first opportunity to question a witness before an Oireachtas Committee and I've perhaps rather naively stuck to the brief, so my questions will be about NAMA and if that's okay, I might just jump in. The first question relates to the 4,000 homes, sorry, more precisely the sites, the Kildare and the Dublin sites that are set up for 4,000 homes. At what stage is that at? I know they'll be handed over to the LDA, but at what stage is it at? How much work did NAMA do to get those sites ready for construction? And are they shovel ready for the LDA or is that likely to take some work and some time? In terms of both sites, and they're massive sites. One is in North Dublin and it has been designated for an LAP under the Fingal 23-29 local county development plan. And it would also, part of the site would be potentially sanitised for a number of years because of a proposed metro station, but ultimately it would deliver at least 3,000 units and potentially more depending on the densities that's permitted on it. So, you know, we've got that site and then we have a site in Kildare where effectively it has zoned and it has planning. And we've submitted the planning application for the first planning application for 344 units two years ago. It hasn't come out of Bordplanola. It was an ACHD application. It is still there. It hasn't come out the other site. But we also sold parts of that site to the Department of Education where they start to work on building much-needed school, preparing for much-needed school there. So, they are the site. So, you know, there may be... The one in Kildare is probably most likely to develop about maybe 1,100, 1,200 units. And the one in North Dublin, at least 3,000 units. So, the one in North Dublin is probably, depending on Fingal doing their work in terms of MNAP, you're probably... I think they've started it, but obviously that has to be go through their council process. So, it's potentially... At this stage, I would say, it's two to three years down the road before work can start in terms of housing. The one in Kildare, if the planning came true, the LDA could start building houses if they wanted, based on our plan permission, and going for the second stage and the third stage plan permission very quickly under the new LRD system. So, I think, you know, in Kildare, I think, potentially, if the planning came true, you could see something happen there in 18 to 24 months. Okay. Thank you. How does the transfer of NARPs to the LDA, how does that align with the statement that you made in your submission, where your focus is to extract as much value as possible from a residual portfolio? Yeah. Well, it aligns because, as I said, we offered these... Back in 2012, when the government was... When the country was under control of the Troika, there was no capital program available to the local authorities or the EHBs to buy substantial social housing units. So, then it was saying that the policy was around the leasing model. And at the time, I met the then-minister for the environment, and he said, can you come up with an idea about helping us here? NARM has got stock. Can you come up with an idea? So, myself and my colleagues came up with an idea that we'd create an SPV and we'd buy the properties off the developers and receivers. And if there was money needed to... Some of these were unfinished housing estates, we'd put the money in to finish them. And then they'd be owned by the NARM SPV and they would be leased in to the EHB or the local authority. And so, effectively, that's how we've got 1,366 units. So, you know, the value of that... The value of those 1,366 units today is in excess of 350 million. So, that is money that the state doesn't have to find somewhere else. We're handed over as part of our surplus to the minister. And the minister has directed us that we ultimately would transfer to the LDA. So, the LDA will just carry on those leases with those EHBs and local authorities. Okay. So, in terms of the 5.2 billion lifetime surplus... Yeah. That 360 million constitutes part of that? Yeah. Because if we sold it in the market, we'd have the 360 million cash or maybe more. Yeah. And give it as cash to the exchequer, but instead of giving it as cash, we're giving it as payment in kind. Yeah. Okay. Yeah. Okay. And 360s, that's a market value? That's a market value. It's actually 3.56 at the end of 2024 is our valuation, our independent valuation. Gotcha. Okay. Okay. And just come back to the 5.2 billion. I mean, much will be said and written about the success of NAMA after all this is done and dusted. How does the 5.2 billion lifetime surplus align to the day one target projection? Well, people may recall, and I suppose people, you know, 2009 was a very difficult time. When the minister was putting, at the finance at the time, was putting legislation through the Dole in 2009, he asked, and people, and people laughed at the time, people sort of said, he said, they asked, as part of the culture actors, for a business plan. We had no details of the assets, things that, but we had to put a business plan together for the minister, based on what limited information we had at the time. And we sort of said, NAMA would return, I think it's about 4.8 billion over his life. So we're in excess of that now. But the NAMA board came in in 2010, they said, that's not our plan. We want to put our own plan. And I think NAMA had the own board said that they would, if everything went according to these number of assumptions, and we published the assumptions, and when we had more information at that stage on the portfolio that we got from the banks, we said, if everything went right, we would probably make about 3.9 billion profit. It turns out we're making well in excess of that. But that's how it came about, definitely. Okay. Just turning to the resolution unit. How long do you think that might last? I think in terms of the small number of litigation cases that we've managed to get it down to, and we're still trying to work with settlements with a number of these cases, which hopefully will settle before the end of life of NAMA, that it could last about two years. But again, it's not unusual. If you look at the experience in Sweden and in Finland, those entities, because of outstanding litigation, there was probably one or two people still working with them 15 years later, because the litigation kept on going. So it's really dependent on the litigation. It doesn't affect the financial outcome. In terms of choosing the staff, I believe... It's not my responsibility, definitely. So 10 are going into the resolution unit and... Well, the NTMA have sent a note to the committee, I believe, and they're saying that maybe potentially up to 10 staff to manage the residual activity of NAMA. That's their decision, not my decision. But listen, it could be 10, it could be eight, I don't know. They really won't know until we get closer to the end of 25 to see how much more have I got rid of and my team have got rid of, yeah. Yeah. And you have no say in which staff? You don't recommend people to transfer? No, no. My understanding is that the NTMA will choose the staff. They'll probably advertise the roles internally in NAMA and offer people, if they want to go on a fixed-term contract for two more years to the NTMA until that work is done, is the way I understand it. So that'll be their decision, not my decision. I guess the concern, and maybe we're in the NTMA space here, but the concern would be a loss of corporate knowledge, you know, in a much reduced team, the skills just aren't there, and the knowledge of those cases. Yeah, no, absolutely. And, you know, it's very important to retain the corporate knowledge, particularly around challenge assets which are associated with litigation, because those people will have to be the people who sign the affidavits, who are going to court, be cross-examined, and whatever, as the case may be. So, obviously, it makes sense for the NTMA to try and retain people who have the appropriate skills to do that. That's a sensible business thing to do. So, in terms of the case settlements, is there any risk that to get these settled by end of 2025, that you would take haircuts in those settlements? No, definitely. Anybody who knows me knows that I pursue every single penny I can on behalf of the taxpayer. And, you know, when you settle, when you think it's really a cost-benefit analysis, how much longer if this litigation keeps on going versus the value that you potentially can get out of a settlement with the other side. So, that's not the way. Listen, the fact that the resolution, and I remind my case managers when they're dealing with the counterparties on the other side, that they say to them, just because NAM is ending, don't think that you're going to get a soft deal come October, November 2025. This is going into a resolution unit. And, in fact, you might actually end up with a worse deal in there. Just to be honest with people, like, you know, we have lots of knowledge of the cases and things like this. But other people, if new people come in, they might take a different view. So, but listen, there's no soft deals. Final question, somewhat related to that, but in terms of the general assets, there's taken no risk of a fire sale to meet a pre-prescribed timeline. No, no, no. Listen, the whole objective of NAMA is to try and do it in an orderly way. We're not force sellers of anything. And we always hold out for what we think is the best price we can reasonably achieve, taken account of the circumstances. Yeah. Okay. Appreciate that.