The impact of the National Asset Management Agency (NAMA) on the Irish commercial property market.

Abstract

The exponential growth in lending to the Irish commercial real estate sector in the mid-2000s facilitated a rapid appreciation in property prices that ultimately resulted in the creation of a real estate bubble. When the prices began to fall in 2008, the depletion in the Irish banking sectors capital base brought into sharp focus the over exposure to real estate lending. As a response, the Irish Government formed the National Asset Management Agency (NAMA) in December 2009 whose primary function was to acquire €74bn of loans from the Irish financial institutions and carry out the management and disposal of these, in order to restore liquidity to the banking system and preserve values across the commercial real estate sector.

The research presented in this thesis serves as the first robust evaluation of the performance of NAMA relative to its stated objectives. The research adopts a mixed method approach to decipher the impact of NAMA on the Irish commercial property market. Firstly, regression modelling of the Irish property market is undertaken to analyse key financial and property market indicators in the context of NAMA’s intervention in the market. The second empirical strand comprises an evaluation of NAMAs sale transactions and disposal strategies in order to ascertain the distinct role played by NAMA in restoring liquidity and confidence to the Irish commercial property market. The final strand of empirical analysis comprised structured interviews with key stakeholders in the Dublin market to determine how the market responded to NAMA’s deleveraging activities. The interview evidence provides further insights surrounding the operational characteristics and intervention strategies employed by NAMA in order to distinguish the extent of NAMA’s role in facilitating recovery within the confines of the real estate cycle and wider macro-economic recovery.

The research outcomes indicate that NAMA played an intensive role in reviving the Irish commercial market by acting as a stimulus for liquidity in its disposal activity, and deepening the circuit of capital flows by attracting new investors to the market. The research highlights a number of favourable factors which were conducive to NAMA’s overall performance to date. In particular, the distinct composition of NAMA’s portfolio gave the vehicle an advantage in its asset management and disposal activities. Further to this, the transparency and maturity of the Irish commercial property market combined with the broader context of low interest rates and poor bond yields deemed that Irish real estate assets were highly desirable at the time of NAMA’s deleveraging process. However, the research ascertains that while NAMA has been a provider for development finance, the Agency could have had a stronger role as a facilitator of development in the early stages of operation, in order to address the huge supply shortage in Dublin adequately. Nonetheless, the research illustrates that NAMA has been a model of best practice in its disposal activities and provides a template for other distressed real estate markets. The key principles applied by NAMA include its timely implementation, strong governance structures, phased disposal strategy and portfolio disposals. The research concludes that asset management vehicles such as NAMA have the capacity to stabilise distressed property markets, by providing a measured and systemic release of assets to the market and in this context can act as an anchor for liquidity and confidence.

Thesis is embargoed until 31st December 2018

Date of Award	Dec 2016
Original language	English
Sponsors	Department for Employment and Learning, Northern Ireland
Supervisor	Jim Berry (Supervisor), Stanley Mc Greal (Supervisor) & Martin Haran (Supervisor)