The National Asset Management Agency, set up to rid Irish lenders of toxic property loans, is on course to make a profit of 1 billion euros ($1.36 billion) over its lifetime, a person familiar with the matter said.
The estimate is an upgrade from September, when the Dublin-based state agency said it would probably be closer to breaking even than making the 1 billion-euro profit it had outlined as a “central scenario” in 2010. The person asked not to be identified because NAMA hasn’t made the forecast public.
NAMA is benefiting from a surge in demand for Irish real estate property as it sells loans tied to hotels, golf courses and office blocks. Investors from Blackstone Group LP (BX:US) to Cerberus Capital Management LP are buying billions of euros of debt from the agency as they wager on a recovery in property markets around Europe.
“We’re beating our targets,” NAMA Chairman Frank Daly said in a statement today. “It’s becoming increasingly likely that NAMA will achieve its objectives sooner than anyone would have expected when it was set up in late December 2009.”
Daly told reporters in Dublin today that he was more confident than ever that NAMA would make a profit, though it’s too early to say how much.
The government set up NAMA to buy 71.2 billion euros of property loans from Irish banks as part of a bid to save the economy from collapse. The agency predicted it would make a profit of 5.5 billion euros before forecasting a 1 billion-euro profit in July 2010.
The yield on prime Dublin offices, which measures a property’s rental income as a percentage of its purchase price, has fallen to 5 percent from 6 percent in September, according to data compiled by CBRE Group Inc. (CBG:US) Declining yields indicate that prices are rising.
NAMA has pulled off some of its biggest ever deals in the meantime. Last month, the agency agreed to sell 4.5 billion pounds ($7.6 billion) of real estate loans to affiliates of Cerberus, the New York-based private equity firm, and chose Blackstone as the preferred bidder for about 1.8 billion euros of loans, people familiar with the matter said.
The sales have also prompted lawmakers to review how long NAMA should continue to operate. While the agency was supposed to be wound down by 2020, the government has asked NAMA whether it would be possible to sell all remaining assets by 2015.
Moody’s Investors Service boosted its rating on Irish sovereign debt to Baa1, the third-lowest investment grade, from Baa3 earlier this month. The ratings firm cited NAMA’s “accelerated asset sales” in its May 16 upgrade.
NAMA today reported 2013 net income of 211 million euros, its third straight annual profit. NAMA generated cash of 4.5 billion euros during the year, which included money from asset disposals and income from properties that the agency has seized.
The agency increased the amount that it set aside to cover losses on soured loans by 76 percent to 914 million euros, according to the statement. The move followed a review of impairments on Irish land banks and smaller debtors, NAMA said.
“It was a bit surprising, given the recovery in asset values and collateral over the period,” said Ciaran Callaghan, an analyst in Dublin with Merrion Stockbrokers. “But there’s no doubt that they’re becoming a lot more confident about their ability to successfully wind down the agency.”
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