Buying Toxic Assets - Helping the Developers?

[grundie]

With the government setting up an agency to buy toxic assets, it got me wondering - could the dodgy developers take advantage of all this?

Ireland is covered with empty office buildings and residential developments. The problem isn't that there will never be someone to occupy these developments. The problem is that the developers built too many, too quickly and there just wasn't the demand for them that they thought there would be. Given enough time these developments will find tenants, just not quickly enough for all the development loans to be paid back.

This is a bit like the UK in the late 80s and early 90s. When Canary Wharf was built, no one wanted it. It lay pretty much empty for a few years. The recession at the time had killed off demand for new office space. People were making jokes about it and it bankrupted the developers, Olympia and York.

But a few years later and it became one of the most valuable developments in the world, a huge sprawling office complex worth billions. This was repeated with smaller developments up and down the land.

Ireland's big office developments will find tenants and they will prosper, but it will take a few years for this happen - ditto the housing developments. The government has said it will try to sell the assets on at a profit, my worry is will they sell them back to the original developers at a knock-down price? This is what happened with Canary Wharf, the original developers formed a consortium and were able to buy back their development from the banks at a reduced price. I fear that in a few years from now the government of the day will be selling these real-estate assets back to the original developers and the cycle will restart. The taxpayer will have absorbed all the losses made by the banks and developers and we'll be back to square one.

Maybe it would be much better to keep all these assets in permanent public ownership and rent/lease them at a little over cost value in order to keep commercial rent prices keen, thus benefiting the competitiveness of the Irish economy?

[MsAnneThrope]

You can be 100% sure there are people plotting right now on the back of beermats how to take advantage of the situation. And you can be sure its the same old faces doing this, when in any other democracy they'd be made insolvent.

I also agree we should keep the commercial properties and rent them out wherever/whenever possible to make money/profit (or at a minimum break-even) for the taxpayers in the long run. Unless of course, a long way down the road, the prices recover and appreciate so much in value it would make sense to sell them outright and net a tidy lump-sum profit.

[smitchy2]

Especially when a FFer said on the radio this morning that the developers would only have to pay whatever price that the agency pays for the debt off the bank.

Some developers are well able to pay back their debt.

It is very hard to believe that FF will have no influence on this agency regarding the price to be paid and chasing what loans.

[Iarmhi Gael]

What is stopping FF and the Greens buying this land and then selling it off within a few weeks to the exact same developers at a reduced rate.

Would not put it up to them

[ballot stuffer]

Especially when a FFer said on the radio this morning that the developers would only have to pay whatever price that the agency pays for the debt off the bank.

Some developers are well able to pay back their debt.

It is very hard to believe that FF will have no influence on this agency regarding the price to be paid and chasing what loans.

Really? Thats not the way it is supposed to operate.

Just because the debt is sold on cheaply to the agency doesn't mean the value of the money the developers owe is reduced. The agency will pursue the developers for the full amount.

[edifice.]

Really? Thats not the way it is supposed to operate.

Just because the debt is sold on cheaply to the agency doesn't mean the value of the money the developers owe is reduced. The agency will pursue the developers for the full amount.

That depends on the terms of the loans. Remember the Golden Circle loans?

[mmrebel]

The report also warns that taking over loans at a knockdown price may significantly worsen the capital position of the banks. It says this may require a further injection of capital into the banks and the new agency.

RTÉ Business: NAMA legislation within weeks - Coughlan


It seems this agency might not be the saviour the goverment thinks it will and the above from a report by economic consultant Peter Bacon

[MsAnneThrope]

Especially when a FFer said on the radio this morning that the developers would only have to pay whatever price that the agency pays for the debt off the bank.

What FF'er said that smitchy and on what programme? Is there a link to the interview? Thanks.

[Clanrickard]

Really? Thats not the way it is supposed to operate.

Just because the debt is sold on cheaply to the agency doesn't mean the value of the money the developers owe is reduced. The agency will pursue the developers for the full amount.

As in RTE pursuing Bev for the money? Excuse me if I sound cynical but unless the FOI is applied here there'll be people trying to fiddle.

[MarD]

The OPW should be given responsibility for commercialising these business assets and maybe saving the Gov some money on its own rents. The councils should get first dibs on the vacant housing estates although anyone who bought into half sold estates might be very put-out. They should pass legislation to stop the same cronies buying back their property at knock-down prices. Are directors of bankrupt companies automatically banned from directorships for a period of time?