Irish 'Bad Bank' Sees Property Market Rebound

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Ireland's commercial property market is "showing encouraging signs of recovery," with an increasing number of international property funds bidding on assets, according to the latest report from Ireland's National Asset Management Agency (NAMA).

"For the Irish commercial market, recent activity suggests that a cautious optimism is warranted," chairman Frank Daly said in the agency's annual report, released today. "With property prices down by 60 percent from their peak, prices have fallen to a level which makes the case for investment compelling."

NAMA was established in 2009 to remove more than €74 billion in distressed loans from the books of Irish banks. Since then NAMA, the "bad bank," has become a major player in the U.K.'s commercial property market, selling and maintaining assets around the region.

The agency has sold €7.9 billion worth of assets since its inception, including €1.5 billion in the first quarter of 2013. Eighty percent of NAMA's sales have been in Britain, reflecting the strength and liquidity of the British market, the agency said in its annual report.

The agency took a €518 million impairment charge in 2012, reflecting underperforming assets in Ireland. But that was a 60 percent drop from the impairment charge in 2011, which NAMA indicated as one of the positive trends in the market.

Investment in the Irish commercial market reached €550 million in 2012, up from an estimated €200 million in 2011, NAMA noted in its report. Commercial investment in the first quarter of 2013 has already hit €336 million, "driven by foreign investors attracted by the high yields available in the Irish market," at a time when yields are low for other asset classes.

A portfolio of loans backed by Irish property recently attracted interest from more than 70 international funds, NAMA said.

For 2012, NAMA reported a profit after impairment, tax and dividends of €228 million, compared to €241 million in 2011.

With the upcoming redemption of €1.5 billion of NAMA bonds, NAMA redeemed €6.25 billion of its, 21 percent of its taxpayer-backed debt. The agency says it is on course to repay a total of 25 percent of its debt (€7.5 billion) by the end of 2013.

Fifty-four percent of NAMA's assets are in Ireland and 33 percent in Britain.