Banks told: sell blocks of flats for cash flow
Nama and the banks will have to sell whole apartment blocks to international investors if they want to deal with the problem of "insolvent" developments in Dublin, a new report has said.
The National Asset Management Agency (NAMA) would have to accept a discount of 15% when it sells apartments to so-called bulk buyers, property specialists CBRE said.
It is the first company to do detailed work on the idea, which NAMA has taken up in recent weeks.
The firm said blocks built in Dublin at the end of the boom were down by 50% from the peak, making most of them insolvent.
Developers, NAMA and the banks were reluctant to sell at these prices because of the losses that would be triggered.
The easy option is to rent them out, said CBRE, and use the income to keep the loans behind them performing.
"However, this is not sustainable in the long term," the company said, adding that there were not enough private investors or owner occupiers to make inroads into all the stock of apartments.
They said that selling an entire block had many attractions.
"The logistics of a single sale are much more streamlined than a multitude of sales to a disparate group of private buyers, with a resultant cost efficiency," said CBRE.
"As there are a number of these investors it may be impossible to generate competitive bidding and hence a price premium."
The note - written by senior executives Sean O'Brien and Marie Hunt - said the downside would come in the area of price.
"Traditionally a bulk sale of a development, or a substantial part of it, would get a discount of up to 20% of the value based on individual sales," they said.
"In the context of an already-built scheme, a discount of 10-15%, is more appropriate."
As is now key, an outside buyer is also likely to have more access to outside funding.
Deals of the kind envisaged by CBRE have already been mooted. It was recently reported that the Alliance Building in Dublin's Gasworks scheme was to be sold to a single investor for over €35m.