Nama drops plans for 400 apartments as PRS market has ‘almost disappeared’

The National Asset Management Agency (Nama) has abandoned plans to deliver 400 apartments before it is wound down in 2½ years’ time, as investment in the targeted private rental sector (PRS) has fallen sharply amid a spike in interest rates in the past year, according to the agency’s chief executive, Brendan McDonagh.

Speaking to reporters after Nama published its annual report on Thursday, Mr McDonagh said the agency had envisaged delivering 1,800 new homes between 2022 and 2025, subject to commercial viability.

However, 400 of the units that it had preapproved funding for its debtors to build, subject to the properties being pre-sold to institutional investors, will now not be constructed during the period, he said. The remaining 1,400 planned units are primary houses, 650 of which have already been delivered.

“The PRS market has almost disappeared in the rising interest rate environment,” he said. “We always regarded funding for apartments as riskier, unless you had a presale [agreement].”

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Savills said last month that there were only four investment deals in the Irish PRS sector in the first quarter, down from 13 for the same period in 2021. Aside from the impact of rising interest rates, it said investor interest had also been hit by “negative media attention and interventions”, rising construction costs and rental growth caps.

The agency, which was established almost 14 years ago to take over risky commercial property loans from Irish banks, said it had funded or facilitated the delivery of close to 30,000 new homes since the start of 2014. Of the 14,000 that were funded by Nama, close to 20 per cent, or 2,800 units, were sold to PRS investors, according to a spokesman.

Nama has identified scope to deliver about 17,000 additional new homes, chiefly post 2025. However, these homes can be delivered only if they are commercially viable, with the necessary supporting infrastructure put in place by other parties and planning permission obtained, it said.

Mr McDonagh said the agency still expected to post a lifetime surplus of €4.5 billion by the time it is wound down in two years, after recording a drop in profits last year. However, he suggested there was slight upside potential to the figure.

The State-owned bad bank posted a net profit of €81 million last year, down from €195 million for 2021, to mark its 12th consecutive year of profitability.

The result reflects the ongoing reduction in the size of the Nama loan portfolio, which had a carrying value of about €500 million at the end of 2022, less than 2 per cent of the value of €32 billion paid by Nama to acquire loans on its establishment.

Nama transferred €500 million from its surplus to the exchequer last year, bringing the total surplus of cash transfers to date to €3.5 billion. A further €1 billion surplus is projected before it is wound down by the end of 2025, subject to market conditions, it said. Some €350 million is on track to be transferred to the exchequer later this year.

“As we enter our final phase we are focused on two overarching aims – maximising value and delivery from our remaining portfolio; and resolving our outstanding workstreams in an orderly and well-managed fashion,” said Mr McDonagh.

“After 12 years in a row of profitability, there is still a lot of work to do to get the most out of our remaining assets – but we will be as rigorous as ever in pursuing and collecting every available cent.”

During 2022, Nama generated €492 million in cash, including €404 million realised from the sale of loans and property, bringing total cash generation since its inception to €47.4 billion.