Annual Report & Financial Statements 2014 Contents LETTER TO THE MINISTER FOR FINANCE 1 KEY OBJECTIVES SET BY THE NAMA BOARD 2 KEY PERFORMANCE INDICATORS 3 OTHER KEY BUSINESS HIGHLIGHTS 4 CHAIRMAN’S STATEMENT 6 CHIEF EXECUTIVE’S STATEMENT 8 10-29 BUSINESS REVIEW Debtor engagement 11 NAMA market activity 14 Development funding 20 Social and economic contribution 25 30-41 FINANCIAL REVIEW 42-48 NAMA ORGANISATION AND SERVICE PROVIDERS Organisational structure 43 Service providers to NAMA 48 49-65 GOVERNANCE Board members 50 Board and Committees of the Board 52 Reports from Chairpersons of NAMA committees 54 Disclosure and accountability 64 Risk management 65 66-170 CONSOLIDATED FINANCIAL STATEMENTS Glossary of terms 171 HIGHLIGHTS BUSINESS REVIEW BUSINESS FINANCIAL REVIEW 12 May 2015 Mr. Michael Noonan T.D. ORGANISATIONAL STRUCTURE ORGANISATIONAL Minister for Finance Government Buildings Upper Merrion Street Dublin 2. Dear Minister, GOVERNANCE We have the honour to submit to you the Report and Accounts of the National Asset Management Agency for the year ended 31 December 2014. Yours sincerely, FINANCIAL STATEMENTS Frank Daly Brendan McDonagh Chairman Chief Executive WWW.NAMA.IE 1 ANNUAL REPORT & FINANCIAL STATEMENTS 2014 Key Strategic Objectives set by the NAMA Board The Board’s primary commercial objective is to redeem all of its senior debt (€30.2 billion) before the end of 2018. The Board also 1. aims to redeem the NAMA subordinated debt (€1.593 billion) by 1 March 2020 and to generate a surplus by the time its work has been completed. It aims to meet all of its future commitments out of its own resources. In order to meet its primary commercial objective (as at 1 above), NAMA will manage assets intensively and invest in them so as to 2. optimise their income-producing potential and disposal value. Through its disposal activity, it will continue to generate transactions aimed at sustaining the strong performance which the Irish property market has experienced over recent years. NAMA will facilitate the delivery of Grade A offi ce accommodation in the Dublin Docklands SDZ; it will contribute, not only in terms of 3. project funding, if required, but also in bringing coherence, direction and drive to the delivery process. NAMA will facilitate the completion of 4,500 new residential units in the Dublin area in the period to the end of 2016 and, through intensive 4. asset management of residential sites, will aim to ensure that additional new supply can be delivered as expeditiously as possible thereafter, particularly in Dublin. Subject to the primacy of its Section 10 commercial mandate but often complementing it, NAMA will seek to make a positive social and 5. economic contribution across the broad range of its activities. 2 HIGHLIGHTS Key Performance Indicators 2014 REVIEW BUSINESS OPERATING PROFIT FINANCIAL REVIEW €9.1 billion SENIOR BOND REDEMPTIONS ORGANISATIONAL STRUCTURE ORGANISATIONAL €648m GOVERNANCE FROM INCEPTION TO END-MARCH 2015 FINANCIAL STATEMENTS €1billion DEVELOPMENT FUNDING IN IRELAND €8.6 €7.8 €25 billion CASH GENERATION billion billion CASH GENERATION DISPOSAL RECEIPTS €19.9billion DISPOSAL RECEIPTS €17.6 billion SENIOR BOND REDEMPTIONS (58%) WWW.NAMA.IE 3 ANNUAL REPORT & FINANCIAL STATEMENTS 2014 Other Key Business Highlights 2014 DUBLIN DOCKLANDS SDZ Development land NAMA holds an interest in 75% of the % 22 hectares of developable land within 75 the Dublin Docklands SDZ. Potential apartments It is estimated that up to 3.8m sq. ft. of commercial space and 1,950 apartments could be delivered in 1,950 all the sites in the Dublin Docklands SDZ in which NAMA has an interest. NAMA SDZ ACTIVITY The planning application for the Planning applications for the The selection of a preferred development of the landmark development of 5 Hanover bidder for the development Boland’s Mill site in the south Quay, 6-8 Hanover Quay of a key site located at Dublin Docklands. and 76 Sir John Rogerson's 72-80 North Wall Quay. Quay. RESIDENTIAL DEVELOPMENT FUNDING New housing supply % NAMA funded more than 40% of Dublin’s total 40 new housing supply in 2014. 4 HIGHLIGHTS SOCIAL HOUSING REVIEW BUSINESS NARPSL over 1,000 units FINANCIAL REVIEW NAMA is facilitating local authorities As part of this process NARPSL, a NAMA By end-2014, over 1,000 units were and housing bodies to purchase and SPV, acquires residential units from delivered under this initiative. lease properties for social housing. NAMA debtors and receivers and leases STRUCTURE ORGANISATIONAL them directly to approved housing bodies. FACILITATING BUSINESS AND EMPLOYMENT IN IRELAND NAMA is working with IDA Ireland and other Working with State agencies to identify suitable properties for companies looking to establish or expand GOVERNANCE IDA Ireland existing business operations in Ireland. NAMA, through the deployment of working FINANCIAL STATEMENTS capital, is directly supporting 15,000 jobs 15,000 in Ireland in trading businesses linked to its loans. NAMA has approved rent abatements with an annual aggregate value in €23m excess of €23m. NAMA has approved long-term rent reliefs worth €40m to support small and medium €40m retail businesses throughout the country. WWW.NAMA.IE 5 ANNUAL REPORT & FINANCIAL STATEMENTS 2014 Chairman’s 2014 was a year of major achievement for NAMA. We reported a profi t for the fourth year in a row. Statement Signifi cantly, we also passed the half-way point in repaying our Senior Bonds. Th e extent of our progress during 2014 is demonstrated by the fact Mr Frank Daly that we repaid more of our Senior Bonds in a single Chairman year (€9.1 billion) than we were able to do in the previous four years combined (€7.5 billion). We intend to build on this excellent progress by staying ahead of schedule for the remainder of NAMA’s lifespan. Based on our current outlook, we hope to complete our core work by 2018, well ahead of our original target of 2020. For too long in Ireland’s recent past, Ancillary mandates big numbers meant bad news: 2014 also saw NAMA being tasked billions lost as a result of poor by the Minister for Finance with lending, billions written off bank additional responsibilities. Following balance sheets and billions added to the completion of the Minister’s the national debt. But 2014 showed review of the Agency, undertaken that big numbers can also mean under Section 227 of the NAMA Act, good news – the billions invested in we have been asked to carry out two the Irish commercial property market new mandates. and in Irish loan portfolios in 2014 reduced substantially the contingent The fi rst is to ensure the timely and liability of Irish taxpayers to IBRC and coherent delivery of key Grade A to NAMA and will give much-needed offi ce, retail and residential space impetus to Ireland’s economic within the Dublin Docklands SDZ and recovery and to employment. Dublin’s Central Business District. The second is to maximise the By the end of 2014, NAMA had delivery of residential housing € generated 23.7 billion in cash from units in areas of most need. the loans it acquired. We sold assets totalling €18.7 billion to investors We believe we can deliver on these whose interest in investing in Ireland ancillary mandates and we are has been transformed by the already making strong progress economic recovery. on both fronts. Major strides were made in 2014 on advancing the € To date, we have approved 3.2 development of the Dublin Docklands billion in loan advances to debtors SDZ. Following approval of the and receivers, investing in our assets Docklands SDZ Scheme by An Bord to make them worth more for Irish Pleanála in May 2014, NAMA taxpayers, to support jobs and to intensifi ed preparatory work in stimulate further investment in our relation to the development land economy. within the SDZ in which it holds an We fi nished 2014 in a strong position, interest (75% of the 22 hectares of closer to our destination, although developable land in the SDZ area). much work remains to be done. Initial appraisal work suggests that 6 HIGHLIGHTS up to 3.8m sq. ft. of commercial We have the capacity, if required, to NAMA is a commercial entity and of space and 1,950 apartments could invest up to €3 billion in these and course we are delivering on the potentially be delivered if all the 15 other viable projects which can commercial mandate set for us by sites in which NAMA has an interest deliver high-quality offices and new the Oireachtas, but NAMA does not are fully developed over the next homes in Dublin and other areas operate in a vacuum. We are very decade. where there is strong demand. sensitive to the impact of our work on REVIEW BUSINESS the wider Irish economy and we work In that context, a number of hard to ensure that our impact is a initiatives announced towards the Making a wider contribution positive one. end of 2014 will help, including the NAMA is not just about generating initiation of the planning process for financial returns. We can and are the development of the landmark making a broader contribution to the Conclusion Boland’s Mill site and the award of a Irish economy. We have, for example, Five years on from its establishment, FINANCIAL REVIEW long leasehold interest for a site on helped stimulate Ireland’s property NAMA is firmly on course to repay its North Wall Quay to Oxley Holdings market recovery by bringing assets to senior and subordinated bonds and is Limited (Project Wave). NAMA is also the market in an orderly way, tapping confident of generating a surplus for a minority shareholder in a number into growing domestic and Irish taxpayers.