Presentation to Permanent Committee on the Cadastre

19 June 2013

Response to Irish Banking CrisisKey Milestones | 2008 - 2010

• September 2008| Irish Government guarantee for banks

liabilities of €440bn

• October/November 2008 | External examination of loan books

of all institutions which partook in the guarantee scheme

• December 2008 onwards |Recapitalisation of certain financial

institutions

• January 2009|Nationalisation of Anglo Irish Bank

• February/March 2009|Review of options on how to deal with

impaired assets

• April 2009 | Plan to establish NAMA

• July 2009 | Draft Legislation published

• September 2009 | Legislation introduced

• November 2009 | NAMA Act passed into law

• December 2009 | Board and CEO appointed

• February 2010 | EU Commission approves NAMA

scheme under State Aid regime

NAMA Timeline2010 & 2011

• February 2010 | NAMA established as part of the Irish Government’s response to the banking and property crisis and

received formal approval from EU Commission

• NAMA was given the objective of ‘cleansing and repairing the banks’ balance sheets’

• March 2010 | Transfer to NAMA of the initial largest borrower exposures across the five Participating Institutions (PIs)

commenced

• September 2010 | Minister for Finance decided to exclude sub €20m loans in AIB and BOI and to expedite transfers

• October 2011 | €74bn of assets had transferred at a cost of €31.8bn (57% discount)

NAMA EstablishmentValuation and Loan Transfer Process

NAMA’s Liquidity Injection into Banks

• NAMA acquired loans with a nominal value of €74 billion for consideration of €31.8 billion - 57% discount

• Consideration paid to five Participating Institutions (PIs) included Senior Bonds of €30.2 billion and €1.6 billion of

NAMA subordinated debt

• Senior bonds were available to exchange for funds from the ECB - represented a substantial injection of liquidity into

the Irish banking system and removed systemic risk to Irish banking system posed by land and development loans

• Following loan acquisition NAMA was responsible for managing 775 debtor connections including more than 5,000

borrowing entities and in excess of 12,000 loans in a range of currencies (subsequently disaggregated into 58,000

individual property units)

• Ultimate purpose of NAMA is to deal expeditiously with acquired assets and to protect or otherwise enhance their

value

What is NAMA?

NAMA RecruitmentBuilt Organisation Alongside Loan Acquisition & Debtor Engagement

2,000+ CVs received within 6 months of announcement

NAMA staff at end-May 2013

Portfolio Management

• All debtors have undergone a business plan process designed to assess their commercial viability and their willingness to co-operate with NAMA

• The 189 largest debtor connections (generally those with par debt in excess of €75m) managed directly by NAMA accounting for €61 billion in par debt

• Day-to-day relationship management of the other 586 debtor connections (€13 billion in par debt) delegated to the PIs

• NAMA is working consensually with the majority of debtors to achieve the best result for the taxpayer through the workout of loans and underlying properties

• Where a consensual approach is not possible, enforcement proceedings are initiated – at end-2012, 271 separate insolvency appointments (relating to 207 debtor connections) had been made

Portfolio Management

• NAMA paid €31.8bn to acquire 12,000 loans to 775 debtor groups.

• These loans were secured by more than 10,000 properties containing over 58,000 units

Breakdown of Property Portfolio

Portfolio is better than NAMA could have imagined at outset

Property Portfolio by worldwide location

Breakdown of Property Portfolio

Regional breakdown of Irish property Regional Breakdown of British Property

NAMA’s portfolio is where investors want to be - facilitates orderly disposal of assets

Business Plan ProcessWork Completed

By end-June 2012, all 789 debtor business plans had been assessed. Based on these assessments, strategies were adopted by NAMA towards each of the 775 debtor connections. Typically, debtor strategies tended to fall

into three broad categories: (1) support, (2) disposal or (3) enforcement.

NAMA’s Approach to Debtor Management

Consensual Connection

Non - Consensual Connection

Borrower sells real estate assets in accordance with

Business Plan

Enforce

No Enforcement

Sell single assets

Create portfolios of assets (sector /

location) for sale /refinance

Sell entire connection’s loans as a portfolio

Sell standalone, non recourse loans

Complete value add strategies then sell

Fixed Charge Receiver /

AdministratorHolds

NAMA Owns

Debtor Debt Restructuring

NAMA pursues one of five restructure options with debtors:

i.Full restructuring (new security and loan documentation)ii.Limited Restructuring (existing security and legal documentation)iii.Letter of support (most common)

i. Requires that a debtor implement a number of milestones in relation to debt reduction. The letter of support must be accepted by the debtor. Support may, in certain limited situations, take the form of a full or partial restructure of loans or may be provided without any changes to the underlying facilities

•Disposal •Enforcement

Full restructuring is typically progressed with compliant debtors and increases the potential monetising options for future recovery/disposal. A full restructure involves the creation of a new loan agreement and associated security documentation.

Debtor strategies (as at end-2012)

Strategy % of NAMA debtSupport 58%Disposal 18%

Enforcement 24%Total 100%

NAMA’s Performance Three Years On

NAMA is profitable for the second year running• We have made a profit in 2012, after tax and impairment, of over €200 million

And is generating strong cash flows•€12.4 billion in cash inflows

• Generated since the Agency’s establishment, from a standing start, just over three years ago

•€8.2 billion completed asset sales • 80% of sales in UK, mainly London, where we are fortunate to hold security over a substantial

number of very good assets. Selling assets in UK at sub 5% yields, and in some cases closer to 3%

• Seeing emerging demand for Irish assets and that will increase in the coming years. We are

investing to take advantage of that

•€4.2 billion in recurring cash, mainly rental receipts • €100 million in monthly non-disposal cash flows. This is despite the sale of nearly €8 billion of

assets and contrary to the suggestion that we have sold the ‘low hanging fruit’

NAMA’s Performance Three Years On

… enabling us to fund our investments, wash our face and pay down debt

•Investing to enhance value: €1.8 billion in new approved advances to end-May across our portfolio, €1.2 billion of which has been drawn down.

•Paying our own way: NAMA covers all of its own administration costs. Not a cent of the tax people pay is needed to prop up NAMA and we intend to keep it that way. And we are keeping those running costs very low as a result of close and stringent cost management

•Repaying our debt: We have redeemed €6.25 billion of senior bonds (21% of the Agency’s total senior debt liabilities) and are firmly on course to meet our end-2013 target, which is also part of the Troika programme, of repaying a quarter of our bonds

•Key objective: To repay all our senior debt by 2020

NAMA Cash ReceiptsDisposal Income/Non Disposal Income

Cash Generation versus Bond Redemption

Total cash inflows of €12.4bn to 10 June generated since inception

2010: €1.0bn 2011: €5.1bn 2012: €4.5bn 2013: €1.8bn

Interest Income – Approx. €100m monthly run-rate of cash generation from recurring income (mostly rental income)

Bond redemption target of €7.5bn by end 2013

To date Bond Redemptions of €6.25bn + €299m repayment of Central Fund loans

Remaining redemptions 2013: €1.25bn

Current Cash & Liquid Assets position of €3.2bn as at 10 June 2013 (includes receivable of €1.12bn from NTMA in relation to derivative collateral agreement)

Debt RepaymentNAMA Senior Bonds

Expected payment in Q3/Q4 2013€1.25 billion

June 2013 payment

€1.5 billion

• June 2013 | €1.5 billion of NAMA Senior Bonds redeemed representing cumulative of €6.25 billion (21% of

senior debt liabilities

• On course to meet target of redeeming €7.5 billion of Senior Bonds by end-2013

• All NAMA Senior Bonds of €30.2 billion expected to be redeemed by 2020

How the €12.4 Billion Cash was Generated

• A significant amount of work is done behind the scenes to deliver these results involving day-to-day intensive management

• 775 Business Plan reviews completed by end 2012 which are reviewed quarterly by NAMA

• Over 4,000 asset sales transactions

• €100 million per month recurring income on portfolio despite over €8bn of asset sales

• Over 25,000 credit decisions made since inception - €1.2 billion in new money drawdowns

• Response times improved despite increasing volumes – average turnaround times now less than 5 days

€100 Million in Monthly Recurring Cash

• NAMA is generating, on average, €100 million in monthly recurring cash, mainly rental receipts

• Key part of NAMA’s approach has been, through intensive day-to-day management of debtor connections, to ensure that buildings are rented and that rental income is mandated to NAMA.

• After acquisition of loans, it became quickly clear to NAMA that there was significant and widespread leakage of funds – most notably rental income – which should have been applied by debtors towards debt repayment. NAMA has addressed this leakage – NAMA’s approach involves oversight of the collection and lodgement of rental income and, as required, the appointment of agents with a duty of care to NAMA to collect rents

• NAMA, through its work with debtors and receivers, has secured tenants for previously empty buildings, capturing recurring cash and increasing long-term recoverable value

Actively Selling – But Responsibly

Disposals by location, inception to end-2012• At end-2012 asset sales completed were €6.8 billion (3,900 individual properties), including €2.8 billion completed in 2012.

• Asset sales completed to date 2013 of €8.2 billion.

• 80% of sales in UK, mainly London, where NAMA holds security over a substantial number of very good assets. Selling assets in UK at sub 5% yields, and in some cases closer to 3%

• In Ireland, over €1.5 billion of assets on the market for sale through debtors and receivers.

• Seeing emerging demand for Irish assets and that will increase in the coming years. NAMA is investing to take advantage of that

Market Outlook

• Cautious optimism for the medium term

• Recovery of Irish property market is underway but will not be homogeneous

• Recovery will be in main urban centres first and investment grade properties

• Good for NAMA given the urban centric location (94%) and quality of the Irish portfolio

• Renewed interest in NAMA’s Irish property portfolio – perception the country is improving. Emerging demand in some key areas, interest in NAMA Vendor Finance and take up of NAMA Deferred Mortgage offerings

Development Capital Commitment for Ireland

• Quality of our portfolio is informing our strategy, both in terms of disposing of assets where the opportunity presents itself and investing in assets, particularly in Ireland, to enhance their value over a medium-term horizon

• In Ireland, we have committed to providing at least €2 billion in development capital over the period to end-2016 to preserve and enhance the value of our assets – creating the low hanging fruit of tomorrow

• That’s not just an idle promise - €800 million has already been approved and €500 million has already been drawn down and is being spent as we speak on projects in places ranging from Dublin to Cork, Drogheda, Galway, Kildare

• The commitment includes the completion of properties which are currently under development and new development in anticipation of future supply shortages and demand

NAMA Development Funding Dublin Docklands

• As an example of our approach, we are devoting particular attention to the Dublin Docklands, where we have significant holdings that we believe will be attractive for expansion of the IFSC and the development of future technology and business hubs

• Our plans are closely aligned with what the IDA and others are telling us about demand for quality office space and the fact that the Docklands is where Ireland will compete internationally for corporate occupiers through the IDA

• We are currently assessing the commercial feasibility of a wide range of projects

• The timing of actual drawdowns of funding in the Docklands, as elsewhere, is dependent on resolution of planning and particularly infrastructural issues that are key to enhancing the commercial viability of these projects.

An aerial view of the Dublin Docklands area where NAMA holds security over a significant number of buildings and sites.

NAMA Strategic Initiatives

• Vendor Finance - Offers medium-term finance to purchasers of commercial assets or loans with €2bn in vendor finance available to prospective purchasers - €360m agreed in 5 transactions to date

• Rent Abatements –222 applications for rent abatement granted (96%) with an aggregate value of €14m per annum

• Deferred Payment Initiative (DPI) – Offers price protection to residential buyers. The DPI has now been operational for 12 months and is offered on 400 properties in 28 developments across 13 counties nationally. To date, sales have been achieved on 167 properties, resulting in a total sales value of €32.2m

• Social Housing - Offers purchase and long-term leasing options to local authorities and approved housing bodies. More than 4,200 units identified (local authorities determine suitability). Pace of delivery not controlled by NAMA. Since the commencement of the social housing initiative in 2012, 367 properties have been completed and committed to social housing by NAMA debtors and receivers – It is up to AHBs to agree and sign leases

A house in Castlerock, Co Limerick, which is one of the properties available through NAMA’s DPI

NAMA and IBRCExisting IBRC/NAMA portfolio

• IBRC (in Special Liquidation) manages par debt of €41 billion for NAMA acquired under

2009 NAMA Act. IBRC provided Primary servicing (loan administration) on €36 billion par

debt but provided Primary and special servicing (business engagement with over 300

debtors) on €5 billion par debt.

• These services are currently in the process of being migrated to Capita (NAMA’s back-up

primary and special servicer). Credit and risk and legal services will be taken over by

NAMA. Other services will migrate to Capita on a phased basis between July 2013 and

early 2014.

• NAMA and Capita are currently recruiting from within the 200 staff in the IBRC NAMA

Unit.

NAMA and IBRCNew IBRC portfolio

• Estimated €24 billion commercial loans portfolio and a €1.8 billion residential loans portfolio

to be valued and offered for sale by the Special Liquidators during the second half of 2013.

NAMA has no role in this process.

• Loans not sold during this process will be purchased by NAMA at a price to be determined by

the Special Liquidators in line with Valuation Instructions published on 17 May 2013.

• Under the Instructions, loan valuations are to be completed by 30 November 2013 and the sale

of IBRC assets must be agreed or completed before 31 December 2013 or as soon as practicable

thereafter.

• NAMA making preparations for loan acquisition - has held a tender to appoint primary and

special servicers to both portfolios and expects to make appointments within the coming weeks.

NAMA | 2013 and Beyond

• Continue to build significant organisational capability, while running a business that has delivered outstanding results

• Work-out strategy and platform in place for debtor connections

• Strategy implementation and delivering key asset management enhancement and completion of projects

• Property Portfolio is well located which in time should facilitate orderly disposal of assets

• NAMA has independent funding availability

NAMA faces a number of key challenges

• Continuing difficult Irish market with other institutions deleveraging

• Lack of market liquidity

• Recent IBRC liquidation

• Status as a public body means less flexibility than banks

• Staff retention

Summary

• NAMA Senior Debt redemption is on target. Repayments of €6.25bn have been made to date and a total of €7.5bn will be repaid by the end of 2013

• Total cash flows in excess of €12bn have been generated, and NAMA currently has €4.4bn of cash and liquid assets on hand

• Non-disposal cash flows of approximately €100m per month are being generated, in addition to sales proceeds

• NAMA continues to generate Operating Profits after Impairment charges, despite unfavourable market movements

• Focus on maximising income and managing Debtors, Receivers and Assets to enhance value

Presentation to Permanent Committee on the Cadastre

19 June 2013