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34 2009

National Asset Management Agency Act 2009

PART 5

Valuation Methodology

Interpretation (Part 5).

72 .— (1) In this Part “ property ” means property that is the subject of the security for a credit facility that is a bank asset.

(2) In this Part:

(a) a reference to the market value of property is a reference to the estimated amount that would be paid by a willing buyer to a willing seller in an arm’s-length transaction after proper marketing (where appropriate) where both parties act knowledgeably, prudently and without compulsion,

(b) a reference to the market value of a bank asset is a reference to the estimated amount that would be paid by a willing buyer to a willing seller in an arm’s-length transaction after proper marketing (where appropriate) where both parties act knowledgeably, prudently and without compulsion,

(c) a reference to the long-term economic value of property is a reference to the value, as determined by NAMA in accordance with this Part, that it can reasonably be expected to attain in a stable financial system when the crisis conditions prevailing at the passing of this Act are ameliorated and in which a future price or yield of the property is consistent with reasonable expectations having regard to the long-term historical average, and

(d) a reference to the long-term economic value of a bank asset is a reference to the value, as determined by NAMA in accordance with this Part, that it can reasonably be expected to attain in a stable financial system when the crisis conditions prevailing at the passing of this Act are ameliorated.

Determination of acquisition values — valuation dates, etc.

73 .— (1) NAMA may specify a date or event by reference to which the market value of a bank asset or type of bank asset or property or type of property is to be determined.

(2) Under subsection (1) NAMA may specify different dates or events for any or any type of bank assets or property.

(3) Under subsection (1) NAMA may specify a date before the coming into operation of this Act.

(4) The specification of a date or event under subsection (1) has effect for the determination of a market value for any purpose under this Act (including for the purposes of Chapter 2 of Part 7).

Determination of acquisition values — guidelines, etc.

74 .— NAMA may, for the purpose of determination of values in accordance with this Part, adopt such guidelines or rules as it considers necessary for efficiency or consistency.

Acquisition values.

75 .— (1) Subject to subsection (2) and any regulations made by the Minister under subsection (3), the acquisition value of a bank asset is its long-term economic value as determined by NAMA.

(2) NAMA may, if it considers it appropriate after consultation with the Minister, and subject to any regulations made by the Minister under subsection (3), having regard to—

(a) the purposes of this Act,

(b) the expected date of acquisition of the bank asset concerned,

(c) the type of bank asset,

(d) the laws of the European Communities governing State aid, and

(e) any other relevant matter affecting valuation,

determine that the acquisition value of a bank asset shall be—

(i) its market value, or

(ii) a value (between its long-term economic value and its market value) that NAMA considers appropriate in the circumstances, having regard to the matters specified in paragraphs (a) to (e).

(3) The Minister may make regulations for the purposes of the application of subsection (2). For that purpose the Minister shall have regard to the factors set out in paragraphs (a) and (c) to (e) of subsection (2).

Determination of long-term economic values.

76 .— (1) NAMA shall determine the long-term economic value of a bank asset having regard to the following:

(a) the market value of the property;

(b) the market value of the bank asset;

(c) the long-term economic value of the property;

(d) the long-term economic value already determined by NAMA, in accordance with the valuation methodology, of any other similar property or bank asset;

(e) any report prescribed under section 78 that is reasonably available to NAMA when it carries out the valuation of the particular property or bank asset,

in accordance with—

(i) any regulations made by the Minister under section 79 , and

(ii) the laws of the European Communities governing State aid.

(2) Notwithstanding any other provision of this Act or any regulations made under it—

(a) the long-term economic value determined by NAMA for a parcel of land shall not exceed the market value of the parcel by more than such fraction as the Minister may determine by regulations for the purposes of this paragraph,

(b) the total long-term economic value of all land held as security in an acquired portfolio shall not exceed the total market value of that land by such fraction as the Minister may determine by regulations for the purposes of this paragraph,

(c) NAMA may determine that, with regard to any particular class of property, or in the particular circumstances applicable to a parcel of land, its long-term economic value shall not exceed its market value, and

(d) the long-term economic value of a bank asset shall be calculated on the basis of net present value methodology.

Market values.

77 .— (1) In determining the market value of property, NAMA may take into account—

(a) any value that the participating institution concerned submits as being, in its opinion, the market value of the property,

(b) any report prescribed under section 78 that is reasonably available to NAMA when it carries out the relevant valuation, and

(c) the market value already determined by NAMA of another similar property.

(2) In determining the market value of a bank asset NAMA may take into account—

(a) any value that the participating institution concerned submits as being, in its opinion, the market value of the bank asset,

(b) the market value already determined by NAMA of any other similar bank asset,

(c) the creditworthiness of the debtor or obligor concerned,

(d) the performance of that asset, and

(e) the market value of property determined by NAMA under subsection (1).

Regulations in relation to certain reports.

78 .— The Minister may make regulations prescribing reports or classes of reports (including reports prepared before the commencement of this Act) concerning factors or matters relevant to the valuation of property or of property of a particular type or in specific locations or with specific features or benefits, including—

(a) zoning,

(b) availability of utilities,

(c) availability of similar property in similar locations,

(d) historic value of property in particular locations, and

(e) recent valuations of similar property in similar locations.

Regulations in relation to determination of values.

79 .— (1) The Minister may make regulations relating to the determination by NAMA of the long-term economic value, or the market value, of a bank asset or a class of bank asset or a property or a class of property, including the matters that NAMA shall or may derive, use, apply or take into account for those purposes.

(2) In making regulations for the purposes of subsection (1), the Minister shall have regard to the laws of the European Communities governing State aid and any relevant guidance issued by the Commission of the European Communities, and may have regard, and may include such provisions relating, to such of the following as he or she thinks appropriate:

(a) with reference to the long-term economic value of property—

(i) the extent to which the price or yield of such property has deviated from the long-term historical average,

(ii) supply and demand projections by reference to the type of asset and its location,

(iii) macroeconomic projections for growth in the gross domestic product and for inflation or deflation,

(iv) demographic projections,

(v) land and planning considerations (including national, regional or local authority development or spatial plans) that may exert an influence on the future value of the asset concerned,

(vi) analyses presented by the Minister for the Environment, Heritage and Local Government on the extent to which existing land zoning and planning permissions granted and in force meet or exceed projected growth requirements,

(vii) analyses presented by the Dublin Transportation Office or any national transport authority of existing and future transport planning and the associated supply and demand projections for land use,

(viii) any analysis by the Minister for Communications, Energy and Natural Resources in relation to the potential rise in energy and other costs due to the long-term decline in non-renewable resources,

(ix) the specification, for the purposes of the determination of the long-term economic value of particular parcels of land, of a fraction by which the long-term economic value determined by NAMA shall not exceed the market value of each such parcel,

(x) the specification, for the purposes of the determination of the long-term economic value of all land held as security in acquired portfolios, of a fraction, by which the long-term economic value of that land shall not exceed its total market value;

(b) with reference to the long-term economic value of bank assets—

(i) the long-term economic value of property,

(ii) the net present value of the anticipated income stream associated with bank assets of that kind,

(iii) in the case of rental property, current and projected vacancy rates,

(iv) loan margins,

(v) an appropriate discount rate to reflect NAMA’s cost of funds plus a margin that represents an adequate remuneration to the State that takes account of the risk in relation to the bank assets acquired by NAMA,

(vi) the mark-to-market value of any derivative contracts associated with bank assets of that kind,

(vii) any ancillary security such as personal guarantees and corporate assets, and

(viii) fees reflecting the costs of loan operation, maintenance and enforcement;

(c) such other matters that he or she considers relevant to the long-term economic value or market value of property or bank assets including—

(i) matters to be derived, used, applied, taken into account or not taken into account;

(ii) the values to be attributed to any matters or the adjustments to be made in or by virtue of their application;

(iii) the data, criteria, information, rules and methodology that may be used or applied in determining the value or application of any matters or in deriving any matters to be used or applied;

(iv) the use of the net present value methodology in determining the value of any property or bank asset;

(v) the appropriate discount rate to reflect NAMA’s cost of funds plus a margin that represents an adequate remuneration to the State that takes account of the risk in relation to the acquired bank assets to be applied in determining the net present value of a cash flow;

(vi) the specification, for the purposes of attribution and application across all bank assets, or all bank assets of a particular class, of a standard discount rate, to be attributed to or applied in the calculation of each bank asset, or each bank asset of the particular class, as the case may be, acquired by NAMA, which in the opinion of the Minister is necessary or appropriate to provide for enforcement costs, due diligence costs and other relevant costs incurred or likely to be incurred by NAMA over its lifetime in the discharge of its functions;

(vii) the extension of the maturity date of any bank asset for such period as NAMA considers appropriate after its actual maturity to allow a reasonable period for its management and enforcement;

(viii) the types or classes of property in respect of which the market value shall be deemed to be the long-term economic value.

(3) Every regulation made under subsection (1) shall be laid before each House of the Oireachtas as soon as may be after it is made and, if a resolution annulling the regulation is passed by either such House within the next 21 days on which that House has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done under the regulation.