Property developer Johnny Ronan got a lot off his chest in a 28-page submission to the Oireachtas Banking Inquiry. But then he went and spoiled it all by writing something stupid like ‘Arbeit Macht Frei’, an ill-judged coda to his lengthy excoriation of Nama, the organisation that paid €30bn for €74bn of Irish bank loans and is charged with getting the money back.

Ronan noted: “Nama was widely referred to as the largest property company in the world. Yet it was led by former civil servants with no proper real estate experience. That is akin to asking an accountant to fly an airplane or a butcher to perform heart surgery. In my experience, they made decisions based on personal likes and dislikes, which gave little or no consideration to the ultimate return for the Irish taxpayer.”

Ronan’s witness statement skipped over why his personal vehicle, Ronan Group Real Estate, ended up in Nama’s clutches. He told the inquiry that RGRE’s total outstanding debt in 2008 was €330m, most of it owed to Bank of Ireland and AIB. He stated that total assets under management in 2008 were valued at €850m, representing an overall Loan to Value ratio of 39%.

“As far as I am aware, in the years 2001 to 2008 RGRE never breached an LTV or ICR covenant in its loans,” he stated. “During these years, RGRE was paying annual interest of €14m per annum and had annual surplus income less interest of €12m per annum.”

Battersea Grievance

Happily, RGRE has now escaped Nama’s oversight after Ronan sourced a new lender to refinance €300m of outstanding loans. But gone by the board is Ronan’s other creation, with his business partner Richard Barrett, Treasury Holdings. Nama pulled the plug on Treasury in January 2012, having two months earlier torpedoed Treasury’s involvement with redevelopment of Battersea Power Station in London.

In Association with

Much of Ronan’s Banking Inquiry evidence focused on this Battersea decision. “We consistently projected a £4.2 billion profit on Battersea in business plans submitted to Nama. Nama never once disagreed with this forecast, which made its subsequent decision to move on Battersea all the more baffling. That estimated profit on Battersea could now, in hindsight, even transpire to be a conservative one. The decision to enforce by Nama was one of the costliest decisions in the history of the Irish state.”

Ronan has a point, though from Nama’s perspective the Treasury situation was complicated. The Treasury loans passed from Irish banks to Nama in 2010 amounted to €1,760m. They were connected to 197 Irish registered companies and 44 non-Irish registered companies. The agency initially worked with Treasury on a work-through solution, even advancing €100m. In 2011, relations started to fray as Ronan and Barrett struggled to tie down a white knight to refinance the Nama debt.

Exactly what happened was explored in depth by Justice Finlay Geoghegan in a 2012 court case. The judge surmised that Nama executives ran out of patience, though she observed that Treasury was doing its best to comply with the agency’s strictures. Her conclusion was that Treasury had been treated unfairly by Nama, though she wouldn’t overturn Treasury’s receivership because the company had boxed itself in legally.

Personal Guarantees

Ronan also had an interesting take on personal guarantees. “The obsession of some banks with personal guarantees as the ultimate security for excessive lending was one of the primary reasons for the over-lending by those banks to the wrong borrowers and significantly contributed to the banking crisis. The fact that neither Richard Barrett nor I had given personal guarantees for Treasury’s corporate liabilities seemed to work against us in all negotiations with Nama.”

Should Nama have given Ronan and Treasury more rope? In retrospect probably yes, especially in light of the huge rebound in commercial property values in the past two years. “As far as I am concerned, Nama was hell bent on taking down Treasury Holding, whatever the cost or consequence to the Irish taxpayer,” Rona declared. “They wanted to make an example of Treasury and that example made no commercial sense whatsoever.”