In May 2012, NAMA announced plans to advance, over the years 2012 to 2016, at least €2 billion in vendor finance to purchasers of commercial property securing its loans, mainly in Ireland.
This initiative has the potential, based on funding levels of up to 75%, to generate new investor equity in the Irish market of between €800 and €900m. Vendor finance is being provided to new investors for periods of up to seven years but typically for three to five years, with the expectation that it will be refinanced by the banking sector when more normal market conditions return.
NAMA’s first vendor finance transaction, involving the sale of an office building, One Warrington Place in Dublin, was completed in April 2012. NAMA has since concluded a number of other transactions including Edward Square Shopping Centre in Galway, Croydon Hotel in London and Project Aspen.
NAMA has advanced €373m in Vendor Finance to date and has indicated its willingness to provide up to €2 billion in total to facilitate investment in Irish commercial property if required.
Vendor finance was introduced in 2012 at a time when many potential investors were constrained by a lack of access to bank finance. A number of developments during 2013 suggest that the need for vendor financing may be reducing. These include the prevalence of international investors with ready access to capital, a gradual increase in domestic bank lending and the introduction of Irish REITs as an alternative investment mechanism
For further information please refer to NAMA’s Vendor Finance brochure