By Caroline McNally

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Bono and the Edge of U2, together with developer Paddy McKillen, have bought back the city-centre Clarence Hotel from NAMA – for a price reported to be below the €40 million of debts that saw it acquired by NAMA in the first place.

No one else was invited by NAMA to bid for the asset. Bono and the Edge were part of the consortium that owned the hotel before the NAMA takeover. On the face of it, this looks as if very wealthy (and tax-averse) rock stars have been given a debt write-down.

Meanwhile, a so-called vulture fund is seeking to evict people from a housing estate in Tyrrelstown in west Dublin. These tenants are not looking for debt relief, they are not in rent arrears, they are not even looking for rent reductions – they just want to stay in their homes.

But Beltany Property Finance, which bought the Ulster Bank loan on the Cruise Park estate, has already served eviction notices on 30 to 60 families (reports vary), with the occupants of all 208 (or 103, depending on what source you read) properties likely to receive similar treatment as the fund seeks to maximise its profits.

The Irish government is unlikely to get much tax on these profits. Beltany’s complex corporate structure and byzantine financing systems mean that although it held €1 billion in assets at the end of 2014, its declared profits were a mere €1,000 and its tax bill a paltry €250. Beltany is an arm of the Goldman Sachs investment banking empire and it ensures maximum tax “efficiency” by shuffling loan financing and profits in and through multiple other arms of the organisation.

This is but one example of a massive and growing issue: up to 90,000 Irish loans are owned by foreign investment funds. Some (as in Tyrrelstown) have been bought direct from the banks, and an estimated 90 percent of NAMA sales have been to such bodies.

The vulture fund that has been hogging the headlines over the last few weeks and months is Cerberus Capital Management, which has purchased €18.75 billion in Irish property loans, covering 16,500 properties, in the last two years, including two large purchases from NAMA.

Barry O’Halloran, in a revealing article in the Irish Times, reports that Cerberus paid €3.2 billion for these assets – a very substantial discount – and that, even after writing down some value itself, it will likely generate a rate of return in Ireland of 18 percent per annum.

As in the case of Beltany, sophisticated financial engineering (the Irish branches of Cerberus borrow from Dutch affiliates at high interest rates and the interest can be offset against tax) means that the Irish government gets little revenue. Six Cerberus companies in Ireland posted income of €350 million in 2014 and paid a grand total in tax of €15,000.

Cerberus has mainly been in the news because of Project Eagle, the €1.6 billion Northern Ireland property portfolio (originally valued at €5.7 billion) it bought from NAMA in 2014. Former NAMA adviser Frank Cushnahan claims to have acted, at least indirectly, for Cerberus in this deal and has been recorded by a BBC TV programme stating that he was to receive €6 million as a “fixer fee”. Cerberus had told NAMA that no one associated with NAMA was involved in the transaction.

As documented by Frank Connolly in Village magazine, a previous bidder for Project Eagle was another US investment fund, Pimco, which withdrew from the bidding after it was asked for similar fees by Cushnahan and related parties. Pimco reported its concerns to NAMA, which passed the information on to Minister for Finance Michael Noonan in March 2014.

A recent report for a Northern Ireland Assembly Committee has expressed surprise at Noonan’s inaction and queried why he did not immediately move to suspend the sales process. The minister’s office has stated that he has no power to intervene in individual NAMA sales. (NAMA also denies any wrongdoing.)

However, albeit in a more general capacity, the minister has shown himself quite willing to intervene in NAMA affairs, recently”>asking it to speed up its sales of land and property so as to combat “hoarding” by developers. (Punitively taxing unused sites would, in any event, be a much more efficient way of tackling this problem.)

In an interesting twist to the Cerberus affair, the company took its first (and successful) legal case in Ireland for repayment (in full) of a loan it had acquired against independent TD Mick Wallace, a prominent critic of the Project Eagle deal.

According to Phoenix magazine, the largest vulture fund active in Ireland is Lone Star, which specialises in buying loans on the cheap and then “flipping” them for enormous profits (€487 million in 2014). A company closely linked to Lone Star is Hudson Advisors Ireland, whose head of real estate is a former portfolio manager for NAMA. As noted here before, a senior executive with the consortium behind the closure of Clerys department store is also a former NAMA executive.

This revolving door between NAMA and private developers (some of whom are also on the NAMA payroll) is legal but, from a public interest point of view, highly problematic.

State policy underpins all of these issues.

It is, in large part, the way in which the state has responded to the property price crash – through the creation of NAMA – that has allowed vulture funds to be enriched and selected local developers cosseted. It is the state’s taxation system that then allows those riches (and those of U2) to be siphoned off almost tax-free.

Meanwhile, the state’s minimal protections for tenants mean that the people of Tyrrelstown might, at best, be able to delay their becoming homeless. To an overwhelming extent, the Irish state favours the interests of sections of capital – at home and abroad – rather than the interests of ordinary people.

UPDATE: This article was updated on 21 March at 10.16 pm to reflect the uncertainty over the relationship between Frank Cushnahan and Cerberus. A spokesperson for Cerberus said: “Cerberus has never employed, paid or sought advice from Frank Cushnahan in relation to our purchase of the Project Eagle portfolio or any other activity.”

Andy Storey is a lecturer in political economy at University College Dublin and a board member of human rights group Action from Ireland (Afri).

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