The National Asset Management Agency (NAMA) was set up in 2009 following Ireland's financial crash and paid a total of 32 billion euros to purge local banks of risky loans worth 74 billion euros.

The so-called "Project Jewel" portfolio, which relates to loans secured on real estate assets including Ireland's largest retail shopping centre, Dundrum Town Centre in south Dublin, had a par or book value of approximately 2.6 billion euros, NAMA said.

The discount of 29 percent on the retail centre, anchored by Ireland’s only House of Fraser department store, represents a relatively lower cut than many of the European loans being offloaded at knockdown prices, particularly in Ireland where commercial prices fell by more than half after the bursting of the property bubble.

NAMA, which sold the portfolio to a joint venture of Britain's Hammerson Plc and Allianz Real Estate Germany GMBH, had paid around 1 billion euros for the portfolio when it took it over, an industry source said.

Seen as a major liability for Dublin's finances during its first few years of operation as prices continued to fall, NAMA has been able to take advantage of a surge in demand for Irish real estate over the past two years.

It expects to repay at least 80 percent of its senior debt by the end of the year, two years earlier than forecast, and is hopeful of making a profit of up to 1 billion euros by the time it winds down.

At the end of last year, two-thirds of NAMA's remaining loans were secured on assets in Ireland, with most of the rest located in Britain, where the bad bank made most of its early sales as it waited for the Irish market to turn.

"The competitive tension throughout the loan sales process is continuing evidence of the strong investor appetite for property-related loans in Ireland," NAMA Chief Executive Brendan McDonagh said in a statement.

Hammerson CEO David Atkins said the transaction provided a unique opportunity to increase its exposure to Ireland, Europe’s fastest growing economy, and would create a platform for significant investment.

(Editing by David Holmes)

By Padraic Halpin