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Archive for January 15th, 2013

Although not associated with NAMA, developer Philip Marley is understood to have a €10m property loan from the Irish Bank Resolution Corporation – or “IBRC” which houses what is left of Anglo and Irish Nationwide. Today however, it is not a bank but a firm of accountants that is revealed to have lodged a petition with the High Court on 7th January 2013 to have the Ely Property Group Limited wound up. The notice in today’s edition of Iris Oifigiuil says Copsey Murray Chartered Accountants of Charter House, 5 Pembroke Row, Dublin 2 is a creditor of Ely.

The directors of Ely Property Group Limited are, according to company information website duedil.com,  Philip Marley (41), Duane Clark (42), Julia Ind (64). The sole shareholder of the company is showing as Newcourt Group PLC – James Sykes’s and Tim O’Neill’s outsourcing and business support services company that has been in receivership since 2009.

Last July 2012, the Sunday Independent reported that Philip, “the former head of Ely Properties”, a provider of student accommodation was producing a US TV show with partner and US reality TV personality Dana Wilkey.

In December 2012, there was a report of ructions when Philip billed his former UK company, Space Student Living Limited which provides student accommodation in the UK, and the bills for tanning expenses were disputed by his co-investor in the firm, Maven Capital Partners.

UPDATE: 16th January 2013. Tom Lyons in last weekend’s Sunday Independent covers this story in some detail and has obtained comment from Philip including “If anyone wants to bankrupt me, go ahead” The Daily Mail last November 2012 took a look at the social life of the couple, Philip and US reality TV personality Dana Wilkey

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Away from our own economic woes, we might have forgotten that the British economy is fragile and looks to be heading into a triple dip recession. Yesterday, CoStar the UK commercial property portal reported a Deutsche Bank outlook report which suggests that there is a further 20% decline in prospect for the UK’s secondary commercial property market in the next three years, mostly caused by a lack of credit. It really does seem that NAMA’s general strategy of selling off its UK assets sooner rather than later was sound.

IPDSummartDec12

Today sees the publication of the December 2012 IPD Monthly Property Index for the UK. The IPD (Investment Property Database) index is the only UK commercial index referenced by NAMA’s Long Term Economic Value Regulations (Schedule 2) and is used to help calculate the performance of NAMA’s “key markets data” shown at the top of this page.

The Index shows that capital values fell by 0.3% in December 2012, which follows declines averaging 0.3% per month since December 2011. Prices reached a peak in the UK in June 2007 and fell steadily until August 2009 when a rally started. Prices then increased by 15% in the year to August 2010 but have since been declining and are down by 4.1% in the last 12 months prices. Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 6.8%. Commercial prices in the UK are now 36.7% off their peak in June 2007. The NWL index  falls to 790 which means that NAMA needs to see a blended increase of 26.7% in property prices across its portfolio to break even at a gross profit level (taking into account the fact that subordinated bonds will not need be honoured if NAMA makes a loss).

The table below shows the three subsectors in UK commercial property with an index for all three at NAMA’s valuation date of 30th November 2009 of 100. Offices have been relatively buoyant whereas industrial premises like factories and warehouses have been relatively flat.

IPDDetailDec12

The UK economy is suffering difficulties almost every bit as challenging as those in the EuroZone and Ireland. Sure, they have their own currency and they’ve printed GBP 300bn of it in an economy with a GDP of 1.5tn, to help inflate their problems away. And yet they appear poised for a triple dip recession.  In December 2012, the UK’s independent Office for Budget Responsibility published its latest fiscal outlook which forecasts GDP for 2012 at -0.1%, 1.2%, 2.0%, 2.3%, 2.7% and 2.8% (but as with all economic forecasts in the long term, all forecasters forecast a peachy outlook). Deficit:GDP is forecast as -5.7%,-4.6%,-3.7%,-2.8%,-1.4% and -0.4% between 2012-2017. Debt:GDP is forecast at 90.3%, 93.5%, 96.3%, 97.4%, 96.6% and 94.4%. Inflation is forecast at 2.8%,2.5%,2.2% for 2012-2014. It expects commercial property to change -2.1%, 1.0%, 3.1%.3.6%, 3.9% and 3.5%  in 2012-2017.

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There was confirmation last Friday 11th January 2013 of James Wallace’s exclusive story on CoStar last week that NAMA had disposed of its €85m of junior loans to the so-called Opera Commercial Mortgage Backed Securities (CMBS) of 16 Irish properties, when a notice was issued on behalf of the buyers of the junior loans, Northwood, to the Irish Stock Exchange.

The notice was issued by a company called Brooklands Partners LLP on behalf of the buyer which is identified as NW Finance Company SaRL, “an affiliate of Northwood Investors LLC”.

The notice says Northwood “is engaging with the Servicer and Noteholders to discuss the potential options to maximise recoveries in the context of the upcoming Senior Loan and Junior Loan maturity date of 15th January 2013, including proposals to restructure the Senior Loan, the Junior Loan and the Notes.”

Northwood reportedly acquired the €85m of junior loans for about €5m from NAMA, and the betting is they will now try to manouevre themselves into a pivotal position to ultimately benefit from the distressed senior loans and the underlying portfolio of Irish property which includes the Merchants Quay shopping centre in Cork and the Stillorgan shopping centre. Treasury Holdings was originally the driving force behind the fund.

Northwood has engaged Brooklands Partners who might be familiar to those following the drama at Noel Smyth’s Alburn Real Estate UK CMBS. They was engaged by Rotschild to provide advice in April 2011. Seems like that company may become past-master experts in leveraged Irish property funds.

UPDATE: 11th February, 2013. According to the Sunday Times (Irish Edition) yesterday – not available online without a subscription – the lender to the CMBS, Eurohypo has commenced talks with at least two potential buyers of the assets underpinning the CMBS. Surprise, surprise, one of the potential buyers is Northwood Investors, the other is one of our new best friends forever (or at least for 2-5 years) Kennedy Wilson. There is a new detail reported, Northwood’s purchase in December 2012 of €85m in junior debt relates to the so-called “Castle Market Holdings” portfolio

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Although a small number of commercial tenants continue to complain, it seems that NAMA is actively cutting deals with such tenants generally when faced with financial difficulty. We learn today via Donal O’Donovan in the Irish Independent that NAMA has agreed with hotel operator Kasterlee – operates some Clarion and Quality hotels in Ireland and one in the UK – that it can pay off rent arrears over a five year period. This is the first time that it has been publicly revealed that an hotel operator has cut a deal with NAMA, even if it involves the paying off of sums due.

Kasterlee is owned by a group of well-known Irish business people including Cork hotelier Frankie Whelehan, the Kelly family including veteran developer Paddy Kelly, developer and author Simon Kelly, Emma Kelly, the McCormack family of Alanis Capital fame,  Audrey McCormack, Breeda McCormack, Gracia McCormack, Jessica McCormack, Gerry McNulty and Peter Redden.

At least some of these people have other relationships with NAMA based on property loans. In the case of Kasterlee, there is reportedly no lending relationship.

NAMA recently published an update to summarise its achievements in 2012 and said it had approved €13.5 million in rent abatement for commercial tenants, comprising 212 applications and that a further 56 applications are currently being reviewed and that only 8 of the 276 eligible applications received to date have been refused (97% approval rate by NAMA). One of the unsuccessful applicants was the Harvey Norman furniture store in Mullingar and its local TD, Fine Gael’s Robert Troy blasted NAMA for not approving the abatement in that case.

Still though, it is obvious that NAMA is cutting deals with commercial tenants, and if you don’t ask, you won’t know.

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There was intense interest in the High Court case taken by Clare developer Bernard McNamara against the Dublin Docklands Development Authority (DDDA) over alleged agreements about planning applications. The case was initiated in 2009 and relates to the infamous 25-acre Irish Glass Bottle site in Ringsend in Dublin bought in 2006 for €412m by a consortium including the DDDA, Bernard, Derek Quinlan and investors introduced by Davy stockbrokers – the freehold and leasehold sellers were a state company and – the big winner in the deal – Paul Coulson’s company, South Wharf PLC.

Previous mentions of the case have given us some flavour of the hubris in the DDDA in 2006 with staff there allegedly seeing the €412m purchase of the site as expanding the influence of the DDDA and enhancing/securing their own personal positions and careers.

Bernard was suing the DDDA over alleged agreements and centrally, an alleged agreement whereby the DDDA was committing to obtaining planning permission for the site. There is a separate case being taken by the Davy clients against Bernard himself.

But all of this litigation has been thrown into doubt with the development last November 2012, when Bernard was declared bankrupt in London. As is usual in bankruptcies, the bankruptcy trustee is now trying to assess the merits of outstanding litigation and whether or not to pursue litigation on behalf of the bankrupt, and in pursuance of this, the DDDA has been ordered by Judge Peter Kelly in the Commercial Court in Dublin yesterday to produce its witness statements within the next two weeks, and the case is set for mention in four weeks when it is anticipated the trustee will indicate if he wishes to pursue the case – no doubt the DDDA has its fingers crossed that he decides to abandon the case, many others hope it proceeds so that we get a better insight into the operation of the DDDA.

The DDDA expressed concerns yesterday that because of Bernard’s bankrupt state, he would have issues with meeting any legal costs should he lose the case. That concern wasn’t apparently dealt with yesterday, though in Irish courts, poverty is generally not a bar to pressing ahead with legal action.

[There is a feature blogpost on the Irish Glass Bottle site, its history and the 2006 deal, here]

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Last July 2012, Cortina-averse developer David Agar was reported to have won €30m in a settlement with Ulster Bank over the mis-selling of a financial product known as an “interest rate swap”. This settlement was understood to be the first and almost certainly the biggest in Ireland. Interest rate swaps are financial products designed to give certainty to borrowers about their interest bills – read more detail here. In the UK, over €2bn has so far been refunded to consumers through the Financial Services Authority and a slew of Irish banks are being investigated for mis-selling in the UK. In Ireland however, the Central Bank and the Financial Regulator seem reluctant to open a new Pandora’s Box in a sector which is still generally teetering even after the 2011 recapitalisations.

So, for the time being, it is left to individual borrowers to pursue their own cases for mis-selling of swaps.

Today, we learn via the Irish Times, that two related groups are suing Ulster Bank and its operating unit, First Active, both members of the Royal Bank of Scotland group, for the mis-selling of swaps in 2007. The basis for the applicants’ case appears to be that Ulster Bank had allegedly not complied with Central Bank rules on the conduct of investment business, and it is apparently alleged that one of the investors claims to have had only a basic knowledge of the products when purchased. The remedies sought by the applicants are reported to be the rescinding of the swaps’ agreements and compensation for any losses suffered or sufferable from alleged misrepresentations. It’s not clear how much they’re seeking but it is reported that there are “notional liabilities” of €65m involved in the swaps which might provide a sense of the scale.

There are 10 individual applicants in the case representing two partnerships which had developed property in Sandyford, south Dublin. The first partnership is the so-called “Colgan-Ryan partnership” which comprises David Colgan, Mark Colgan, Davis Colgan, Patrick Ryan, Ronan Ryan, Desmond Ryan, Deirdre Ryan and Padraic Ryan. They are reported to be suing over a swap instrument of June 2007, which expires next November, and another which has expired.

The second partnership is the so-called “Oval partnership” which comprises Patrick Ryan, David Colgan, Mark Colgan and Davis Colgan, and property developers Philip Monaghan and Finian McDonnell. They are reported to be suing over a May 2007 swap, which has expired.

The case was initiated on 22nd November 2012, and just like in the David Agar case, the applicants are represented by Downes solicitors in Dublin – tel 01 6762546, Dublin 2, there doesn’t appear to be a website . The case reference at the High Court is 2012/11840 P. Yesterday the case was transferred to the Commercial Court division of the High Court.

It is surprising that there have not been more swaps’ cases publicized, and given the Irish Statute of Limitations and the fact that our construction and property boom petered out in 2007, developers may have to be quick to make their case.

UPDATE: 16th January 2012. A UK firm of solicitors, Bond Pearce,  has analysed what might be the first swap mis-selling case that went all the way through the UK courts. John Green and Paul Rowley v The Royal Bank of Scotland [2012] EWHC 3661 (QB)

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