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Archive for February 26th, 2013

As the old Moscow Rules say, once is happenstance, twice is coincidence and three times is enemy action. So when not one, not two but three residences of Northern Ireland NAMA developers come onto the market together, it’s noteworthy.

Now, although developer David Agar complained that NAMA wouldn’t be happy until all developers were driving around in Ford Cortinas and living in three-bed semis, the truth is that NAMA seems to be generally relaxed with sub-€1m family homes. Back in 2011, when Neil Callanan was doing a stint at the Independent, he reported “several sources also said that the family home the developers end up in must be worth less than €700,000, or €500,000 in some cases.” The following three Northern Ireland homes wouldn’t seem to break NAMA’s rules, so it is all the more interesting that they are all on the market at once.

MMGreenanLoughRoad

First up, we have Malachy Murdock’s residence as presently recorded with the website, company-director-check.co.uk – 40 Greenan Lough Road, Newry, county Armagh, BT34 2PX. The property is on sale through estate agents, Eoin Lawless and this is its listing at PropertyNews.com. It is a substantial five bedroom property on an acre and is being offered for sale at GBP 650,000 (€754,000). Malachy is one of the directors of the Murdock Group, some of whose loans have been transferred to NAMA – specifically, according to the BBC, those in Rathdrum Properties, Murdock Nursing Homes and Clyduff. Malachy’s brother Ciaran Murdock (49) is the main driving force in the Murdock Group, but Malachy (48) is a director.

CKKnocktarna

Next we have Chris Kennedys residence as presently recorded with the website, company-director-check.co.uk – 10 Knocktarna Grange, Coleraine, county (London)Derry, BT52 1HN. The property is on sale through estate agents, McAfee Coleraine and this is its listing at PropertyNews.com. It is a fine 5-bedroom property and is being offered for sale at GBP 525,000 (€609,000). Chris is a director of the Kennedy Group Properties Limited, which is in NAMA.

DKMountsandel

Fellow director in the Kennedy Group, Daniel Kennedy also has his residence, as recorded with the website, company-director-check.co.uk – 154 Mountsandel Road, Coleraine, county Antrim, BT52 1SW. The property is one sale through estate agents Bensons and this is its listing at PropertyPal.com. It is another fine 5,500 sq ft 5-bedroom detached property on what estate agents on this side of the Border would call a “large site” and it has a price most familiar to estate agents here – “price on application”.

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Well, Bank of Ireland has prevailed.

Minister for Finance Michael Noonan has announced this afternoon that that the so-called “Eligible Liabilities Guarantee” scheme will end for all new liabilities from midnight on 28th March 2013. The ELG scheme meant that deposits and bonds and all other money loaned to the banks whilst the ELG was in operation would have a backstop guarantee from the Government, so if the bank failed, then the Government would step in and cover 100% of what was owed to depositors, bondholders and other lenders to banks.

The ELG was provided by the Government but it made a charge for it. Last year, it took in €1,024m in ELG fees after taking in  €1,236m the previous year, and guess what? Bank of Ireland which is now only 15%-owned by the Government wasn’t happy with having to hand over so much protection money, when Bank of Ireland felt that it was strong enough to attract deposits and loans without having the ELG in place.

The scheme was supposed to have continued until June 2013, so this announcement this afternoon is a bit of a surprise. It almost certainly means that Bank of Ireland has got its own way with Minister Noonan. There is no explanation today as to why the scheme has been ended earlier than previously.

But what about the other ELG banks – AIB/EBS and Permanent TSB?

The assessment on here is both of these banks are still in difficult straits with the potential for full-blown mortgage crises which threaten to create a wave of new losses. And Permanent TSB isn’t quite a “pillar bank” or at least it wasn’t one of the two “pillar banks” which the Government committed to supporting in March 2011.

So, could there be a Project Orange in the works right now in the Department of Finance to emergency liquidate PTSB, just as Project Red was in the planning pipeline since at least 12th October 2012? Remember that depositors at what was Anglo and Irish Nationwide are today nursing losses of at least €93m following the special liquidation three weeks ago.

But don’t panic. Even after the ELG is withdrawn, your deposits will still enjoy a guarantee of €100,000, and this is backstopped by the Central Bank of Ireland which has a €388m fund for such claims, and that fund is constantly replenished with an annual 0.2% levy by the Central Bank on all deposits in the State.The Department of Finance has issued some guidance notes that may reassure you further.

But if you have deposits of over €100,000, you might want to consider the health or AIB/EBS and PTSB closely, because the view on here is that neither is in the healthiest of states, and that with continuing high unemployment, the prospect of further property price declines, interest rate increases, less income as a result of the property charge, water charges, Croke Park 2 and anaemic domestic growth, both banks might be back looking for further handouts, and there is less than full support from the Government for PTSB in particular.

UPDATE (1): 26th February, 2013. PTSB has just issued a statement welcoming the Minister’s announcement this afternoon. The statement says “permanent tsb bank has welcomed the announcement today by the Minister for Finance of plans to bring the ELG scheme to an end.  A spokesman for the bank said: “permanent tsb has supported calls in recent months to bring the ELG scheme to an end and we very much welcome the decision to do so that has been announced today. This is a further sign that the Irish banks – including permanent tsb – are now able to fund their ongoing activities in the market without the requirement for Government support and that’s to be welcomed by all.”

UPDATE (2): 26th February, 2013.  Although PTSB has not been referred to as a pillar bank, in January 2013, the Department of Finance did issue a statement to the Sunday Business Post Jon Ihle which said “The Minister outlined the concept of Pillar Banks, being Bank of Ireland and AIB, in his speech of 31st March 2011. This concept was to strengthen these banks through recapitalisation and restructuring in order that they could play a material role in the provision of credit to the economy, as universal banks providing nationwide coverage and a full range of services to retail, SME and corporate customers.  At that time the future strategic direction of Permanent TSB was less certain. Since then we have agreed a way forward for Permanent TSB with the Troika which envisages it playing an important role in the future of Irish retail banking, being a more focused retail bank bringing an element of competition to the marketplace which has consolidated significantly since 2008″ and this evening a PTSB spokesperson has said that PTSB has no issues in terms of funding its ongoing requirements in the market at competitive rates without any need for Government support and that specifically, it has the April 2013 bond redemption of €1.3bn covered.

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It’s a reflection of Ireland in the 2000s. The fabulously successful Westlife pop group sold millions of singles, and one of its members Shane Filan branched out into property development with his brother Finbarr. Initially made a few bob, but then the crash came, the development company Shafin Developments (SHAne and FINbarr) had receivers appointed last May 2012, and Shane headed to the UK where he has been declared bankrupt, though he is scheduled to be discharged in June 2013.

Today, his mansion in Sligo has come on the market through agents Sherry Fitzgerald with a price tag of €990,000. There is a listing on Daft.ie complete with 28 photographs of the 5-bedroom mansion on just under 5 acres, in the “southern suburbs” of Sligo town. Below is a photograph of the property via Daft.ie and the bankruptcy record at the UK insolvency service in which Shane’s address is withheld.

So, a bit of a sad day for Shane perhaps as his affairs are unwound, but it could be worse, he could have married Kerry Katona.

ShaneFilanBankrupt ShaneFilanGaff

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What: Allsop Space sale of 150 Lots, mix of residential, commercial and development, Dublin and provincial, catalogue here. Note that of the 156 Lots in the original catalogue, six have been withdrawn.
When: Friday 1st March 2013, from 9.30am (auctioneer announcements from 9.15am)
Where: Shelbourne Hotel, St Stephen’s Green, Dublin 2
How much: The maximum reserves for the 150 Lots are €14.9m.

This will be the 10th Irish property auction organized by Allsop Space – Allsop being the UK property auctioneer which specializes in distressed property sales and Space being the Dublin-based estate agency. The previous nine auctions have raised €123m and have transformed the Irish auction experience through transparency and efficiency. Two years ago, a “mega auction” was the description used in Irish media for an auction with 20 Lots; what superlative would apply this coming Friday when Allsop Space will be offering 150 Lots? Allsop Space also championed the “maximum reserve” concept so punters know that over that advertised price, the Lot will definitely sell to the highest bidder.

There is the usual mix of residential, commercial and development, though the commercial weighting is more pronounced than previously. There is also a heavy weighting of residential buy to let properties. If Fiona Muldoon’s words of advice to the banks are taken on board, then we might expect more of these to come onto the market in future auctions.

RWEyreCourt

I think Allsop Space is proud to be selling musician Roger Whittaker’s detached home in Eyrecourt in Galway – pictured above. Not only does it add a little razzamatazz to proceedings but it underlines the fact that some properties on sale are not distressed and have not been the subject of bank foreclosures. The detached property in Galway comes with its own studio and gym and has a maximum reserve of €275,000. There’s an estate in Leitrim with a maximum reserve of €250,000, a shop on Capel Street with a MR of €500,000 and 400 sq ft of office space in Harold’s Cross with an MR of €21,000. There’s a 4,500 sq ft warehouse close by to TV3 studios in Ballymount with an MR of €90,000 which might help us assess the health of the industrial sector.

Allsop Space produced in January 2013, a review of its auctions to date which show that although there is strong overseas interest, 87% of buyers are Irish, that cash and mortgage sales are now about evenly balanced compared with 85% cash at the first Allsop Space auction in April 2011, 93% of Lots sell and, although it doesn’t appear in the review, on here it is calculated that the average “premium” realized above the maximum reserve is about 30%.

Carol Tallon at Buyers Broker Limited should be live Tweeting from the auction on Friday and you can follow her here, and if the technological gremlins don’t play up on Friday, then Allsop Space should be live streaming proceedings as well as hosting live bidding – details here.

UPDATE: 1st March 2013. The auction concluded at around 3.30pm today. Gary Murphy presided for most of the proceedings which went off without incident. The results are lackluster compared with previous auctions, with an 81% success rate as the hammer fell (three more properties were sold after the auction so I guess Allsop Space will claim a 83% success rate). €13.1m was spent on 112 properties which had maximum reserves of €9.9m meaning the average price achieved was 32.4% above max reserve. 18 Lots were withdrawn, up from six last week and nine earlier this week, and the suspicion will be that the auctioneers withdrew some Lots which would not attract sufficient interest. Still €13.1m plus the three post-auction sales is not bad. There were a lot of regional sales this time around. Yields ranged from 6% upwards. We should have some additional analysis tomorrow with reaction from Allsop Space. Here is the summary, you can full Lot details here.

AllsopSpace1Mar13

UPDATE: 5th March, 2013. Overall, Allsop Space claim a success rate of 86% after after-sales are taken into account – that’s 119 Lots worth €13.75m, compared with just 83% or 112 Lots sold under the hammer or 115 Lots sold during the auction. There is limited demand for commercial property in poor locations or with poor leases, with the same going for secondary residential property  in areas of over-supply. Having said that, there is strong demand for well-located property with performing tenants on new leases. Residential investment property in Dublin city centre is enjoying buoyant demand. A house in Cabra sold to a Chinese national whilst a pub in Buttevant sold to a bidder from Lithuania. The largest lot of the day 20 Herbert Street in prime central Dublin sold for €640,000. The property comprised of a vacant freehold mid terrace Georgian building extending to approximately 346 sq m (3,733 sq ft). An online UK bidder succeeded in securing the former home of singer Roger Whittaker for €285,000. The Old Convent in Eyrecourt, Co Galway includes a recording studio, gym and outhouses.  37% of the auction buyers purchased with pre arranged finance indicating that the Irish banks are lending, proving their confidence in the auction property market. Recent auctions have been 50:50 cash and mortgage so this result indicates cash is back as king.  38% bought for owner occupation, 57% for investment and a 5% for development.  Proving that the auction process is equally popular to sellers as buyers, 74% if the buyers at the auction claimed they would sell their property at auction.  In the commercial market Cork’s Munster Rugby shop sold for €295,000. Several lots in the licence and leisure sector were successfully sold including The Farren Well Bar, Co Cork a freehold mixed use building including a public house and first floor one bedroom apartment. The lot sold for €192,500 with maximum reserve of €150,000. A 27 bedroom hotel in Co Clare in the South West of Ireland sold for €305,000 with a maximum reserve of €215,000.  Speaking after the sale Robert Hoban, Director of Auctions commented ‘The level of bidding on properties within the main urban centres was very encouraging. This is in line with recent reports on the apparent strengthening of the city markets. Tenanted properties in Cork, Dublin and Galway attracted multiple overseas bidders, driving prices up and yields down.”

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I mean what’s the problem? A Limerick developer is offering to pay off a €86.5m judgment to NAMA at the rate of €1,000 per month, which in a mere 7,208 years should see the debt totally cleared, ignoring additional interest of course.

And yet still, NAMA is pursuing Michael Daly, of Fordmount fame, over the transfer of his share in the family home to his wife in 2009 and the sale of assets – which were reportedly previously valued at €11m – for a mere €2.

And before you think that Michael transferred his share of the family home to his missus to deprive his creditors, think on. Not only is Michael claiming that he executed the transfer out of “natural love and affection” but Michael even obtained a declaration of solvency from a firm reportedly founded by former colleagues of Michael at Grant Thornton. That firm, referred to yesterday as the HDS Partnership – which appears to be a Limerick firm whose partners are Dara Smyth, Eddye Duffy, Louise Matthews, Gearoid Flannery and John Hinchy – is also said to have audited the Fordmount Group, Michael’s property group.

And before you chortle that there must be something fishy about this, because surely in 2009 it would have been apparent that the game was up for the property industry, again think on. Remember PwC, E&Y, Deloitte, KPMG and Jones Lang LaSalle were engaged by the Department of Finance at the end of 2008 and start of 2009 to examine the state-guaranteed banks’ loan book and failed to predict the scale of losses which we eventually shouldered. Take a look at the €6m of invoices from these fine firms, and then bear in mind the ultimate gross cost of €70bn of bailing out the banks. The HDS declaration of solvency might be presented in a poor light in today’s reporting in the Irish Times, but far, far bigger firms got their valuations and declarations badly wrong when compared with subsequent losses.

I mean if John Mulcahy’s Jones Lang LaSalle was unable to predict the scale of future losses in late 2008 and the start of 2009, then how can NAMA, who today employs John as a board member and its most senior property man, criticize the declaration of solvency prepared by the Limerick firm of accountants in 2009.

And as for the sale of multi-million euro assets in a German company for just €2, the Irish Times reports “The shares sold had no value and the supporting assets were still in place, he [Michael] said.” So, on the face of it, the sale might sound fishy but in the property business, there were substantial collapses in values and if the German firm was a property company, then assets that were “previously valued at €11m” could well be worthless.

Michael was in the Commercial Court before the redoubtable Judge Kelly yesterday where NAMA successfully sought permission to examine Michael before the court over his financial affairs and dealings. The Judge, whilst noting that Michael had already provided substantial documentation and had been intensively examined by NAMA’s solicitors, still granted NAMA its application noting that NAMA had a very low threshold of argument to overcome to win the examination.

The upshot is that we will have a day or two of examination of Michael by NAMA before Judge Kelly in April 2013. Other developers will be watching these proceedings intently because they are likely to be repeated a number of times in future in other cases.

[Credit to Mary Carolan in the Irish Times today whose report is the basis for the above blogpost. Mary reminds us that in the original judgment which saw €86.5m awarded against Michael Daly, the judge dismissed the claim that when the loans were originally provided by Anglo, that Anglo had provided  "oral assurances from Anglo executives that personal guarantees provided by him over loans were secondary to security taken by the bank and would never be relied upon"]

UPDATE: 1st May, 2013. NAMA is back in the Commercial Court division of the High Court this week. Today, the feature appears to have been a €300,000 payment by Michael to his wife

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