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Archive for February, 2010

Yes “sources” tell the Irish independent that the European Commission is likely to give its approval to NAMA (requested on 23rd December 2009 after FG Senator Eugene Regan asked the government on 19th December 2009 how the approval was progressing).

Buuuut.. there may be preconditions. Senator Regan’s second submission to the EU at the start of February did ask for some modifications to NAMA if it were to be approved including barring Anglo from participation, restriction of loans to be taken into NAMA as toxic and an independent monitoring group at EU level. Will these or otheres be granted? I don’t know though the Independent talks about a review after 6 months (when the vast majority of loans will have been transferred!).

Look out for the EU statement tomorrow evening.

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Respected property company and NAMA GB valuer Cushman and Wakefield have just published their review into global office rents for 2009, abad year for office rents globally. Dublin’s IFSC rents fell by 38%, the second largest collapse in Europe after Kiev. Cork CBD fell by 33% and Dublin 2/4 fell by 31% – all sounds bad though average global rents fell by 21%. However even after these drops Dublin is still more expensive than Frankfurt, Brussels and Amsterdam – cities in countries which are experiencing modest growth. What will happen with Dublin’s rents given the expectation that GNP drops by 2% this year.

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One of NAMA’s most trenchant critics today reminds us of the absolutely horrible state of the property market in the State and raises again concerns of overpaying for assets. David McWilliams again calls for a capitalist solution to the ills besetting our two main banks, Bank of Ireland and AIB, and suggests a sell-off rather than the State pouring more money into them. What bank would be interested in buying these two entities is not clear.

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First called for in the Kenny Report in 1973, the latest call for a Register of prices comes today from an unlikely quarter (unlikely because one of the main benefits of a Register would be to obviate estate-agent puffery), Tom Parlon of the CIF who says “It has been obvious for some time that Ireland needs a register that captures, in real time, movements in house prices. Hitherto, we have been relying on lagging indicators that tells us what has happened as opposed to what is happening. Given the centrality of the housing market in any domestic economy, a guide to house prices movements as they happen, as is available in the Northern Ireland, UK and US economies, is an absolute requirement”. It is amusing to this author that such calls were not made during the boom when upward speculation was rife but now that we are in a crash (now at 50% off peak says Parlon) where downward speculation is rife, the call emerges!

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One of the first developers to be NAMAed, Joe O’Reilly, is the subject of an Indie report today which claims that Anglo are keeping his firm going. Now of course the bank may be doing this because the alternative, a liquidation, may see the sale of distressed assets onto a weak market which would only exacerbate the bank’s losses (and as we own Anglo and have put in €4bn from national debt, you could say “our” losses). However it is an inescapable economic fact that supply is being prevented from coming onto the market which would serve to depress the market further. I hope NAMA valuers are watching.

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Valuation is one of the functions that NAMA has outsourced and indeed valuation services cover a spread of assets from property to loans to derivatives. The property valuers were named last August 2009 and one of the valuers DTZ Sherry Fitzgerald comes in for some unflattering comment today in a shopping centre rent review where it characterised a rent increase of 426pc as a typographical error. Retail Excellence Ireland (a retailers trade association has said)

“Landlords who are being lined up for NAMA are seeking to boost their yields and thus boost the valuation of their properties At the same time that some landlords are quoting high headline rents they are also doing deals with some retailers which include rent free periods,” he added.

Of course NAMA has a board and an executive to hold valuers to account, but as Lois Lane asked Superman who was flying with her through the sky “You’re holding me up. What’s holding you up?”. I repeat a call for a cross party select committee to frequently and routinely quiz NAMA on its activities.

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Ireland’s number 2 property (by number of properties for sale) website myhome.ie has reported that the number of sale agreed properties has risen dramatically (2-3 times) in January and February 2010 compared with a year earlier. The website’s press release is now available. The website reports that sales agreed have been steadily rising since September 2009, a period in which ESRI/Permanent TSB report a 8.5% fall in prices from Sept-Dec 2009 with falls accelerating towards the end of the year – statistics for Jan and Feb 2010 will not be published as they have decided to make the index quarterly with the next release in April 2010. The website emphasises it does not know how many of the “sale agreed ” properties have proceeded to completion though it did make the anecdotal observation that estate agents were being more diligent in ensuring documentation was in place before changing the status of a listing to “sale agreed”.

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Demonstrating yet again that NAMA is leakier than a colander, the Irish Independent quotes “sources” providing an update on the progress of NAMA. The update is that EU approval of the NAMA scheme (sought in December 2009) should be provided by the end of this week and the first loans should be transferred by the end of March 2010.

Of the €77bn of loans and rolled up interest (see the NAMA financial overview to place this in context) AIB was to transfer €24bn of loans (now €23bn or less); BOI €16bn (now €14bn or less), EBS €1bn (no update from the “sources”); Irish Nationwide €8bn (no update from the “sources”); and Anglo Irish Bank €28bn (now €30-35bn and the Indie settled at €33bn).

We await further news from the “sources”

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Deidre de Burca, the so-called “shafted” Green party senator who failed to land the European job with Maire Geoghegan Quinn yesterday released an email she sent to her party leader and Minister for the Environment, John Gormley, to prove that she did indeed communicate with him about the DDDA.  It’s hard to see the great political significance of the email at present – the forthcoming publication of the DDDA report in the “coming weeks” once cleared by the Attorney General may shed more light on the significance of the communication. One of the reports is available here thanks to thestory.ie for OCRing it and for Fine Gael for getting it released.

The author of the email which Ms De Burca forwarded is not known though the author is clearly concerned at the proposed NAMA haircut of 30% and the facts that were appearing on the ground in August 2009 – and the market has deteriorated clearly since that point (in August 2009, the 27-acre Glass Bottle site in Ringsend which had been bought for €412m in 2007 was apparently worth 40% of that – €164m and is now apparently worth €60m). Clearly it’s not publicly known what assets comprise the €88bn of gross assets that once underpinned the NAMA loans but with the physical assets whose deals are unravelling in the Commercial Court or indeed on the consumer pages of our property media it would appear that the market has dropped by well in excess of the 47% cited by Brian Lenihan last September 2009 and makes Enda Kenny’s statement in London last week that any haircut of less than 40% would be “outright theft”.

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Airplane!

Remember that scene from the great 1970s movie Airplane! when the plane is eventually about to land and someone pulls the plug on the airport landing lights as a joke? This is how I felt at the decision today by ESRI and Permanent TSB to stop publishing the monthly house price index and instead to publish statistics on a quarterly basis (the next one in April 2010). We knew that prices were dropping at an accelerating rate in the final quarter of 2009 (indeed down 8.5% since September 2009 when Brian Lenihan called the bottom of the market and down 3.6% in the month of December 2009 alone). Did the December 2009 trend continue and are prices down another 8% since then?

So NAMA is going to buy the first tranche of loans without even knowing how the State’s main price index has been performing for the two previous months! Turning off the lights indeed – good luck valuers at NAMA!

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