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Archive for July 27th, 2010

The MacGill Summer School has made available the speech of Michael Somers, formerly of the NTMA and presently non-executive director of AIB – it is available here (consult the index to start the video at the appropriate point). The speech briefly deals with the decline and fall of the Church from the State’s power hierarchy and the pretty sorry state of the remaining power structures in the hierarchy – government and the civil service. Government suffers from lack of checks and balances – whilst other democracies have worked hard to separate the executive from the legislature, we seem to have done a good job fusing them together. And did you know that our Constitution allows government terms of up to seven years, and it is only from a 1927 piece of legislation that it was reduced to five – Michael says that our government could reverse that piece of legislation very quickly so the 2012 election might become a 2014 election. On the civil service, Michael criticises the calibre of the staff and the poor image of the civil service which is partly to blame for its failure to attract better calibre individuals.

Whereas Paddy Kelly’s speech at MacGill was like Father Ted’s acceptance speech at the Golden Clerics awards (To all the people who fecked me over down the years. And now, The Twats – that would have been ACC Bank, Bord Pleanala and NAMA’s John Mulcahy in case you missed Paddy’s speech), Michael Somers’ speech was more philosophical and avoided personal attacks and he dealt with one aspect of the national character that is not conducive to getting things done and that is our pre-occupation with process at the expense of getting things done. So to all those New Age nutters talking about the journey being more important than the destination, Michael’s message is that the destination should always be at the fore of our thinking. His words of wisdom on NAMA seem to come, not from his speech but from an interview with the MSM afterwards. In that interview he again returns to a theme from his speech – that we Irish are focussed on process rather than results. He characterises NAMA as “bizarre” in the way one State agency NAMA takes loans from another State-owned body, Anglo with the only benefiting being the professionals used to facilitate the transfer and management of the loans. He goes on to say that whilst he didn’t object to NAMA, he thinks that a better solution would have been to armlock the banks into dealing with their own impaired loans.

Oh and the Gordon’s Gin. Michael is fond of his gin – he’s “long on gin” in his own words. He seems to be an expert at international price comparison of this commodity. His experience is that you can get the green bottle of the good stuff for €10.60 in Germany, €17.50 in France and it costs €28.95 here (€25 sometimes when it’s discounted). His more serious point was that we are still a very costly country (unit of electricity Kwh costs 8c in France compared with 14c here, GP appointment €22 in France versus €45 here and our hourly legal and accounting costs of €700 compare with the most expensive cities in the world). Michael called for a realignment of our costs though he was short on the practicalities of realising this.

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Property giant and arguably lead-valuer to NAMA, CB Richard Ellis, has issued its periodic report on the Irish commercial sector and again concludes that there is evidence of stabilisation by reference to total returns from the investment sector of the Irish commercial property market.  CBRE go on to say there is some evidence of Irish investors offloading property in the UK which has seen advances in parts of its commercial sector in 2010. In Ireland, CBRE lament the lack of quality product on offer and note that NAMA has not yet brought product to the market.

The CBRE report comes days after another of NAMA’s valuers and NAMA’s Head of Portfolio Management’s former employer, Jones Lang LaSalle opined that falls in capital values were coming to an end though more deals will apparently be needed in order for this view to be widely accepted.

Despite the optimism from the two property giants, the indications are that commercial property capital values are continuing to fall in the State and indeed that the rate of fall is accelerating. The latest commercial index to be published is the SCS/IPD index for Q2 which shows that commercial capital values fell by 3.5% in Q2 following a drop of 1.8% in Q1. Because this quarterly index is produced after rival Jones Lang LaSalle’s Irish Property Index, it is no longer used in the key NAMA market performance data at the top of this page. The JLL index released at the start of July showed that commercial capital values had dropped by 4.7% in Q2 up from 2.2% in Q1.

UPDATE: 28th July, 2010. The Irish Times reports on the latest SCS/IPD Index with a valuable contribution from Phil Tily, the Managing Director of IPD for UK and Ireland.  There is an examination of historical trends which notes that capital values are back to 1999 levels. There is some optimism about a recovery in prices though this seems to be based on the already deep declines in prices (58% from peak on average though Henry Street retail has the highest average decline of 68%).

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Another judicial review involving developers and NAMA is to take place at the High Court in October 2010 according to today’s Irish Times. This time, it will be Clare-based developers John Flanagan and Gerard Lillis whose two companies Atlantis Developments Limited and Liscannor Properties are reportedly subject to receivership proceedings involving loans from Anglo. The pair also claim their loans may be NAMA-bound.

What is at issue is that Anglo have sought to appoint a NAMA Board member, Brian McEnery as the receiver to the applicants and their companies and the developer duo claim this gives rise to a conflict of interest and bias. An important strand to the case is that the duo are seeking to have NAMA and Anglo declared “amenable to judicial review”. It puzzled me why Sean Fitzpatrick didn’t seek a judicial review of Anglo’s decision to bankrupt him when there were claims that Anglo would have recovered more if bankruptcy wasn’t sought – why didn’t Sean seek a judicial review of that decision and whether it represented an abuse (politically inspired perhaps) of State-aid? Is Anglo presently outside the realm of judicial review?

NAMA is named as a notice party to the proceedings and the outcome of the case could have implications for the scope of private work undertaken by NAMA officials. Gerard Hogan SC represented the developer applicants yesterday. Property associated with the applicants has included Ballykilty Manor Hotel and Holiday Complex (Clare), Peacockes Hotel (Maam Cross, Galway), Tír Gan Éan House Hotel and Holiday Complex (Doolin, Clare), the Smerwick Harbour Hotel (Dingle, Kerry), Burren Coast Hotel and Holiday Lodges (Ballyvaughan, Clare), Cliffs of Moher Hotel (Liscannor, Clare), Joseph McHugh’s pub (Liscannor) and Ballyvara House (Doolin).

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Bernard McNamara’s Elm Park (a commercial and residential development on Merrion Road in Dublin) is in the news today with the Independent highlighting the fact that many (not all) of the units in the development are for rent but not for sale. The residential part of the development has 330 units with the “broke” Bernard McNamara personally owning 32 and an unknown number owned by his development company, Radora. There are units for rent from €950 per month with a rental period of “minimum one year” (UPDATE:  DAFT.ie doesn’t include the lease term within the property description, so searching for “minimum one year” within property description doesn’t give accurate results. In fact most properties for rent on DAFT.ie are for a term a minimum of one year), according to the Independent (see here for what €950 per month gets you).

The Independent points out that the apartments were originally placed on the market in April 2007, the exact month when the Permanent TSB/ESRI DUBLIN House Price Index reached its peak of 142.6. At launch one-bedroom apartments were starting at €455,000 with two-bedroom apartments from €585,000. Today these apartments are offered at €420,000 and €470,000 respectively. At the end of March 2010, the Permanent TSB/ESRI DUBLIN House Price Index stood at 83.0 which is 42% off the peak and if applied to Elm Park would suggest prices of €265,000 for one-beds and €341,000 for two-beds. This would suggest Elm Park is 60% overpriced.

Now NAMA don’t comment on individual cases, and it is possibly the case that they haven’t yet engaged with this asset of Bernard McNamara’s but if NAMA were to maintain prices at 60% above what the general Dublin index would suggest, that would demonstrate that NAMA was hoarding.

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