Archive for September 14th, 2010

Fine Gael’s think-in last week attracted Dr Michael Somers, NAMA critic, Fianna Fail’s think-in today in Galway secured Frank Daly, the NAMA chairman. I don’t think NAMA is aligning itself with any political party and indeed neither opposition party – Fine Gael or Labour – has indicated they would scrap or reverse NAMA if they came to power though it is interesting that the governing party is hosting NAMA’s chairman and the main opposition party hosted a prominent NAMA critic (Dr Somers feels that the banks should have been strong-armed into dealing with their toxic loans and that NAMA is an expensive, process intensive means of cleansing the banks of their toxic loans).

Frank Daly, the NAMA chairman, is of course the former head of the Revenue (Irish tax collection agency) and it has been amusing in the past when opposition politicians have been less than fulsome in any attack on NAMA that might be critical of Mr Daly personally. I have sometimes had the impression that to attack Frank Daly today is akin to criticising Lavrentiy Beria, head of the Stalinist NKVD in the 1940-50s and would have serious consequences. Perhaps Frank knows where a lot of wealth bodies are buried. It’s only an impression and probably fantasy.

In Galway today, the NAMA chairman is reported to have given a progress update, and is said by those there to have reiterated the NAMA commitment to seek full repayment of debts and to vigorously pursue and take action against developers who do not co-operate. Batt O’Keeffe says that Frank Daly is confident of NAMA making a “profit” of at least one billion euros. Should the text of any presentation be made public, it will be linked to here.

UPDATE: 15th September, 2010: NAMA has now released Frank Daly’s speech.

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Today sees the publication of the UK August IPD Monthly Property Index – the index covering UK commercial property up to the end of August 2010. 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 a continuing decline in the rate of growth. Capital values in the month of August 2010 were just 0.1% up on July, the lowest increase for more than a year – overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 9.3%. The recently published EU stress test of selected banks had a benchmark scenario of 0% growth in 2010 in UK commercial prices. Year to date, we are up 6.1% approx (the data at the top of this page is from Nov 2009 – NAMA’s Valuation Date – not Jan 2010) which would imply that the next 5 months will see an overall drop of 6.1% if the EU stress test was accurate.

Clearly in recent months, Irish developers and investors have been taking advantage of the recovery in UK commercial prices which has been particularly pronounced at the end of 2009 and start of 2010. An unnamed Irish investor made a cool GBP £8m two weeks ago when the lease on the Etoile Building at 117 Jermyn Street in London was sold for GBP £31m having been bought for GBP £23m just a year earlier. There has recently been speculation that NAMA may take advantage of the recovery in UK prices by possibly selling the loan secured by the Cosgrave Brothers on a 1.1 plot between Oxford Circus and Bond Street in London’s West End. And despite Paddy McKillen’s best efforts to prevent NAMA in acquiring his loans, it seems that NAMA has gotten its foot in the door of the Maybourne group of hotels (and its parent Coroin), possibly through the transfer of Derek Quinlan’s loans in tranche 1. It is certainly the view of many in the property industry that NAMA will offload its loans and properties in the recovering UK market in preference to the home turf which is still on a downward trajectory.

Of course we are still waiting for an update on the AIB plan to sell its UK operations which apparently have €3.2bn of what were NAMA-bound loans but apparently NAMA has agreed that these loans can be sold. These loans had provisions for impairment of 6% in the 2009 AIB accounts compared with 20% provisions for the Irish loans so the implication is that they have been performing better than the Irish loans. NAMA indicated that 27% of its loans were secured by assets in the UK (Great Britain and Northern Ireland) in its draft business plan in October 2009. In April 2010 at the Oireachtas, NAMA CEO Brendan McDonagh said that it was 20% and in July, 2010 Minister for Finance Brian Lenihan indicated that it was one third. AIB indicated with the release of its 2010 interim report that it expected the sale of the UK operations to take place in September.

The first table below shows the month-on-month % change in commercial property capital values since 30th November, 2009. The IPD index is broken down into three components – retail, office and commercial.  The second table shows the change in value of an index set at 100 at 30th November, 2009 and applying the month-on-month % increases in a compound manner. Overall it shows that commercial property in the UK is worth 9.3% more at the end of August 2010 compared with the end of November 2009.

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