I must say that I am more than a little surprised not to see No 1 King William Street in the City of London advertised on the GVA Grimley website (based on a search of office buildings for sale (freehold/leasehold) in London). GVA Grimley is the receiver for the building and is also reported to be responsible for its sale. NAMA is a key creditor. Regardless, it is reported by Property Week that the building which was formerly owned by a consortium which included Paddy Shovlin and the Fitzpatrick brothers, Anthony and Patrick is attracting strong interest from potential buyers and is likely to fetch €55-60m reflecting, according to Property Week a 6% yield which is okay-ish (but no more) for what is a relatively buoyant market – the property is located slap in the centre of prime City of London. As reported on here last week, although London City and West End have enjoyed considerable recovery in 2010, there is a very real risk that NAMA association with a property may lead to buyers downgrading their offers though you would expect that for a prime property such as 1 King William Street, the NAMA knock-down would be marginal. Still, only a 6% yield?
Today sees the publication of the UK January 2011 IPD Monthly Property Index – the index covering UK commercial property up to the end of December 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 that capital values are still increasing but at a modest rate compared with the end of 2009/start of 2010. The Index rose by 0.1% in January 2011 compared with December 2010. Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 10.2%. Commercial prices in the UK are now 35% off their peak in June 2007. On an annual basis prices are up by 5.9%. The NWL index is now at 893 which means that NAMA needs to see a blended increase of 12% 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). However don’t expect this fact to be reflected in NAMA’s accounts for Q3, 2010 which are now seriously overdue as NAMA does not revalue its loans on a quarterly basis.
Given that NAMA has valued the loans it is acquiring at 30th November, 2009 it would seem to make sense if it disposed of UK property first given the pressure the agency is under to generate cashflow and some sales – it hardly makes sense to sell off Irish property which has dropped by 12% since November 2009 unless the assessment is that it might continue to fall and not recover for a considerable period, possibly beyond NAMA’s life expectancy (or that a future recovery in UK property would exceed any falls in Irish property).
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 10.2% more at the end of January 2011 compared with the end of November 2009.
NAMA Wine Lake 