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 
Ah NWL, you have missed the obvious – the beginnings of the conflicts of interest that will eventually bring ignominy to NAMA and its receivers and agents.
Here we have GVA Grimley acting as both Receiver and Sales Agent on the disposal of this property. I am sure that we will be told that “Chinese walls” are in force, but this discredited ethical barrier does not replace the checks and balances of separate entities.
Maybe it’s time for Chinese masons to consider a class-action defamation lawsuit. Because time and again in recent years, when there’s a catastrophe, somebody blames the failure on a Chinese wall.
Failure to quarantine the two sections keeps legions of lawyers and ethicists busy, and the price of neglecting this job has been a subtext of the big calamities of recent years. Not least is the oil spill in the Gulf of Mexico, which might not have happened if the Minerals Management Service, which collects royalties from offshore drilling, had stayed away from the arm of the agency regulating the industry.
Combining receiver’s and agents fees, will eventually put duties of care to both the bank and the borrower in a headlock. That’s why they can’t be under the same roof. This axiom is especially true as the sums get larger.
To scholars of the Great Wall of China, the figurative use of Chinese wall is one of those ironies that only history, with its perverse sense of humor, could produce. As it happens, the Great Wall was pretty lousy at keeping out foreigners, in particular Mongols, who repeatedly crossed over the wall during the Ming Dynasty. Mongols breached the wall in some cases because those guarding the gates opened them, or because portions of the frontier were inevitably poorly guarded and in decay, or by bribery.
Bribery?
The Great Wall, it turns out, is a perfect emblem of the Chinese walls banks and business now embrace, though not for the reason that anyone thinks. The original, like its criticised namesakes, didn’t work very well — and turned downright porous when money was involved.
Have NAMA and its Receivers no cop on at all?
This setup is an accident waiting to happen!
Points well made WSTT. You might recall the NAMA CEO, Brendan McDonagh telling the Oireachtas Committee of Public Accounts last November that NAMA was going to change the market in Ireland by engaging the UK equivalent of property insolvency practitioners. Where he was coming from was the extortion of €900/hr rates from Irish IPs and in the UK I would guess GVA Grimley is charging 1/4 that. But by being an integrated receiver/estate agent you risk all sorts of conflict of interest.
I know No 1 King William Street personally. It’s prestigious old City and within that subsector should command a rock bottom yield. If it goes for 6% I would be surprised, indeed I would be asking questions.
I agree – and there will be many questions to be asked as (and after) these disposals are made. The beginnings have all the makings of a new decade long Tribunal.
I would have thought that at least SOME lessons would have been learned by now.
BTW, this is not the first disposal where GVA Grimley assumed a dual role. In another similar and recent case, questions are being asked.
I was in that very building once in the early 90’s. Two guys in blue uniform with white gloves handed me tea in a silver cup. They reminded me of Michael Jackson as they slinked, backwards, out the door, nodding. Some other guy, who immediately knew I was a UCD man and not a Trinity man (how?) told me that even grandmothers were investing in the stock exchange these days. He shook his head ominously.
Then he showed me the door, politely.
One wonders when this all started,and where…
Speaking of real estate, what would the Blarney Stone fetch? The Greeks are about to sell out with the IMF lead broker. Can Ireland be far behind?
http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_10886_14/02/2011_378306
From a Real Estate point of view the building is not grade A spec, in need of modernisation and it’s Tenant is unlikely to renew its lease. So 6% is not a cheap price in these credit starved times.
On the seperate issue on NAMA disposals, poor old Paddy is going to learn that the property industry in London has been taking advantage of the naïve for years. And just because they have posh accents, shiny shoes and Hermes ties does not mean they are not Highway men.
Let the great swindle begin…..