Archive for April 21st, 2011

It’s “devoid of any substance and verge on the ridiculous” according to the Greek finance ministry but as Greek 10-year bonds touch even greater highs this afternoon – presently trading at 14.9% mid-point – it seems that something may be afoot in bond markets. The claim is that a Citibank employee was responsible for an email which speculated that Greek authorities might seek to implement a restructure/default/burden-share scheme over the Easter holiday weekend.

Meanwhile, Ireland’s 10-year bond has reversed all the gains since the announcement of the stress test results on 31st March, 2011 and are presently trading at a record 10.28% mid-point compared with a previous record closing of 10.22% just before the announcement of the stress test results and details of the bank restructuring. Portugal’s 10-year bond is also in record territory trading at 9.5% mid-point. If there is any cheer it is thatSpain’s 10-year bond has eased back today to below 5.5%. It is still a mystery on here as to howSpain’s banks are so healthy and their property sector so relatively unscathed by the financial crisis and construction and housing bubble.

The concern is thatGreecewill default and thatIrelandwill follow closely on her heels. And if a default is inevitable forIrelandthere are actions that can be undertaken now to try to make the default as orderly and inexpensive as possible. Dealing robustly with bondholders (senior and subordinated) would fall into that category of discussion.

So Greece’s drama is seemingly fuelled by a rumour but this coming Sunday, there will be the now-weekly fact of a demonstration in the villageof Ballyhea in Cork calling for action on bondholders. It’s not a high-profile march, takes no more than 15 minutes and will be held again this coming Easter Sunday morning at 10am, with folks meeting from 9.45am in the car park of the church. It’s a non-political march and isn’t accompanied by any fanfare. There’s a website here.  Here are some photographs from recent marches.


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You’d have some sympathy for property companies these days as a catastrophic economic downturn still plays itself out. And as with other factors of production there is a general oversupply with prices still coming under pressure. Property giant and NAMA valuation panel member, DTZ Sherry FitzGerald has just produced three reports in respect of quarter one of 2011 examining the following:

(1) Dublin Office market – Like the Jones Lang LaSalle review covered on here this week, the report is upbeat pointing to an increase in the take-up of space but acknowledges a reduction in headline third generation prime rents to €30 psf and sees vacancy rising marginally, which is at odds with JLL which saw vacancy dropping marginally. DTZ say prime rents are now down 48% from peak. Putting aside the 210,000 Montevetro building acquisition by Google, the market is still looking pretty shaky. It is multinational technology companies that are credited with keeping the sector alive whilst indigenous companies falter. The report is the latest to acknowledge the current dearth of property under construction in the capital with only some 5,850 sq metres presently under construction. If the 20,000 sq metre Liam Carroll Anglo HQ gets the go-ahead of course, then we will be returned back to the same level of construction as in 2010. Rents continue to come under pressure and headline rents continue to be diluted by rent-free periods, now estimated to be two months in every 12 months and “other tenant inducements”. There is little analysis on offer on rental levels and the restriction of quoted rents in the southern suburbs to Sandyford is curious. There is no mention of Upward Only Rent Reviews at all, which is also curious. DTZ Sherry FitzGerald regard the following asDublin’s Central Business District.

(2) Dublin Industrial

Again an upbeat assessment with claims that prime industrial rents have “remained stable” at €70 per square metre (€6.50 psf). Coincidentally, as withDublinoffice space above, this also represents a 48% drop from peak. Take-up is stabilising it seems but at very, very low levels – take a look at the graph on page three of the report to see how take-up is now less than 20% of the peak. Again, it is multinationals taking up space, notably Amazon and Lidl in the quarter. Although DTZ stick with the claim that prime headline rents are €70 psm, it concedes that there are “numerous good quality buildings” available at €55-60 psm. The vacancy rate is nearly 25%. There is only one industrial property under construction at present, a 3,000 sq metre unit in the Fonthill Business Park in Clondalkin.

(3) Regional Commercial

This reports primarily deals withCork, Galway andLimerickand concludes, not surprisingly, that the market remains challenging with oversupply and elevated, if stabilising, vacancy. There is an altogether unconvincing claim that rents are stabilising – the only analysis is on page 16 and is of “indicative rents” only. Not  unsurprising either is the claim that new construction is drying up which might assist in returning the markets to some sort of equilibrium.

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