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Archive for April 28th, 2011

The Jones Lang LaSalle (JLL) report published yesterday showed that both capital values and rents were still declining in Ireland, though based on the experience of one quarter, the declines were moderating. There is a competing commercial property series for Ireland produced by Investment Property Databank (IPD) and the Society of Chartered Surveyors in Ireland (SCSI, the newly merged unit which brought together the old Society of Chartered Surveyors and the Irish Auctioneers and Valuers Institute) and it has been published this afternoon and is available here. This blog uses the JLL reporting to produce the NWL Index at the top of this page because it is usually published before the SCSI/IPD’s. Both series are referred to in NAMA’s Long Term Economic Value Regulations (Schedule 2).

The SCSI/IPD index confirms prices are still dropping, at 2.3% overall for the quarter which ended on 31st March, 2011. This compares with JLL’s own reporting yesterday which suggested prices were down 1.5% in the quarter. I haven’t tracked the SCSI/IPD index historically but I believe it would show we are now down by ~62% from peak, compared with 61% with JLL’s index. So over time, both indices show a strong correlation with each other.

The SCSI last week published its Quarterly Commercial Property Review which reflected the views of its members on aspects of the commercial property market. The Review is a private publication for SCSI members and has been monitoring the market for the past five quarters. It showed that overall transactions volumes are dropping, as are enquiries. Vacancy levels continue to rise. Lease lengths are falling which might be considered good news for commercial tenants but inducements are also coming down. Of the three basic commercial segments (office, retail and industrial) it is the office segment which looks the most positive in the sense of transaction volumes increasing. Overall it paints a sector still facing challenges. And with an anaemic economic environment and uncertainty over Upward Only Rent Review legislation, it seems that the sector will remain challenging for the next quarter or two at least.

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Although the advertisement is not currently showing on the NAMA website under its recruitment section, the Irish Independent today reports that NAMA is, in fact, recruiting an unspecified number of “forensic managers and analysts” whose role will be to “verify and substantiate the credit standing of NAMA debtors”. The role will also involve liaising with unspecified third parties.

The roles will be based in Dublin and the principal duties are understood to include undertaking and overseeing “forensic and investigative searches to verify debtor credit positions”. The person specification for the role says that candidates are “likely to have a minimum of 3-4 years’ investigative/forensic experience”. Any prospective candidate must comply with section 42 of the NAMA Act which says:

“(2) Before employing or otherwise engaging a person to be assigned to NAMA under subsection (1), the NTMA shall ascertain to its satisfaction that the person—
(a) is of good character and has not been convicted of any offence likely to render him or her unfit or unsuitable to perform the duties that the person is required to undertake or is likely to be required to undertake,
(b) has not been disqualified or restricted from acting as a director under the Companies Acts, and (c) has no material conflict of interest, whether actual or potential

(3) Before the NTMA assigns a member of its staff to NAMA under subsection (1), the NTMA shall ensure that he or she provides a statement of his or her interests, assets and liabilities to the Chief Executive Officer of NAMA and the Chief Executive of the NTMA in a form that the NTMA specifies”

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News today that the Central Statistics Office (CSO) in Ireland is to start producing a new monthly house price series, will be welcome in a country where there is a dearth of real information on actual sales prices. The new series will be unveiled on 13th May, 2011 and will reportedly reveal data stretching as far back as 2005.

Details of the new house price series

(1) It will use data on mortgage draw-downs reported by eight financial lenders under Section 13 of the Housing (Miscellaneous Provisions) Act of 2002

(2) It will exclude cash transactions, though the CSO plans to include in the monthly release detail on the overall size of the residential property market based on Stamp Duty data supplied by the Revenue Commissioners

(3) The index will be hedonic, that is, it will take account of changes in price on a like-for-like property basis. The opposite of hedonic in an Irish house price series is the information published by the Department of Environment Heritage and Local Government which simply takes the sales prices of all property sold and divides that by the number of transactions to give you an average house price!

(4) There will be a monthly national index as well as three sub-indices (a) Dublin Houses (b) Dublin Apartments and (c) Rest ofIrelandHouses and Apartments

There is indeed a dearth of price information in Irelandwhich is preventing price discovery in what has been the collapse of an almighty residential property bubble. It is encouraging that NAMA is calling for the rapid implementation of a house price register , the legislation for which is wending its way through the Oireachtas at present but at a very slow pace.

The following are the current sources of house price information in Ireland at present

(1) Permanent TSB/ESRI quarterly mortgage-derived average prices. It’s hedonic, produced within a month of the quarter end but only applies to less than 4% of the mortgage market and excludes cash transactions.

(2) Department of Environment Heritage and Local Government series which is produced six months after the period end, isn’t hedonic but is apparently based on all mortgage transactions.

(3) DAFT.ie and Myhome.ie produce quarterly series based on asking prices from their property marketing websites.

(4) Sherry FitzGerald produces a quarterly series based on its valuation of a portfolio of properties.

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Britain’s Property Week today reports that NAMA has appointed property receivers to a major property in London’s Leicester Square. The property is the present site of the Odeon cinema and the adjoining Leicester Square Theatre which occupies a substantial part of the south western corner of Leicester Square. The site is owned by Steamboat Developments Limited, the Irish company to which NAMA appointed Kieran Wallace of KPMG as receiver on 25th March, 2011. Steamboat is most associated with rugby legend, Pat Whelan, his business partner Pat Chesser and solicitor Paul Hanby.

The site was assembled at a reported cost of GBP £58m and Property Week estimates that it might be worth GBP 200m (€225m) in its developed state. According to Property Week the site has planning permission for the development of a 245-bedroom hotel, 33 flats, four restaurants and a two-screen cinema. The planning application does not appear to be available online from Westminster City Council but an application in respect of an Environment Impact Study is available here.

The property receivers appointed are our new friends, Allsop, who ran a spectacularly successful auction inDublin’s Shelbourne Hotel two weeks ago. In the British context, Allsop are termed fixed-charge property receivers and the two gentlemen at Allsop handling the property are Jon Gershinson and Simon Davidson.

There is a little sting in the tail of this story. Property Week say that another company called Real Estate Resolutions bought part of the site in November 2010 and that the redevelopment cannot take place without the input of that company. Curiously Real Estate Resolutions which was founded by former Ballymore planning director, Tim Farrow, does not list the Leicester Square site as one of its developments on its website. Ballymore is Sean Mulryan’s company and the last I heard of Tim Farrow in connection with Ballymore was that he was suing the company for €4.5m after his dismissal.

UPDATE: 30th January, 2012. The property in Leicester Square has reportedly been sold to the Edwardian hotel group, no price has yet been disclosed. There is a press release by the NAMA receiver, Allsop, here. The Financial Times is reporting the site sold for “what is thought to be close to £100m”, which if confirmed,  would be considerably more than the GBP 58m thought to have been the cost of Steamboat assembling the site. The site is presently undeveloped and it has been estimated it might be worth GBP 200m in its developed state.

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