Archive for May 3rd, 2011

The Department of Finance has this evening published what seems to me like a brazen Programme of Support update for our creditors in the EU and IMF. Brazen in the sense that whilst it acknowledges the commitment in the original Memorandum of Understanding to recapitalise the banks by the end of February 2011, and certainly no later than March 2011, the update states that the stress test analysis identified the capital requirement and that the capital will in fact be injected into the banks by end of July 2011 but subject to, and perhaps contingent upon, successful liability management exercises (burning subordinated bondholders). Local media reports had previously suggested the €24bn will be injected in June 2011 but, perhaps sensing delaying the recapitalisation is one of the few bargaining chips in his hand as we seek a renegotiation of bailout terms, Minister Noonan continues to keep our creditors unsettled. Brazen.

In relation to NAMA the update says “the implementation of deleveraging will be subject to ongoing review. In particular, a portion of the assets now within the scope of the deleveraging exercise (particularly land and development loans in amounts less than €20m) were previously intended for resolution by NAMA. Currently, the government no longer intends to transfer these assets to NAMA. We will require AIB and BoI by end-May 2011 to provide contingency plans to meet the deleverage targets. If these plans are not feasible, we will find and implement alternative ways to meet the deleveraging goals and may reconsider the possibility of transferring the remaining loans to NAMA”

Elsewhere the good news is that we are doing what we said we would do to tighten our deficit, at least over the first three months of the year. However, it is unclear if that will continue in light of higher than expected unemployment and a lowering in GDP growth estimates. It is claimed in the document, which is dated the 28th April 2011, that our bond yields improved after the stress tests on 31st March, 2011 and that is bunkum – on 31st March, 2011 our 10-year bond was priced at a record 10.22% closing and on 27th April, 2011 it was at 10.45%. It seems that a property tax is to be introduced in the December 2011 budget and there is no word on the water levy which the Independent reported today might cost each household a flat €175 from next year.

UPDATE: 4th May, 2011. I am reminded of what the NAMA CEO, Brendan McDonagh said about the sub-€20m loans just a couple of weeks ago during the interview with Neil Callanan for the Financial Times “we didn’t want them in the first place, it’s an absolute relief,” Mr McDonagh says. ““There were 6,000 individual customers, that was 20,000 loans. For us to do that … it would have been a logistical nightmare.””

Will the “nightmare” materialise after 30th May?


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Interest seems to be growing in the future of the iconic Liam Carroll development on the north side of the Liffey in Dublin that was, at one time, destined to be Anglo Irish Bank’s new headquarters. There is a detailed entry on the background of the building here, but the potted version of its history is that the iconic 230,000 sq foot partly-built complex on the north side of the Liffey in the IFSC has been sitting idle since 2008 when a legal battle erupted about the complex’s planning permission, which was finally resolved last September 2010. The site was being developed by NAMA Top 10 developer, Liam Carroll and it seems NAMA is close to concluding a decision on the site’s future, not least it seems, because the eye-sore is visible from the top floor of NAMA’s offices on the south side of the Liffey at Grand Canal Street. It is reported that a court was told last year that even with €40m spent so far on the complex, it would cost an additional €68m to “clad and complete” the complex consisting of three buildings. That equates to €295 per square foot assuming the building will have 230,000 sq ft (there have been other reported sizes that range from 200-300,000 sq ft). For a building that might rent for €30 psf when complete? No wonder we are banjaxed.

What is encouraging is that despite the glut of commercial property in Dublin at present – some 25% of the available stock is said to be vacant – property companies still think there will be demand for this building because it will offer well-located, third-generation, headquarters-sized accommodation.. Indeed in recent days, the BNY Mellon bank has been mentioned as a possible tenant for the building. The 1,500-strong Central Bank of Ireland is bursting at the seams at its existing 70,000 sq ft headquarters on Dame Street and satellite offices at Spencer Dock and Harcourt Road and although the Liam Carroll building will exceed current requirements, parts could be rented to other companies. There is a third un-named candidate also interested in occupying the building, according to the Irish Times last week.

But what about this €295 per square foot to complete the existing development? Rebuilding costs of residential property which includes demolition and clearance and VAT in Dublin were recently estimated at up to €179 per square foot. Shouldn’t a partially complete office where tenders would be commercially evaluated and economies of scale would be expected, be a fraction of this build cost? There doesn’t seem to be a lot of information available on commercial build rates in Ireland but on the face of it, this €295 per square foot looks ludicrous. And uneconomic if €30 per square foot is all the completed building would fetch on the open market.

The complex is said to be available today with a price tag of €5m. If you’re interested, NAMA might be able to provide you with further details.

UPDATE: 14th November, 2011. Last month, NAMA CEO Brendan McDonagh told the Oireachtas Committee of Public Accounts that negotiations for the sale of the building were at a sensitive stage but that he expected some progress by the end of November 2011. Today the Irish Times reports that the promoters of a “vertical park” have been invited to give a presentation to NAMA “before Christmas” which indicates that negotiations with the other interested buyers, believed to be Bank NY Mellon, the Central Bank of Ireland and two former Liam Carroll associates, David Torpey and John Pope  who have set up a new business, Property Asset Management Enhancement Services.

UPDATE: 14th December, 2011. The Irish Times reports that the Central Bank is the frontrunner to purchase the Anglo HQ site with plans to complete the building and house its 1,500 staff which are presently dispersed in Dame Street, Harcourt Street and Spencer Dock – the claim is that the site would be the only one in Dublin which could house that number of staff together. It is claimed by Frank McDonald at the Irish Times that the Central Bank is now the only bidder talking to Anglo.

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Laura Noonan in today’s Irish Independent reports that of the 30 top NAMA developers, 18 have signed “or are close to signing” a memorandum of understanding with the agency and these 18 are seen as being “relatively safe” (presumably that’s a direct quote from NAMA). Of course the reported phraseology might mean that all 18 of the developers have yet to sign, and “close to” is a very imprecise term. In addition to the signatures of the developers, the memoranda of understanding will need be signed by NAMA, which might require the agreement of the NAMA board, and potentially the spouse of the developer. And after the memorandum of understanding comes the Heads of Terms and finally a full agreement, and these two subsequent documents will also need to be signed by the developer, NAMA and potentially the developer’s wife. Next Tuesday will be the 10th of May, 2011 and the first anniversary of the completion of the transfer of the first Tranche of loans to NAMA. Now the first 30 developers have an average loan exposure of €900m and the business plans will not be straight-forward to say the least. That said, it is difficult to conclude anything other than NAMA is well behind schedule in its agreements with developers.

As for the remaining 12 developers in the Top 30, apparently five are facing foreclosure action by NAMA because the memoranda of understanding have not been agreed. The other seven are presumably already subject to foreclosure action.

And here’s where it starts to become very messy. NAMA does not generally disclose the identity of its developers – the agency stubbornly stuck to its guns last November 2010 at the Oireachtas Committee of Public Accounts hearing where Deputy Roisin Shortall in particular pressed NAMA for names of the Top 10 but the agency did not yield and asserted that such information was confidential. So we don’t definitively know the identity of the Top 10 or the Top 30. That said, Ireland being Ireland, we have had what seemed like well-informed reporting which speculated about the Top 30 and it is that reporting (particularly this and this article) which forms the basis of the table above. A further complication is that the Top 30 developers have extensive portfolios of property that might be split across many companies and some of those companies are subject to receivership and some aren’t.  For example, the only company with which David Courtney and Jerry O’Reilly have been associated which is subject to a NAMA receivership is Radora Developments which was responsible for the Elm Park development.

NAMA has foreclosed on quite a number of developers not on the above list. Jim Mansfield is not there, for example; reporting suggests that his debt to NAMA is “tens of millions of euro” which might mean he was too small for the Top 30. Jim however owes loans to other banks and Bank ofScotland(Ireland) foreclosed on the Citywest hotel complex last year. The implication from Laura’s reporting is that NAMA has foreclosed on seven of the Top 30 and that being the case, I would say those seven refer to Liam Carroll, Bernard McNamara, Derek Quinlan, Paddy Shovlin, Paddy Kelly, David Courtney/Jerry O’Reilly (Radora) and Ray Grehan (where the receiver has been “stood down”, temporarily perhaps). In addition, McInerney is in examinership and its appeal against the withdrawal of that examinership is scheduled to be heard at the Supreme Court this week. There was a report about receivership in respect of Sean Dunne in the Irish Sunday Times (not available online) but that seems to have been denied by Sean’s spokesman and nothing has come up in the Iris Oifigiuil.

So we don’t know the identity of the Top 30, we probably just about know the receiverships affecting the Top 30 and we certainly don’t know the identity of the 18 that NAMA claim have signed, or are close to signing, agreements. We most certainly don’t know the identity of the five that may be facing imminent foreclosure.

As always with these pieces, I get concerned that the media can get used by NAMA to wave its stick at recalcitrant developers – since NAMA doesn’t disclose confidential information and not all developers are networked with their competitors sufficiently to know the status of the negotiations with NAMA, there is a concern that developers will read articles like those in today’s Independent and conclude they are risk. Which they might be. Though they might also conclude that NAMA’s apparent failure to sign the three documents that comprise an agreement with a single developer, one year after absorbing the first tranche, might mean there are more general difficulties at the agency.

UPDATE: 5th May, 2011. Its status is hardly much above tittle-tattle but the Irish Times today claims that two Top 30 developers will be on the wrong end of a NAMA receivership application by the end of next week, that is, Friday 13th May, 2011. The two are not named. The grandly-titled “Around the Block” column in the newspaper claims “one of the top 20 borrowers is expected to move to the UK this month with the aim of declaring himself bankrupt, while another well-known name has already done so.” We don’t get the identity of either from the column. And on the subject,  I didn’t regard John Fleming as a Top 20 developer and he is the only significant developer whose bankruptcy has been reported here. So who is the Top 20 developer who “has already done so” and who is the one expected to move to the UK this month? Tittle-tattle at its finest from the grandly-titled Paper of Record.

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