Archive for September 19th, 2011

Property developers in Irish cities nursing empty blocks or plots with the potential for high–density housing, but scratching their heads wondering from where the demand for developed property will come, might care to take a look at an innovation currently taking shape in the centre of Belfast. The 12-storey 48-apartment M Building on Montgomery Street will be home to the city’s first pop-up apartments – apartments sold fully furnished, in this case with customized furniture provided by a Portadown company, Terry Furniture. The scheme is being launched today. The building, sample apartments and facilities are pictured here.

The apartments are reported to be 350 sq ft which is pretty small but the space seems well utilized. There’s a shower room (or “wet-room”) rather than a bathroom, there isn’t a separate bedroom but a “bed pod” which just about accommodates a double bed within its footprint though there is under-bed storage; there is some compensation with a large built-in flat screen TV at the foot of the bed. The main living area provides a fitted kitchen, dining table and built-in sofa. The décor is described as “funky” (in the good sense). Estate agents BTW Cairns entice us with the claim that “if you have a suitcase and yourself, you’re ready to move in”

Elsewhere in the building there’s a communal laundry room (which avoids the need for facilities in the tiny apartments), a communal roof garden and a coffee shop.

Prices start from just under GBP 80,000 (€92,000). With a sale price of over €250 psf the apartments are not cheap by current Dublin standards but if you deduct the value of the customized furniture and take account of the designed use of space, then bargain-hunters may be more impressed. The annual service charges are estimated at GBP 695 (€800) per apartment.

For developers, there is the attraction of a wide market able to afford the  modest price tag which might see demand from students (or their parents), buy-to-letters, those looking for a pied-a-terre, or traditional buyers on the bottom-rung of the property ladder. There are a couple of businesses in the laundry room and coffee shop, both with a ready market from the building’s occupants. There is also the possibility of generating ongoing service charges.

The building is being developed by Alan Fraser, son of well-known developer Fred Fraser who died in 2008 and is scheduled for completion in late 2012/2013

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News yesterday of the latest NAMA property to go up in flames, a former pub in Coleraine in County Antrim (pictured here) which according to the Belfast Telegraph this morning required 40 firefighters from as far afield as Derry to tackle the blaze, which not surprisingly forced local residents to be evacuated. The former pub was known as Squires Bar and had been closed for some time. It was included in the first NAMA enforcement list of properties taken over by NAMA upto 6th July, 2011 where the “receiver’s firm” is shown as Osborne King and Megran Limited (page 25 of 37). It’s not totally clear who the developer was. The cause of the fire yesterday has not yet been reported.

This appears to be the second NAMA property in Northern Irelandto go up in smoke. In May 2011, the historic Hilden Mill in Lisburn, also CountyAntrim was attacked by vandals and set alight. The BBC reported that the blaze needed 60 firefighters to tackle and that the building was “extensively damaged”. The developer of the site is Galliard.

On this side of the border, NAMA-associated properties have also fallen prey to arsonists. In August 2011, the Evening Herald reported on the third arson attack on property owned by NAMA top-10 developer, Gerry Gannon. The three buildings targeted were Newton House, Balheary Road in Swords, Co Dublin on 5th August 2011 and Knockdromin House, in Beau, Rush, Co Dublin on 1st July 2011 (pictured here, before and after the fire) and thirdly, Belcamp College in Balgriffin, Co Dublin on 14th April 2011 (pictured here after the fire). It is understood that theBelcampCollege site is under NAMA’s control, it is unclear if either of the other two properties are controlled by NAMA.

In August, arsonists also targeted the Limerickcity site for the Opera shopping centre causing fire damage. The site is owned by NAMA top-20 developers Jerry O’Reilly and David Courtney.

All of the above buildings were derelict when burned, which might be more a factor than any association with NAMA. Throughout the country thieves and vandals have targeted derelict buildings and ghost estates, for example stripping plumbing which is then sold as scrap metal (and which oftentimes results in the buildings suffering water damage).

UPDATE (1): 20th September, 2011. The News Letter this morning reports that the Coleraine fire which broke out on Saturday before midnight was  in fact arson. Curiously the newspaper says that NAMA is seemingly disowning the property despite the property appearing on page 25 of the first NAMA enforcement list. “NAMA has a loans association with the building whereby the loan gets deferred to NAMA and not the property” the paper writes, quoting NAMA. The pub is reported to have been empty for five years.  The NAMA spokesman has been asked for comment.

UPDATE (2): 20th September, 2011. The NAMA spokesman has disowned the News Letter quote and says that he is not sure of its source let alone what it means. It seems that the property was correctly shown on the first NAMA enforcement list.

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It was 19th May, 2011 when NAMA announced its intention to introduce two innovations to help shift property inIreland – a negative equity mortgage product for residential property and so-called “staple financing” for commercial property. Staple financing has long been a means of facilitating commercial transactions; in simple terms it involves the seller financing the sale. So in NAMA’s case, NAMA might sell a property for €10m to a buyer, the buyer might give a deposit of €3m to NAMA and agree to pay the remaining €7m with interest over a five year period. In an Irish market where there is a dearth of financing, staple financing has the potential to get transactions moving. Of course there is a concern that NAMA might distort property prices by not allowing properties to sell for cash or the limited financing that is available.

Sources have claimed that a NAMA developer has sold an office block in Dublin’s docklands and that it is the first sale which features staple financing by NAMA. The property is One Warrington Place (pictured here) at the junction of Northumberland Road and Dublin’s Grand Canal in the heart of the south Docklands and no more than a long stone’s throw from NAMA’s own headquarters at TreasuryBuilding. One Warrington Placeis an ultra-modern 60,000 sq foot glass and steel building developed by David Arnold (pictured here) who was reported to be a NAMA top-20 developer. The property was being jointly marketed by local Cushman and Wakefield partner, Lisney and domestic player, HT Meagher O’Reilly (UPDATE: 21st September, 2011. Although HT Meagher O’Reilly was involved in the renting of the property, it seems that the sale of the property will be handled by Lisney).

Details are sketchy at present with neither the buyer, the price or the details of NAMA’s staple financing being available. A 210,000 sq ft building close-by, Montevetro on Barrow Street was sold by Treasury Holdings under NAMA’s auspices at the start of this year for €99.9m. Commercial property prices in Ireland have dropped by 7% in the first six months of 2011, as a result of credit shortages and continuing uncertainty over the future of upward only rent reviews (the latest on the latter is that the Government said last week that it would publish a Landlord and Tenant (Business Leases Review) Bill before Christmas 2011 to give effect to commitments made in the Programme for Government – it is hoped that outline details of the controversial piece of legislation will become available in coming weeks).

Neither NAMA or Lisney had any comment on the One Warrington Place transaction at time of writing.

Last week, Britain’s CoStar reported that another David Arnold building, the Woolgate Exchange office in the City of London’s Basinghall Street was set to come onto the market after D2 Private, a David Arnold company, reportedly “did not refinance the securitised loan once it defaulted at maturity” in August 2011. It is not clear if NAMA will offer staple financing in the UK, where property finance is more abundant than in Ireland.

UPDATE: 28th September, 2011. Jack Fagan in the Irish Times today writes that the above property is indeed being offered for sale with staple financing available from NAMA. The joint agents will in fact be Lisney and HT Meagher O’Reilly (Ann Hargaden and Deirdre Hayes, respectively). The asking price is expected to be €28m, the current rent from blue-chip tenant, Bord Gais is reported to be €2,138,356 equating to €36.50 psf on this 56,103 sq ft building. There’s a 25-year lease signed in February 2010 which provides for five yearly rent reviews and includes a break clause in year 10. In addition, 31 basement car parking spaces are being rented at two rates, €1,500 and €3,500 per annum. The “net initial yield” is said to be 7%. At €28m the property is claimed to be worth just 37% of its peak price which almost exactly equals the 63-64% declines from peak reported by both JLL and IPD for Q2, 2011 – though figures expected in the next few weeks for Q3, 2011 are unlikely to show any improvement. NAMA’s staple financing is said to be available for 70% of the purchase price at an annual interest rate 2.5% above the “standard bank rate”. Interestingly NAMA was said to have provided a €10m to Fingal council at 4.25% per annum which would also represent a 2.5% margin on NAMA’s estimated cost of funds of 1.7%.

UPDATE: 24th January, 2012. Without citing sources, Simon Carswell in today’s Irish Times claims that the sale was effected without staple finance. Simon claims that “the decision [by the buyer, Prudential, not to avail of NAMA’s offer of staple finance at 2.5% over NAMA’s cost of funds] means NAMA secures a much bigger windfall on the transaction, clearing the outstanding debt on the office block previously owned by developer David Arnold.” Hmmm, NAMA forgoes a profit of 2.5% on provision of funds for a few years whilst holding a 30% security, and that is a “windfall”?

UPDATE: 22nd March, 2012. Informed sources claim that the deal on One Warrington Place with Prudential has “fallen out of bed”. Further information is being sought. Since December 2011, Bord Gais which is the tenant in the building has been lined up for privatisation, Ireland’s economic prospects haven’t markedly improved and indeed information this morning from the CSO shows that we are now back in technical recession with two quarters of declines in GDP, and separately GNP which is a better reflection of Ireland’s domestic economy is contracting at an alarming rate. Although the two commercial property indices for Q4,2011 showed the positive effect of the announcements in Budget 2012, it is clear that underlying pricing is still very shaky indeed and no amount of assuaging and comforting words from NAMA will obviate that fact.

UPDATE: 27th March, 2012. The Irish Times today reports that Prudential has walked away from the deal.

UPDATE (1): 25th April, 2012. The Irish Times reports that the property has now been bought by an un-named US investor for €27m representing an “initial return” of 7.25%

UPDATE (2): 25th April, 2012. This evening US investment group Northwood Investors is being mentioned as the buyer of One Warrington Place and that the sale is subject to NAMA providing staple finance. Northwood seems to be a new player in Ireland but it was one of the companies sniffing around the Maybourne group refinancing in 2010/2011 when up to GBP475m was apparently being offered for the GBP 660m of loans.



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