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Archive for March 24th, 2012

Although Bank of New York Mellon and a company formed by former Liam Carroll employees called “Property Asset Management Enhancement Services” were reported to be in the running to buy it, it is the Central Bank of Ireland which is now understood to have purchased the former Anglo HQ shell on Dublin’s North Wall Quay. The price being paid by the Bank is not available but industry sources say that NAMA had been offered €10m last summer for the building by a party whose name was not publicly linked with the site, in a deal which would have required staple financing but which would have seen both the existing Anglo shell completed AND the completion of an adjacent building which has yet to be started. It is understood the Central Bank will now develop the shell on the existing site which will eventually bring together and house the mushrooming 1,500-strong workforce, presently sited across three main locations -its iconic HQ on Dame Street from where the Occupy protesters were removed last last month,  Iveagh Court on Harcourt Street and an office building (pictured) in Spencer Dock.

Sources say that the Central Bank had been looking at other potential sites in central Dublinand the IFSC, in particular the Treasury Holdings Spencer Dock complex, but it is said that both the Department of Finance and NAMA arm-twisted the Bank into taking the Anglo HQ shell.

Neither the Central Bank or NAMA has commented on the sale, though the sale is expected to be confirmed by NAMA before Easter.

UPDATE: 26th March 2012. The Irish Independent reports today that NAMA has not “yet” “sealed” a deal with the Central Bank and the Central Bank says that no plans had been “formalised” for the Bank’s long-term accommodation plans.  A spokesman for NAMA who on Friday told this blog that the Agency had no comment on the report, seemingly told the Independent “an online report yesterday that indicated agreement had been reached was incorrect”

UPDATE: 16th April, 2012. Bloomberg now reports that the CBI has agreed to buy the shell for €8m (USD 10m), though neither the CBI nor NAMA is commenting.

UPDATE: 31st May, 2012. NAMA has issued a statement to confirm that it has sold the Anglo HQ shell. NAMA says ” NAMA working with the Receivers had prioritised the sale of this asset for the past 18 months and had engaged with a number of interested parties. We are very happy now to have concluded the process and look forward to the Central Bank completing the building which will greatly enhance the whole landscape of the Dublin Docklands” . RTE reports that the purchase price was €7m.

UPDATE: 14th November, 2012. NAMA has today issued a statement confirming the contract for sale has at laaaast been signed. The statement says “The National Asset Management Agency welcomes the signing of contracts relating to the Central Bank of Ireland’s purchase of North Wall Quay, Dublin 1. The purchase and planned development of North Wall Quay, Dublin 1 is an important signal of improving sentiment and activity in the office market. The development of the North Wall Quay site is also important for the future development of adjoining lands within this key strategic location. “

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So says the Central Bank of Ireland which yesterday issued a financial stability report examining debt and the Irish financial sector. Of narrow interest on here is what the report had to say about future trends in house prices (bizarrely, nothing) and commercial property prices (quite a lot, mostly positive). The Bank has concocted a series of indicators which suggest that Irish commercial property prices which have already dropped 65% from peak values, may now be substantially undervalued by reference to economic indicators – employment, GDP, rents and “consumption”. Indeed on average the Bank considers commercial property to be more than 30% “undervalued” – mind you, using the Bank’s own figures, it would have thought that commercial property was undervalued by 12%, 28%, 30% and 32% in 2008, 2009, 2010 and 2011. This is what the Central Bank says:

Or to put it another way, if you bought a €100m property in 2008, you might have expected that to increase by 12% to get back to what the Central Bank thinks is the “proper value”. Instead three years later, your €100m property would be worth today, wait for it…€60m with the Jones Lang LaSalle index falling from 880 in Q4, 2008 to 527 in Q4, 2011.

Even with the benefit of certainty on the Upward Only Rent Review issue, new tax incentives to buy and hold commercial property and the straight-forward reduction in stamp duty on transactions from 6% to 2% in the December 2011 Budget, commercial property rose by just 1.1% in Q4, 2011 and if you strip out the stamp duty reduction, the fall would have been 2.6%, following falls in the previous four quarters of 4.2% in Q3, 2011, 5.7% in Q2, 2011, 1.5% in Q1, 2011 and 3% in Q4, 2010.

The importance of stability and recovery in commercial property prices is stressed in the Central Bank report, but it might be worth again saying that the National Competitiveness Council believes that property is still over-valued by reference to its rental potential and underlying commercial worth to businesses operating in the State.

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Quote of the Week

“It is a matter of any member bringing to our attention the concerns of a local community or a constituent. It is not lobbying because one is not advocating any particular approach. Certainly in that context, from time to time, everybody draws our attention to something that is going on” NAMA CEO Brendan McDonagh

Okay this is from the previous week’s Oireachtas Joint Committee on Finance, Public Expenditure and Reform hearing with NAMA, but it seems that despite all of the hullabaloo in 2009 of strong “anti-lobbying” rules and talk of Gardai and prison sentences, it will be nigh impossible for anyone to fall foul of NAMA’s anti-lobbying rules as long as they are just drawing matters to NAMA’s attention. Indeed NAMA is facilitating the process by providing deputies and senators with a dedicated email address : oir@nama.ie

Runner up goes to Kenneth Maclean QC who was giving Paddy McKillen a hard time in the High Court in London when he likened Paddy’s ability to bring investors to the Maybourne group of hotels, to the quixotic Owen Glendower in Shakespeare’s Henry IV – “I can call spirits from the vasty deep” to which Hotspur replies “Why, so can I, or so can any man; But will they come when you do call for them?”. A couple of days later, Paddy wiped the smile off his face when he showed that spirits do come when he calls them after he produced evidence of a GBP 1bn investment proposal from the Qatari sovereign wealth fund, Al Mirqab.

Photograph of the Week

 

Just two fellows hanging out on a step – that’s NAMAed Harcourt boss Paddy Doherty on the left and that’s one of Ireland’s great friends, Senator George Mitchell on the right, both sitting on a step of the 10,000 piece replica of the Titanic’s great staircase at the Titanic exhibition in central Belfast which opens next week. Former US senator, George Mitchell was back in Northern Ireland this week, 14 years after the Good Friday Agreement and bringing with him, his 14-year old son who was born amidst the tortuous marathon negotiations in 1998.

U-turn of the week

It was just over a week ago when An Taoiseach, Enda Kenny told the Dail on 14th March, 2012, in respect of the negotiations of the Anglo promissory notes:

“I have never tried to raise expectations or enforce a time limit here” and “it has an old saying which is important for everyone to remember when negotiations are under way: Is binn béal ina thost (≈ “silence is golden”).”

A week later, Minister Noonan raises both expectations and a time limit – “Finance Minister Michael Noonan has said he is confident of a deal over the weekend in talks with the European Central Bank about the promissory note payment to the former Anglo Irish Bank” and as for “silence is golden”, deputies are still trying to understand the reasoning behind the dramatic interruption of Private Members Business in the Dail on Wednesday night, and in a breach of protocol delivered a statement that he was negotiating “on the basis that the €3.06 billion cash installment due from the Minister to IBRC on 31 March 2012 under the terms of the IBRC promissory note could be settled by the delivery of a long term Irish Government Bond.”

And whilst not strictly a U-turn, you can’t help but be in wonder of An Taoiseach’s speeches in the US over the St Patrick’s Day weekend where he regularly claimed “the Irish Economy is growing again.”and the reality of the CSO’s Quarterly National Accounts released on Thursday 22nd March, 2012 which showed thatIreland was back in recession with GDP contracting for a second quarter in a row in Q4, 2011 and with GNP contracting by a shocking rate of 2.2% in the quarter.

Graph of the Week

 

The top graph shows the picture of Irelandbeing hawked around the world by the NTMA and is from their March 2012 investor “road-show” presentation. The graph underneath, from CB Richard Ellis, zooms out a little to show that yields of 9% and above were a feature of the Irish economy during the last recession/depression.

NAMA CEO Brendan McDonagh was in Londonduring the week and he gave a speech to the Chartered Accountants Ireland branch on Moorgate on Wednesday night. The Irish Times reports “commercial property prices in Ireland have “over-corrected” and now offer attractive yields to investors, National Asset Management Agency (NAMA) chief executive Brendan McDonagh has said. “The yields at the moment are the highest since 1995, but that is because commercial prices have fallen by 55-65 per cent,” he told the Chartered Accountants Ireland London Society. Some commercial properties now offer an 8.5 per cent yield, compared with a post-1995 average of 6.25 per cent.”

Hmmm does that remind you of similar sentiments in 2009 after which Irish commercial property declined by 25%

“The fall in property values has pushed up property yields. Yields are now above their long term average, and this suggests that values are bottoming out”

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