Archive for July 3rd, 2012

“I’m a hard grafter and, as some of them found out, they shouldn’t tangle with me too often” An Taoiseach Enda Kenny speaking after the Thursday night/Friday morning EU summit talks last week.

“With that the sun came out between the cloud and the hill, and it shining green in my face. “God have mercy on your soul,” says he, lifting a scythe; “or on your own,” says I, raising the loy.. He gave a drive with the scythe, and I gave a lep to the east. Then I turned around with my back to the north, and I hit a blow on the ridge of his skull, laid him stretched out, and he split to the knob of his gullet” Christy Mahon in The Playboy of the Western World

When Christy Mahon turned up in Pegeen Mike’s shebeen in JM Synge’s The Playboy of the Western World, he was greeted as a man of mystery, as an exotic adventurer who had a wild tale to tell of killing his father with a loy (a sharp hoe for you non-turf cutters). It took less than a week for Old Mahon to turn up and puncture the myth, with the real story that Christy had merely dealt a cowardly blow to the old man when he had his back turned, and far from the worldly adventurer, he was a man to hide if he saw a woman, get ill if he took a drink and a vain man who spent his days admiring himself in a mirror.

Last Friday morning – against expectations, and indeed against previous form – An Taoiseach Enda Kenny emerged from the EU summit in Brussels to announce a game-changing concession to Ireland in the summit talks. We could hardly believe it, yet there in black-and-white in the summit communiqué was a prominent reference to Ireland– not to Portugal or Greece– and An Taoiseach’s words weren’t contradicted by the text. Back home in Ireland, journalists and some economists were embracing the development as highly positive for Ireland, and talk soon turned to the €63bn – €68bn if you count the €5bn in state aid paid by NAMA to the banks – cost of the bank bailout. How much would be refunded to Ireland, we wondered? Indeed on what basis or principle, would anything be refunded to Ireland or our debt burden be softened? At this point, the gushing triumphalism from official sources dried up. It might have been too much to expect a precise euro amount, but surely we might have expected some points of principle.

Yet the markets have rallied and Ireland’s benchmark 9-year bond is now trading at 6.23% compared with 7.4% a fortnight ago. This, despite the fact that the Finns and Dutch are seemingly not accepting the principle that the European bailout fund, the ESM, be used to buy sovereign bonds. And as for bank debt, the existing ESM rules make it clear that the ESM can only lend on a viable basis, and the ESM must cover its costs. There seems to be little chance of the ESM, in its current form, handing over billions of euro to Ireland in respect of the dead money cost of bailing out Anglo, for example. At best, it seems we might be able to sell our shares in the viable banks, AIB/EBS, Bank of Ireland and Irish Life, sooner rather than later. How much might these be worth? Low billions perhaps, and the ESM will only pay what the shares are worth.

Here’s the difficulty. None of us were behind the closed doors of the EU summit, and it is rare we get leaking of what actually took place. An exception was in March 2011, when Channel 4’s Faisal Islam reported that Enda Kenny had “grandstanded” at his first summit in his new role of An Taoiseach and managed to personally alienate some European leaders. Enda himself confirmed he had what he called a “Gallic spat” with the French president. But for the most part, we get very little about what actually is said.

So we rely on An Taoiseach in the first instance, and just a few short days after the summit, we might still be accused of doom-mongering or begrudgery in seeking or questioning the lower-level detail of what was agreed last week, and it is a fact that the interest rate offered on our bonds is keeping to a downward trend, but for all that, we have nothing tangible to focus on which might help us plan our finances.

It took less than a week for Old Mahon to turn up and put an end to one Mayo man’s tall tales. Let us hope that this other Mayo man’s claims are true, but several days after the event, the absence of detail is unsettling.


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> Office take-up (new rental transactions) projected to be down 40% in full-year 2012 compared with 2011
> hardening of 0.25% in yields on prime retail and office, double digit yields still on secondary assets
> Investment market worth €135m for first half of 2012, including €27m for One Warrington Place, €36m for Riverside II and €40m for the Alliance/Gasworks apartment complex. Compares with €150m for first half of 2011.
> Amount of supply coming onto market has increased “markedly”
> Prime rents “stabilising”, secondary rents still in decline
> Prime Dublin office rents of €27.50 psf, prime Belfast €12.50 psf
> NAMA becoming more prominent in commercial market

With the economy still bumping along the bottom, at best, with the EuroZone lurching from one crisis to the next, with credit availability severely limited and really just Bank of Ireland, Barclays and now NAMA lending and an overhang of the wrong type of supply, times are still tough in the commercial property sector in Ireland – Northern and Republic. Property powerhouse and NAMA valuer, CB Richard Ellis (CBRE) has published its two-monthly report on the Irish commercial property sector which contains a couple of bright spots, but the bottom line is that signed activity is still declining, prices are at best stabilising though there is evidence of declines in secondary markets and transactions are taking forever to conclude.

With respect to NAMA, the recent announcement of the Agency making €2bn available for staple finance is noted with deep appreciation, and it seems that NAMA is bringing more product to market eg Fota Island resort, a range of other hotels including the Killerig and Edward Square Galway shops. NAMA was behind the sale of One Warrington Place, and the biggest rental in Q2, 2012 when 35,000 sq ft were let to BSkyB in Burlington Plaza – a deal that nearly didn’t happen until the IDA or politicians got involved. In Northern Ireland, there was the sale of a Sainsburys store in Derry for GBP 18m (€22m) to LaSalle Investment Managers – this store was owned by the McGinnis group which is now in NAMA, though that doesn’t necessarily mean the store was, the store is described in detail here.  NAMA of course will be behind some development and refurbishment also as it has recently announced plans to invest €2bn over four years in its developers’ projects. NAMA has said that it paid €9.25bn for loans secured on commercial property in the Republic of Ireland, loans likely to be worth €6-7bn today, so it is obvious that NAMA is going to be a dominant player in the Irish commercial property market for some time to come.

It will be a couple of weeks yet before we start getting the commercial property indices for Ireland for Q2, 2012. NAMA is claiming/praying prices are stabilising, though the indices recorded falls in Q1, 2012. Jones Lang LaSalle reported that rents had increased in Q1, 2012 for the first time since 2008, but CBRE seems to be saying today that rents are still in decline in secondary assets which will presumably offset any stabilising on prime assets.

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What a difference a year makes! This time last year, Treasury Holdings – the Dublin-based company which recently described itself as the “only full spectrum property asset management and development company inIreland” – was seemingly making progress in its relations which NAMA and word on the street was that it was one of the Top 10 NAMA developers which would be saved. NAMA and Treasury were then making progress in selling what is likely to be NAMA’s most expensive property, the 38-acre Battersea Power Station site on the banks of the Thames in central London. Progress was also seemingly being made in NAMA and Treasury’s discussions aimed at producing a restructured loan agreement.

But then in December 2011, NAMA and other creditors put the Battersea site into administration, a move which showed all was not sweetness and light in the NAMA/Treasury relationship. Then at the start of this year, NAMA made a move on Treasury’s Irish properties when it sought to appoint receivers to a raft of Treasury group-companies. This was resisted by Treasury who then hit back with an application for a judicial review of NAMA’s dealings in its loans. This led to a hearing in February 2012 where NAMA resisted the judicial review. NAMA lost its bid to stop the judicial review. Treasury then held out an olive branch of mediation, to which there was no public NAMA response.

This morning at 11am in Court 14 at the Four Courts (High Court) in Dublin, Ms Justice Finlay Geoghegan is set to start hearing the judicial review proper. Treasury is set to bring a range of arguments that go to the core of NAMA and the controversial legislation which created the Agency. NAMA must defend itself tooth and nail, lest it find aspects of its operation declared unlawful which might have awful financial consequences for NAMA, and because ultimately we guarantee NAMA’s finances, on us.

Both the NAMA CEO Brendan McDonagh and the colourful Treasury co-founder, Johnny Ronan, are set to take the stand during the course of the hearings. Today is likely to be given over to Treasury’s opening argument.

It is hoped that there will be daily coverage here – with updates to this blogpost, unless there is a particularly significant development – from the hearing which is likely to last a couple of weeks.

UPDATE: 3rd July, 2012. RTE probably has as good a summary of Day One as any media outlet. Michael Cush SC, the barrister/senior counsel who did so well for Paddy McKillen, opened for Treasury Holdings today and said there were five matters for the court to decide, though only four are mentioned – (1) If the NAMA decision at the start of December 2011 was a “public law decision” and if so, breached NAMA’s obligations as a public body (2) did Treasury have a right to be heard by NAMA before the decision to foreclose was taken (3) does NAMA have to act “fairly and reasonably” (4) did NAMA consider the third party investors and their interest in Treasury’s loans before making the decision to foreclose. Separately, NAMA has served Treasury companies and Richard Barrett and Johnny Ronan with demands for payment in the “past few days”. The gloves are truly off.

UPDATE: 5th July, 2012. Day Two. The Irish Times and Irish Independent have almost word-for-word identical reports on yesterday’s performance at the High Court – the Irish Times report by Mary Carolan was filed first online yesterday evening – Tim Healy’s report in the Independent is date-stamped today. Curious. RTE has reporting online also. With respect to the case, Michael Cush SC concluded yesterday Treasury’s opening salvo against NAMA, and a lot of consideration seems to have been given to a papernote made by NAMA which was disclosed to Treasury in these proceedings, a note which warned against “tipping off” Treasury, lest according to Michael, Treasury runs to the courts for protection or to seek examinership.

Paul Sreenan – barrister/Senior Counsel – opened the response for NAMA yesterday. Going to the core of the matter, Paul suggested it was ridiculous if the law required NAMA to participate in what he termed “endless debate” with a massively insolvent company, or to put it slightly sarcastically, that NAMA would have to give notice to Treasury to let it know in advance that it was going to demand repayment of loans from Treasury – loans which Treasury admitted it owed. NAMA is said to have given Treasury – whose €1.7bn of loans were taken over by NAMA in 2010, Treasury has total borrowings to all banks of €2.7bn –  €100m in additional lending for working capital and finishing projects, presumably a significant sum went on the Google Monte Vetro building on Barrow Street. Treasury is said to have attempted on several occasions to go back on an agreement to reverse the so-called TAIL transaction, and the claim is that NAMA reached its decision to foreclose after extensive engagement with Treasury.

The case continues. Michael Cush told the judge, Ms Justice Mary Finlay Geoghegan on Day One that the case may only last a week instead of the scheduled two weeks. The NAMA CEO Brendan McDonagh may make an appearance on the stand tomorrow. Later today he faces the Oireachtas public accounts committee where frankly he will face more confrontational questioning than even Michael Cush can muster.

Separately, we have learned that both KBC and NAMA have both served repayment notices on Treasury, and in the case of NAMA on the Treasury founders, Johnny Ronan and Richard Barrett. According to both the Irish Times and Irish Independent “KBC, in a notice served last Friday, said it would seek an order winding up Treasury unless it was paid €20m within 21 days of that demand. NAMA also issued demands for repayment of €3m each to Mr Ronan and Mr Barrett in their capacity as guarantor of a €13.5m loan to Treasury”

UPDATE: 13th July, 2012. Thanks to a sparse report by the Independent and Examiner, it seems the seven-day hearing has concluded and a judgement is expected later in July 2012. There is NOTHING about the proceedings themselves – did Johnny turn up? Did the NAMA CEO take to the stand? Who knows, who can tell.

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