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Archive for September 14th, 2012

Okay, this will be one of the most tenuously-linked NAMA stories but the quarterly list of tax sinners published by the Irish Revenue Commissioners this afternoon, shows that model Glenda Gilson (31) has been hit with an overall total of €73,000 payable to the Revenue in settlement of tax owing together with interest and penalties. The particulars given by the Revenue are that there was an under-declaration of income tax and VAT.

It was back in March 2010 and life was relatively carefree for Treasury Holdings co-founder, the colourful Johnny Ronan who had spent the day watching six-nations rugby but when he later met up with his then-companion, Glenda Gilson at a pub in Ranelagh, south Dublin, a row erupted in which the statuesque Glenda kicked poor Johnny in the unmentionables, and Johnny responded with what might be termed a “Bishop Brennan”

These days, Johnny and his Treasury co-founder, the understated Richard Barrett have far more to worry about – their loans were acquired by NAMA in 2010, and the relationship has gone distinctly sour since the end of last year with receivers appointed to Treasury assets and companies, and Johnny and Richard sued in their own rights for sums that NAMA claims is owing.

Another notable inclusion on the latest list is the former principal of the private school in Tipperary who hit the headlines earlier this year when he refused admission to a pregnant girl. According to the Revenue list, Padraig O’Shea of Borrisleigh, Thurles has been hit a bill of €705,619 comprising due tax of €346,059 plus interest of €100,016 and penalties of €259,544. In July 2012, what the Revenue Commissioners as a “private school operator” gave an interview with the Irish Independent in which he talked about “standards of morality” and the “moral integrity of the Irish people”

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Today sees the publication of the August 2012 IPD Monthly Property Index for the UK. The IPD (Investment Property Database) index is the only UK commercial index referenced by NAMA’s Long Term Economic Value Regulations (Schedule 2) and is used to help calculate the performance of NAMA’s “key markets data” shown at the top of this page.

The Index shows that capital values fell by 0.3% in August 2012, which along with the decline of 0.4% in July, and the 0.5% decline in each of May and June, represents. Prices reached a peak in the UK in June 2007 and fell steadily until August 2009 when a rally started. Prices then increased by 15% in the year to August 2010 but since then prices are actually down by 0.9% and in the last 12 months prices have decreased by 2.8%. Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 8.3%. Commercial prices in the UK are now 36% off their peak in June 2007. The NWL index  falls to 802 which means that NAMA needs to see a blended increase of 24.7% in property prices across its portfolio to break even at a gross profit level (taking into account the fact that subordinated bonds will not need be honoured if NAMA makes a loss).

The table below shows the change in value of an index set at 100 at 30th November, 2009 and applying the month-on-month % increases in a compound manner.

The overall outlook for the UK economy is muted in the short term with the country suffering a double dip recession after a quarterly declines in GDP in the first and second quarters of 2012 – 0.3% quarterly contraction in GDP in Q1, 2012 and 0.7% quarterly contraction in Q2, 2012. The UK has a so-called Office for Budget Responsibility (OBR) which is independent of Government and produces its own economic forecasts and commentary on fiscal policy. The latest report from the OBR was published on 21st March, 2012 and it forecasts GDP growth from 2012-2015 at 0.8%, 2%, 2.7% and 3%, deficit of 8.3%,5.8%,5.9%,4.3%, debt:GDP of 72%,75%,76%,76%, unemployment rate of 8.7%, 8.6%, 8.0%, 7.2%, house prices of -0.4%,0.1%,2.5%,4.5% and inflation of 2.8%,1.9%,1.9%,2%.

Monetary policy is overseen by the independent Bank of England and the  current Bank of England rate is 0.5% and has been since February 2009. So far the UK has printed an additional GBP 350bn of new sterling in an economy of GBP 1.5tn – UK inflation since 2007 has been over 15% compared to near-flat prices in Ireland.

About half of NAMA’s portfolio was located in London which has so far performed very well from Aug 2009 to Dec 2010 but has been more subdued over the past year. Supply shortages and money chasing a relatively stable investment have maintained prices and there might even be a short term fillip from this year’s Olympics. Beyond London and the English south east, there is evidence of prices waning amidst sluggish economic growth and stunted lending. NAMA’s strategy for UK assets was revealed in the recently published Comptroller and Auditor General’s report. NAMA expects to dispose of half of its UK assets by 2013, and 40% extra by 2015 and just 10% by 2020. So by 2015, NAMA will have largely exited the UK market.

One of the most valuable Irish sales in London this year was concluded in August 2012 when David Arnold’s D2 Private sold 23 Savile Row in London’s West End for GBP 220m (€275m). It is not known if this is a NAMA related sale – David Arnold’s One Warrington Place in Dublin was a NAMA-related property but loans relating to D2’s Woolgate Exchange in the City of London have remained with the original bank, Anglo (or IBRC as it is now known after the merger with INBS).

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Figures released by the Central Bank of Ireland (CBI) today show that in the month of August 2012, the reliance by Irish banks on central bank funding fell again in what has been a downward trend since December 2011. Lending by central banks to Irish banks comprises lending directly from the ECB and lending from the CBI. In total overall lending has reduced by €1.9bn in August 2012 from €121.6bn in July to €119.7bn in August. Lending directly from the ECB fell by €0.9bn in the month of August 2012, from €80.0bn in July 2012 to €79.1bn. Lending from the CBI to Irish banks, which is mostly known as “Emergency Liquidity Assistance” or ELA declined by €1.0bn, from €41.6bn to €40.6bn.

What does this mean for Irish banking and the wider economy? If our banks are to return to some degree of normality, they will rely more on deposits from customers and lending from other banks. So today’s figures indicate – though don’t absolutely prove – that deposits and inter-bank lending are increasing which suggests an improvement in confidence and good news. Overall the trend in Irish banks has been positive since the start of 2011 This is indeed positive news, particularly given the jitters in other EuroZone countries, such as Spain, Greece and Italy.

It is worth pointing out that ECB direct lending to Irish banks today stands at €79.1bn. This compares with a €3tn ECB balance sheet, and indicates that Irish financing arrangements are now proportional to our economy, and that the ECB is no longer providing “unprecedented” support to Irish banks. Last month, the Irish Department of Finance said that Irish banks now account for less than 5% of all ECB lending to EuroZone banks.

We will get deposit information on Irish banks for August 2012, at the end of September. Deposit analysis for Irish banks for July 2012 is available here.

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The Irish Times London editor Mark Hennessy will soon be on his lonesome on the Irish press bench whilst sitting through court hearings when RTE’s Brian O’Connell retires from RTE this month, though as far as I can tell, RTE’s Brian has been coasting for the past few months ever since RTE announced the closure of its London office. Today, it is Mark Hennessy who is alone amongst the Irish media in reporting progress in a hitherto unreported case involving NAMA and Ray Grehan (pictured below) and others, a case that is set to be substantively heard in October 2012.

Ray Grehan and his brother Danny were amongst Ireland’s biggest developers, and one of NAMA’s biggest critics. The relationship between NAMA and Ray broke down in early 2011, and ever since there has been a series of receiverships and court cases as NAMA pursues debts which include judgment orders of nearly €300m for each of the Grehan brothers. It really didn’t come as a surprise when firstly Ray and then Danny were declared bankrupt in the UK earlier this year.

We knew NAMA had been in action in the courts in Toronto and New York successfully reversing transfers of Grehan assets, but we find out today that NAMA is also seeking to unwind a transfer in London. The property at issue is an apartment in one of London’s swankiest addresses, One Hyde Park, a stone’s throw from Harrods and which overlooks (on one side) the great expanse of Hyde Park. The apartment, number B.04.3 (pictured above) was transferred/sold by Ray Grehan to a company called Postlake in August 2010, according to the Irish Times. NAMA believes the price obtained was below the market value, and NAMA wants its money, and no doubt wants to warn off other debtors from engaging in similar alleged practices.

Yesterday at the High Court in central London, the case came up for mention and it seems NAMA wanted to defer the hearing that was scheduled for October because of what NAMA claims has been inadequate disclosure of documents by the Grehans – NAMA is suing both Ray Grehan and his wife Geraldine, whom the IT says is now “estranged”.The judge yesterday gave NAMA and its co-plaintiff, the bankruptcy trustee, short shrift telling them that their own performance had been “unacceptable” and “lackadaisical”. So it will be October [CORRECTION/EDIT: 14th September 2012. The NAMA spokesperson has been in touch to say that the reporting in the Irish Times is incorrect and the hearing has in fact been postponed by the judge from October 2012] when the hearing takes place – it is not clear if it was NAMA or the bankruptcy trustee that was criticised for delays.

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