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IBRC staring at colossal loss as iconic Belfast property comes onto the market

September 26, 2012 by namawinelake

[The BBC is now reporting this sale here]

It remains the position on here that IBRC – the “bank” which we 100%-own which was formed from the merger of Anglo Irish Bank and Irish Nationwide Building Society – is going to cost us a gross €52bn to bailout and not €35bn as commonly expected. The €17bn difference is the interest on the promissory notes which I believe Minister Noonan confirmed last week was to be paid in full, on schedule to IBRC. This view on here differs with other views, but the main reason for the disagreement appears to be over the forecast of IBRC’s losses between now and 2022. Some think that IBRC will break even in 2012-2022 but I think it faces additional losses, and the €742m loss in the first six months of 2012 was just a precursor to a decade long work-out of loans which will be costly and which will see additional major losses come out of the woodwork.

And in that vein, step forward today the Odyssey Pavillion complex in Belfast which comes onto the market via Savills with an asking price of GBP 10m (€12.58m). The developer of the property included prominent northern Ireland property man, Peter Curistan and the property had GBP 71m owing to Anglo when the developer was placed in administration.

So even if the asking price is realised, Anglo or IBRC as it is now, will face a loss of at least 85% on its loan, and given the foreclosure and recovery costs, the loss is likely to be more. Nearly 70% of IBRC’s loans are now impaired according to the H1,2012 accounts and the view on here is that IBRC still faces multi-billion euro losses as the legacy loans are worked out between now and 2020.

And remember that it costs us €300m-a-year to operate IBRC, a cost no doubt reflecting the €1m-CEO and the money-is-no-object approaches to the Quinns and David Drumm. And remember that IBRC has been paid €900m in NAMA subordinated bonds for its loans and these bonds will not be honoured if NAMA makes a loss, and the jury is still out on NAMA’s prospects. And remember IBRC lost a key case against bondholders in June 2012 in the UK which could expose it to massive losses if IBRC loses its appeal and other bondholders get antsy. And don’t even mention the disastrous INBS mortgage book absorbed into IBRC. Yes, the view on here is the literal interpretation of Minister Noonan’s response to a parliamentary question was correct – IBRC will cost us €52bn gross to bailout.

As for the Odyssey itself, according to Savills “The Odyssey Pavilion comprises a total of 15 leisure based units extending to a total gross internal area of over 242,000 sq ft and occupies a prominent quayside river position. It acts as a gateway to the ever expanding Titanic Quarter which now hosts the Titanic Belfast signature tourism attraction, the Paintworks Film Studio, BelfastMetropolitanCollege, Premier Inn, the Public Records Office (NI) and the Northern IrelandSciencePark.” The brochure for the property is here.

The Odyssey was developed in part by Peter Curistan who has been behind developments in Northern Ireland and mainland UK. He was also behind the Parnell centre on Parnell Street in Dublin city centre, where he was on the losing side in a battle to repay Anglo’s loans adjudicated in Dublin’s High Court earlier this year. In Northern Ireland, he was battling with Anglo in the courts claiming Anglo behaved improperly towards his company in favour of a company associated with one of the Maple 10, though it seems he lost his case there. All of this litigation is not cheap, and even if Anglo wins, it faces further a battle to recover its costs. I haven’t seen Peter Curistan associated with NAMA, and he appears to be a developer whose loans were left in IBRC by the Agency.

Yes, that €52bn bailout estimate for IBRC is looking correct even if the blogpost here last week caused consternation in some lofty parts of our Establishment.

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Posted in Banks, Developers, Irish Property, NAMA, Northern Ireland | 6 Comments

6 Responses

  1. on September 26, 2012 at 1:28 pm JP

    Certainly a job of work to be done on the asset management side:

    The property is partially let and income producing. Out of the available 15 units & 4 kiosks there are presently 7 income producing units. The scheme currently consists of;
    • 4 Tenants in contract paying rent.
    • 1 Tenant in administration.
    • 1 Tenant in CVA.
    • 2 Occupiers on tenancies at will paying rent.
    • 4 Management agreements under the administrator with no rent but contributing to void costs.
    • 3 Vacant units.
    • 4 Kiosks of which 1 is let at no rent on a 5 month licence.

    Currently only 61.80% of floor space is income producing. Given the nature of
    administration the property offers excellent asset management opportunities. Namely;
    • Re-positioning the tenant mix to appeal to a wider market.
    • Letting the vacant space and attracting National Covenants.
    • Reduce the service charge shortfall.
    • Establishing a rental tone.
    • Run the administration units until re-letting.
    • Reconfiguration of existing layout.
    • Further establishing a brand destination.


  2. on September 26, 2012 at 3:48 pm Jake Watts

    According to my math, that is around 90 euros a sq. ft. One hell of a deal for “waterfront” property. If it were in lower Manhattan, it would be 200 million. I understand the Pavillion does have a Pizza Hut. Not sure if that is factored into the selling price.


  3. on September 26, 2012 at 3:54 pm Jake Watts

    That should be 50 euros, even cheaper.


  4. on September 26, 2012 at 5:14 pm JP

    A very similar crowd to lower Manhattan:

    http://www.4ni.co.uk/northern_ireland_news.asp?id=89805

    http://www.u.tv/news/Woman-sexually-assaulted-at-Odyssey/7cec3362-76fd-4e54-8a0e-82a57655b31b

    http://www.bbc.co.uk/news/uk-northern-ireland-12858925

    http://www.bbc.co.uk/news/uk-northern-ireland-12205793

    http://www.bbc.co.uk/news/uk-northern-ireland-16957015

    http://www.bbc.co.uk/sport/0/football/17067665


    • on September 27, 2012 at 12:47 am Jake Watts

      @JP

      Incontrovertible proof that blue-collar crime harms local real estate prices while white-collar crime enhances them. And, that power lunch at the Pizza Hut might not go down as well as the Asiate. In case you are in town:
      http://www.opentable.com/asiate


  5. on September 26, 2012 at 11:17 pm DCB

    £40 per sqft is as cheap as it gets. However at c60 per cent occupancy, with empty rates and service charge irrecoverables there probably is no net income.



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