Major Dublin office complex sells at 67% off peak values with 9.6% yield

Jack Fagan has a rare weekend outing in today’s Irish Times where he reveals that a consortium of European investors has bought the four main office blocks of AIB’s Bankcentre in Ballsbridge opposite the RDS. The seller, Aviva is said to have accepted “just over €70m” for the sprawling 154,000 sq ft complex set over four buildings. The property was originally bought in April 2006, a year before the general peak in Irish commercial property, for €177m. Commercial property generally increased by just over 21% between Q1 2006 and Q1 2007 which would have indicated a notional peak valuation of €214m. A €70m price tag today represents a 67.3% decline which is in keeping with the general market as tracked by Ireland’s two commercial property indices from Jones Lang LaSalle and SCSI/IPD.

The tenant in the offices is the 99.8% state-owned AIB which has thus far cost us at least €20.7bn bailout and additional state-aid injected via the NAMA acquisition of loans. There is a lease which expires in 2026 yielding an annual rent of €7m or €41 psf on an upwards only rent review. The yield quoted by Jack Fagan today is 9.6%. Jones Lang LaSalle was the selling agent and the unnamed investors are reported to have been assemble by Davy.

So there you have it, a landmark office block in central Dublin yielding 9.6% per annum until 2026 from a government-backed bank with evidence of a 67% decline from peak.

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Private sector deposits at covered banks continued to stabilise in August 2012

Yesterday, the Central Bank of Ireland (CBI) released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 31st August 2012 and shows that during the month of August 2012, deposits by ordinary households and businesses decreased slightly at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. The decrease of €0.2bn from €105.0bn in July 2012 to €104.8bn in August 2012 continues a trend of stabilising private sector deposits at the covered banks, and over the past year such deposits have increased by €2.6bn. Deposits are now back at May/June 2011 levels though are still €20bn lower than in October 2010 on the eve of the IMF/EU bailout. The CBI monthly commentary on the financial statements is here.

The CBI doesn’t provide an analysis of private sector deposits at the covered banks – about the only analysis it doesn’t provide – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits rose by €239m in August, which brings such deposits to €92.2bn. Total deposits from all sources in all Irish banks fell by  €12.4bn in August with the main cause being a €13bn decline in deposits from Euro area and rest of world.

The Department of Finance on 20th September published its “Deposits Trends” series for August 2012 which showed, according to the Department “deposits at the Covered Banks fell by rose by €0.3bn (-0.2%) month-on-month to €154.1bn. This still represents an increase of €14.0bn to €154.4bn since reaching a low-point of c. €140bn in July 2011. This demonstrates depositor confidence in the strength of the banking system following its successful recapitalisation last year” These deposits include deposits at overseas branches, in particular at the Bank of Ireland/British Post Office, so they are of limited use, but the trend indicates positive news. The small decrease in the month was due to the strengthening of the euro and on a constant currency basis, deposits actually increased by €0.3bn.

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks based in the IFSC which do not service the domestic economy.

Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.

And lastly the six State-guaranteed or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank ofIreland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outside Europe)

NOTE: THE CBI SOMETIMES MAKES MINOR ADJUSTMENTS TO PREVIOUS MONTH’S INFORMATION, THE DATA PRESENTED ABOVE SHOWS THE FIGURES WHEN THE ORIGINAL FINANCIAL STATEMENTS WERE PUBLISHED

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Of the Week…

Website of the Week

Right now, practically none of you has heard of propertypriceregister.ie but by the end of tomorrow it is set to become one of the most visited websites in Ireland. Tom Lynch, the CEO of the Property Services Regulatory Authority says that the new register of residential property sales prices, which will include sales as far back as January 2010, is set to go live tomorrow, 30th September 2012. The above is what the website looks like on Saturday morning. It might be worth pausing for a moment to consider how it was back in 1973/74 that Judge Kenny in his Kenny Report, recommended the introduction of a public property price register, something which was warmly embraced in public by all political parties – Fianna Fail, Fine Gael, Labour, Democratic Left, Greens, Progressive Democrats – and yet, somehow, when they got into power it never happened. You can thank the IMF that it is happening tomorrow, and I have no doubt were it not for the IMF, this Government would have created some excuse to delay the introduction of a tool which will immeasurably improve transparency in this country. Along with a fiscal council, bankruptcy reform, a central credit register, reform of the medical and legal sectors, it’s another innovation brought to us by the IMF.

Bad but it could be worse of the week

 

With the spate of six killings in the past eight days, you could be forgiven for thinking that we are truly on our way to Hell in a handcart with a breakdown in law and order, but annual recorded crime statistics from the CSO this week revealed that in most categories of crime, including killings or homicide, the numbers for the year ended June 2012 are down on the previous year. Homicides were down by 19 to 62 in the year. Burglary was one of the few categories to show an increase of 10% to 28,623 incidences in the most recent statistics. Still though, the perception of deteriorating law and order is there, but those perceptions of society being better in the old days, though common, aren’t always borne out by the facts.

Table of the Week

 

The Comptroller and Auditor General published its annual report this week where it set out the work undertaken on the nation’s finances. Jaw-dropping errors were uncovered and the 300-page report is worth a read, but its overview of the national debt is particularly enlightening and the above very simple table shows just how much our finances have deteriorated since the onset of the financial crisis in 2007/8.

This was the week we learned that 87,100 were estimated to have emigrated in the 12 months to April 2012, a daily average of 240 putting our emigration rate at an absolute record since 1987 and just behind 1989 in terms of rate of emigration per 1,000.

Foreign News story of the Week

The Wall Street Journal reported on Thursday, see above, that a country in financial distress is set to have its state owned bank – 99.8% state-owned AIB, which has thus far received at least €20.7bn of a bailout – pay €1bn to bondholders on Monday next 1st October. The world-renowned WSJ seems to be in wonderment at such generous behaviour, considering how the country in question is verging on being an economic basket case (14.8% unemployment, debt:GDP set to rise to 120% in 2013 or 150% of GNP, €13bn or 8.4% deficit with difficult budget adjustments ahead, close to zero economic growth, 87,000 emigrants per year, subject to an IMF bailout)

Domestic News story of the Week

Oddly enough, there doesn’t seem to be any mention of the above country and its €1bn bond payment in the domestic media. Mind you, when AIB paid out €1.5bn to senior unsecured unguaranteed bondholders in April 2012, there was nary a mention of the matter in our national broadcaster, save to report an incident when an AIB branch in Dublin was briefly occupied by protesters. Some people claim that RTE is a government mouthpiece trying to stultify us into thinking it will all be good and we have turned the corner. That seems to be unfair on the organisation and the individuals working there, and a more realistic reason might be that they’re just not very good at reporting, or basic arithmetic judging by their percentage calculations below

Parade of the Week

There are 48 parades taking place in Northern Ireland today, many commemorating the signing of the Ulster Covenant 100 years ago when over 400,000 men and women signed petitions seeking to promote the union with Britain. About two hours ago, the main parade in Belfast got underway with 209 bands and over 20,000 parade participants plus an unknown number of spectators. As with a small number of parades each year in Northern Ireland, there will be a protest in the Carrick Hill area of Belfast, a protest limited to 150 participants – this particular area has been the scene of serious public order disturbances this year with a band filmed playing sectarian music outside a church, Orange Order parades breaking the terms under which licence to march had been granted and rioting which left scores of policemen and women wounded. The parade today and the protest have been the subjects of determinations by the Parades Commission with which all parades – be they a Maxda MX5 rally or a charitable demonstration – must be approved. An extract from the determination for today’s main march in Belfast is shown above and is here. The terms governing the protest are here. People on this side of the Border may be bewildered at this state of affairs – tomorrow at 11.30am, the Ballyhea bondholder protesters will meet at the Garden of Remembrance at the top of O’Connell Street in Dublin at 11.30am from whence they will march at noon to Croke Park. There will be a march at 11.30am in Charleville also. They’re protesting the payment of bonds in state-owned banks – which are in receipt of €64bn of our cash/promissory notes so far plus €6bn of state-aid from NAMA – repaying 100% of sums owed to bondholders. There is less than €190m of the most contentious bonds left at IBRC but there are still billions in AIB, PTSB and Bank of Ireland – AIB is 99.8% state-owned, PTSB is 99% state-owned, BofI is 15% state-owned though given the state-ownership of preference shares, arguably BofI is de facto state-owned also. Details of the march and of the €1bn bond being paid on Monday 1^st October are here.

Stoke the Rage of the Week

Yesterday the Department of Finance published its own accounts for 2011 and gave us detailed information on pension payments made to former (and current) politicians. You probably won’t be pleased at the sums paid to former politicians given some of their records in office…

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