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Archive for October, 2012

We learn from today’s Iris Oifigiuil that NAMA has had receivers appointed to assets at twop companies, both of which have been financially embattled for some time.  NAMA has had Liam Dowdall of Smith & Williamson Freaney appointed as receiver to the following assets at P Elliot & Company Limited

(1) 133 and 134 New Seskin Court, Tallaght, Dublin 24, and the rents and profits deriving therefrom
(2) 305 Harbour Point Business Park, Little Island, Cork;
(3) Apartment 90, Block B, Temple Court, Northwood, Santry
(4) No. 17, Knightsbrook Park, Trim, County Meath
and the rents and profits deriving therefrom

P Elliot had receivers and liquidators appointed in June 2011 at the behest of non-NAMA creditors.

NAMA has also had Liam Dowdall of Smith & Williamson Freaney appointed as receiver to an unidentified property – looks like a development site – owned by  NORTHWOOD (RESIDENTIAL) LIMITED in Dublin. Northwood is already in receivership. Its directors are listed as William Kilmurray (64), Ben Underwood (63) and Anthony Donnelly (48). It is owned by John Shiel (12.5%), Globe Estates Limited (37.5%) and AWG Property Developments (Ireland) Limited (50%. Globe Estates Limited is owned by William Kilmurray. AWG Property Developments (Ireland) Limited. AWG is owned by Northern Ireland company AWG which is showing as a “closed company” though its former directors include Paul Devine, Stephen Kelly and Lesley Anne Wallace.

Remember you can see a comprehensive list of Irish foreclosure action by NAMA here and in this regularly updated spreadsheet.

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NAMA sues Bank of Scotland

NAMA’s degree of transparency nearly matches that of the Irish court system. Today we learn that NAMA is suing Bank of Scotland, no less, but there is practically no chance of finding out in outline or in detail, NAMA’s grievance. We simply know that on 24th October, 2012 NAMA made an application to the High Court in Dublin – reference number 2012/4068 S – and that the applicant is National Asset Loan Management Limited represented by Dublin solicitors, Gartland Furey and the respondent is Bank of Scotland, and as is usual with recently-filed cases, there is no solicitor on record for BoS.

You might think you could get details of the application from the Court itself, but no, the Central Office at the High Court that unless you are a solicitor acting in the case, the papers including the application are out of bounds. Even if you’re a barrister.

NAMA doesn’t comment on individual court cases and BoS are unlikely to. So all we can say at present is this is NAMA’s 35th application in Dublin’s High Court this year and that the Agency has been on the receiving end of a separate additional six applications.

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On Wednesday this week, the NAMA chairman told an Oireachtas oversight committee that NAMA was working with two thirds of developers. The other one third has seemingly been subjected to foreclosure action – receivers, administrators and liquidators appointed and in some cases, the companies and individuals have been chased through the courts. The reckoning on here is that NAMA has had receivers appointed to over 200 companies but in some cases, individual companies may be part of the same group. So NAMA is generating a strong demand for insolvency professionals and we all know this. And less than two years ago, NAMA appointed panels of insolvency professionals for foreclosure work in Ireland and the UK.

So it came as a little bit of a surprise that yesterday the Agency issued a new tender for insolvency professionals. NAMA is seeking tenders for the following panels

(1) Insolvency Practitioners (corporate) for Ireland

(2) Insolvency Practitioners (corporate) for the UK

(3) Insolvency Practitioners (fixed charge) for Ireland and

(4) Insolvency Practitioners (fixed charge) for UK

Asked how these tenders sit with the existing panels and if the existing panels were being stood down, a NAMA spokesman would merely say this morning that the new panels are the ones from which appointments will be made.

NAMA said on Wednesday at the Oireachtas that it was not black-listing companies touched by the Enda Farrell affair, which will come as a relief to Ernst and Young, former employer of Enda Farrell’s wife, Alice Kramer.

The deadline date for submission of tenders is 19th November 2012 and the full tender document is available here.

UPDATE: 2nd November 2012. NAMA has “clarified” that there is no longer a minimum turnover for eligible tenderers. The previous requirement was E2m in each of the last three years. That requirement has now been removed. The clarification is here.

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Good news for those property professionals who have been having sleepless nights at the dwindling vacant office space in Dublin city centre – still over 20% though somehow the property companies are trying to convince us that 15% is the new 5% normal vacancy level. Junior finance minister at Brendan Howlin’s Department of Public Expenditure and Reform, Brian Hayes yesterday told the Society of Chartered Surveyors in Ireland that “being blunt, there is much greater value on the outskirts of Dublin and if we are serious about saving money not all functions need to be city centre based” So any imminent shortages in the Dublin city centre office market might be alleviated!

The junior minister was referring to plans to cut the Government’s expenditure on accommodation in its 2,200 buildings of which 900 are leased by the State at an annual cost of €112m in 2012 which the Minister wants cut to below €100m in 2015. Within certain echelons of official Ireland, eyebrows have been raised at the continued occupation of prestigious Dublin city centre buildings when rents can be 70% less just a 20-minute Luas jaunt away. It’s unclear when the NTMA’s lease on its HQ at Treasury Buildings expires or if the present receiverships of Treasury companies may affect the expiry date, but is there any reason it can’t be moved, perhaps closer to Dublin airport to facilitate meetings with all these international investors that NAMA keeps talking about – apparently there are locations available in Balbriggan and Swords!

We should not be surprised that the State’s property bill is coming down – the public sector employed 320,000 people in 2008 and it is intended that this should fall to 282,500 by the end of 2014. The Minister also referred to other streamlining measures in his speech. The Minister also referred to the construction sector and whilst we all accept that the sector in still on the floor, there were some rays of home given with accommodation needs for new enterprise.

The transcript of the Minister’s speech is here. Those attending were seemingly impressed by the Minister’s grasp of map-based inventories, standardised fitouts and other technical issues.

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Embattled Capel Developments has seen its Sandford Lodge apartment complex go on the market in September 2012, at the behest of receivers acting for Bank of Scotland. The 109 apartments are reportedly all rented generating €2.1m per annum and the property had an asking price of €26m. This evening, sources are claiming that a sale has been agreed at €27m, representing a 7.5% initial yield, after eight bidders pursued the property. The buyer is understood to be Californian investor Kennedy Wilson which has made a major foray into Irish property in 2012 with the purchase of the 210-apartment Allianz building just off of Barrow Street in south Dublin Docklands for about €40, Brooklawn House in Ballsbridge for €15m – Kennedy Wilson’s contribution was €7.5m as it purchased in a 50:50 joint venture –  on and the purchase of €360m of Lloyds/BoSI loans acquired in a joint venture with Deutsche Bank.

Capel Developments is a NAMA developer as well as having exposure to non-NAMA banks and NAMA has taken foreclosure action against it and its directors personally.

At time of writing this evening, neither Kennedy Wilson nor receiver Kieran Wallace at KPMG had any comment on the matter. The sales listing and brochure for Sandford Lodge is available here from selling agents, Savills.

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Most people agree that the first Matrix film was an entertaining,  and maybe a great, film. The second film was a bit “meh” and the third was unwatchable except for the most diehard fans. But as popular as the first Matrix was, and it was certainly stylish and the tone of the conversations was impressively weighty, what was actually said was a load of crap. “More important than what, is when” says Morpheus before explaining to Neo that the year is 2197 not 1997. Think about that for a second and it is utterly meaningless. Morpheus goes on to explain that their craft is a “ship, the Nebuchadnezzar. It’s a hovercraft”. No, it’s not, it’s a submersible and you never see it hovering. In fact, you might never be able to watch that film with a straight face again if you actually think about what is being said throughout, because it’s just a stylistically-rendered load of rubbish.

NAMA has this morning produced a matrix .

The matrix (shown above) is NAMA’s attempt to show that contrary to popular perception, NAMA is a very transparent organisation, at least relative to the State-owned banks and semi-state agencies. And on the face of it, NAMA is impressive, and as far as this matrix goes, it is accurate.  In fact NAMA is a martyr to itself by omitting the fact that it has a dedicated blog to track its progress, and there isn’t an AIBshootingFishInABarrel or an IBRCcosts50pcmorethanNAMAtorun blog. Okay, NAMA doesn’t refer to the fact that it is not subject to Freedom of Information legislation, and it might be considered a tad inconvenient to remind us that it is at present fighting tooth-and-nail with the Information Commissioner in the courts to stop NAMA being subjected to environmental requests. But this is NAMA’s visual attempt to convince you it is transparent.

But unlike the ESB or Bord Gais, where you can get a good sense of sales, costs and profits, NAMA’s performance is still shrouded in thick fog. If you were to ask me today how NAMA was performing, I could stick on a pair of shades and adopt Morpheus’s all-knowing tone and tell you it’s doing badly or well, but in truth we don’t really know. Is NAMA making a profit? Presently yes, by reference to accounting standards though it is carrying a €1bn cumulative loss, and remember that it imposed a separate €42bn loss on the banks. But even the current NAMA profit is skewed by accounting conventions like “effective interest rates” and the rules about when NAMA can recognise profits. We know that NAMA overpaid the banks by €5.6bn compared with what the loans were worth on the open market – that was deliberate and the EU approval of NAMA anticipated that a premium would be paid for long term economic value et cetera. And since NAMA valued those loans, property values in Ireland are down a further 25-30%. So what big hole lies beneath NAMA?

NAMA won’t tell you about profit on individual sales, or what projects it is investing in or how many staff are currently suspended – “we don’t discuss individual transactions”, “we don’t discuss individual staff” – nor even confirm overall totals for staff suspended. Somehow, even though the ESB and Bord Gais are less transparent than NAMA in NAMA’s matrix, we tend to feel more confident about the transparency of their operations.

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Opposition politicians may have largely abandoned their sallies on Minister for Health James Reilly’s position on the bumping-up of a site in Balbriggan belonging to his associate, for development as a primary care centre, but controversy and malodour involving the Minister and his actions are not going away. Today we learn of continued resistance by consultants to his late-in-the-day reform of work practices, but it was earlier this week that the Minister revealed in the Dail that practically all medicines used in the Irish public health system are expensive non-generic medicines. This compares with just 20% use of non-generic medicines in our closest neighbour, the UK.

Minister Reilly was responding to a series of questions from the Sinn Fein health spokesman Caoimhghin O’Caolain and the Sinn Fein finance spokesperson Pearse Doherty. It was revealed that in 2011, a staggering total of €1.85bn of drugs were prescribed in Ireland and that just a paltry €100m per annum are non-generic. In a recent IMF report on selected issues in Ireland, it was revealed that in the UK, 80% of drugs prescribed are generic. It seems that the IMF estimate of generic drug use in Ireland of 20% was four times over the true percentage*, which just aggravates the point being made by the IMF. Generic drugs, whose patents may have expired, are less expensive than non-generic drugs, yet Ireland’s health service, overseen by Minister Reilly is aloof to tackling an area which could see hundreds of millions of euro savings per annum. Just how much longer can this minister continue in his post.

The full parliamentary questions and responses are here:

 Deputy Caoimhghín Ó Caoláin: To ask the Minister for Health the full drugs bill for the Health Service Executive for 2010, 2011 and to date in 2012; if he will provide a breakdown of same by scheme, by patent status and branded generic status.

Deputy Pearse Doherty:  To ask the Minister for Health if he will provide an estimate of the cost of drugs and medication used by the public health service in each of 2010 and 2011.

Deputy Pearse Doherty: To ask the Minister for Health if he will provide an estimate of the cost of generic drugs and medication used by the public health service in 2010 and 2011.

Minister for Health, James Reilly: HSE expenditure on drugs and non-drug items (dressings, etc.) under the GMS and community drug schemes for the years 2010 and 2011, including mark ups and dispensing fees for pharmacists and wholesalers, is set out in the following table:

The HSE’s Performance Report indicates that expenditure up to July 2012 is approximately €1 billion . Expenditure on generic drugs is estimated to be in the region of €100 million per annum.

The outstanding information sought by the Deputies is being collated and will be supplied as soon as possible.

* UPDATE: 25th October, 2012. It has been pointed out that the IMF study examined volume which showed that 20% of volume was non-generic, the PQs above reveal that 5% by value is non-generic.

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“Deputy Joe Higgins should note that the site is under the control of NAMA and that, as a consequence, Mr. Murphy does not gain. NAMA gains if there is any gain. NAMA represents the people in trying to get back the moneys that were lost.” Minister for Heath James Reilly in Dail debate on 3rd October, 2012

The controversy over the decision by Minister for Health, James Reilly to bump up a site belonging to his associate at 66,68,70 Dublin Street, Balbriggan, north Dublin to a priority list for the development of a primary care centre, just isn’t going away. The Minister has so far failed to provide credible criteria for his decision and from the reflection of the words and actions of former junior minister Roisin Shortall, there is a sense that the decision stinks to high heavens.

A couple of weeks ago, NAMA refused to confirm if it had discussed the site with Minister Reilly. The site is in NAMA as a result of the borrowings of businessman and developer Seamus Murphy being acquired by the Agency. NAMA cited its obligation to maintain confidentiality pursuant to Sections 99 and 202 of the NAMA Act

In the Dail this week however, Minister Reilly was asked directly by the Sinn Fein finance spokesperson Pearse Doherty if he had met with NAMA about the site, and the response was that yes, Minister Reilly met NAMA in April 2012. The Minister was asked for the nature of the discussions but he did not respond to that aspect of the question. The Minister says that he and his officials discussed “a number of PCC locations” with NAMA “including Balbriggan” but he then confusingly goes on to say “no specific address” was mentioned. It is unlikely that NAMA has myriad properties in Balbriggan!

So now, we have James Reilly having discussions with NAMA prior to his bumping-up of a site – belonging to his associate Seamus Murphy – to a priority list which prompted the resignation of his junior minister amid accusations against Minister Reilly of “stroke politics” and we also have NAMA saying it didn’t provide anyone outside the Agency with details of Seamus Murphy’s borrowings, meaning that when James Reilly claimed that Seamus Murphy would not benefit from the transaction, he could only have known whether the loan on the Balbriggan site was in excess of its sales value from someone other than NAMA, but Minister Reilly says he didn’t discuss the financial aspect of the site with Seamus Murphy. We are unable to judge if the discussion that James Reilly had with NAMA in April 2012 had any impact on NAMA’s intentions with the site, though NAMA is duty-bound to report any attempt to influence its decision on a property to the Gardai – “it is an offence to communicate with NAMA with the intention of influencing the making of a decision in relation to the performance of its functions.  If such an attempt were to be made, the Act imposes an obligation on an officer or Board member of NAMA to report it to a member of the Garda Síochána.”

The full parliamentary question and response is here.

Deputy Pearse Doherty: To ask the Minister for Health if he or his representatives have had contact with the National Asset Management Agency in respect of a property at 66, 68,70 Dublin Street, Balbriggan, County Dublin; and if so, the dates and nature of the contact.

Minister for Health, James Reilly: My officials and I met once this year with NAMA on 20 April 2012.  Within its commercial remit NAMA advises that it is at all times open to proposals which can contribute to the achievement of broader social and economic objectives.  In this context many issues of interest to the health services were discussed.  A record of the meeting shows that a number of PCC locations were discussed, including Balbriggan.  However, no specific address was mentioned.

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[UPDATE: 29th October, 2012. The transcript of the Committee hearing is now available here]

This afternoon, the NAMA CEO and chairman – Brendan McDonagh and Frank Daly respectively – made their way up the road from the NAMA HQ to attend an Oireachtas finance and public sector reform committee hearing. NAMA’s Head of Asset Management and NAMA board member, John Mulcahy turned up eventually despite the word on the street that he is up to his ears in dealing with what he describes as “shit” in the Agency. The opening statement by the NAMA CEO is here and the NAMA chairman is here.

Of course the Enda Farrell scandal was to the fore and NAMA came prepared to close down any examination with the old reliable that the matter was before the courts and was subject to a Garda investigation. It emerged that NAMA initially found out via the Deloitte investigation on 12th August that there was an alleged leak of information. NAMA says that “two or three debtors” have contacted the Agency to find out what data may have been leaked relevant to them – it is understood that David Daly, an ex-NAMA debtor who had his loans refinanced and Sean Dunne were two such debtors. NAMA says that there is one further investigation in train; this is likely refer to the matter reported by Ronald Quinlan in the Sunday Independent last week. What was new was that NAMA didn’t take the opportunity offered to it to say if there had been any staff suspension.

NAMA maintains that the alleged leak of information has not been prejudicial to its debtors and expresses confidence that the information has not been disseminated beyond the identified email recipients. Although NAMA previously stated that one of the reasons it protects the confidentiality of its sales, is that if prices were published, it would damage NAMA commercially – now NAMA says that the alleged leaks will not affect its commercial prospects! NAMA is also requiring buyers to assure the Agency that it is not connected with a NAMA employee. NAMA will not blacklist investors or suppliers of services after the Enda Farrell affair.

NAMA says that since October 11th, it is ensuring nearly all property sold by NAMA and its debtors is offered on the open market. This follows extensive  criticism of NAMA’s sale of property off-market. NAMA revealed that 200 approximately properties out of the 3,500 disposed of by NAMA debtors have been sold off-market.

NAMA accepts that where it sells loans, it loses control over the debtor who may go on to see immediate debt forgiveness from the buyer of the debt. NAMA has sold €1.9bn of loans to date. NAMA says that the ICG Longbow transaction was initiated by the other lender on the scheme.

NAMA expects over 1,000 properties to be actually transferred for social housing by the end of 2013.

The hearing is ongoing. The transcript and any other nuggets from the hearing will be posted as an update later.

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This morning has seen the publication of the Central Statistics Office (CSO) residential property price indices for Ireland for September 2012. Here’s the summary showing the indices

  • at their peak (various months in 2007 depending on type of property and location)
  • the NAMA valuation date (November 2009)
  • 12 months ago (September 2011)
  • the start of this year (end December 2011)
  • last month (August 2012)
  • this month (September 2012)

The CSO’s indices are Ireland’s premier indices for mortgage-based residential property transactions. The CSO analyses mortgage transactions at nine financial institutions : Ulster Bank, Allied Irish Banks, Bank of Ireland, ICS Building Society (part of the Bank of Ireland group), the Educational Building Society, Permanent TSB, Belgian-owned KBC, Danish-owned National Irish Bank and Irish Nationwide Building Society. The indices are hedonic in the sense it firstly groups transactions on a like-for-like basis (location, property type, floor area, number of bedrooms, new or old and first-time buyer or not) and then assigns weightings to each group dependent on their value to the total value of all transactions. The indices are averages of three-month rolling transactions.

Cash transactions: With the launch of the property price register three weeks ago, the continuing relevance of a mortgage-only index from the CSO may be short-lived. Already DAFT.ie has begun the work to produce hedonic indices based on all the transactions made available by the Property Services Regulatory Authority, transactions dating back to January 2010. I would not expect the CSO index to be the foremost residential property index in the State by the start of 2013.

As for the key questions:

How much does property now cost in Ireland? The CSO deliberately doesn’t produce average prices. The former PTSB/ESRI index did, and claimed the average price of a property nationally hit the peak in February 2007 at €313,998, in Dublin in April 2007 at €431,016 and outside Dublin in January 2007 at €267,987. If, and it is a big “if”, you were to take PTSB/ESRI prices as sound and comparable to prices captured by the CSO series, then these would be the average prices today:

Nationally, €158,322 (last month €156,879, peak €313,998)

In Dublin, €188,109 (last month €183,622, peak €431,016)

Outside Dublin, €143,981 (last month €144,189, peak €267,987)

I don’t think the CSO would be happy with this approach but it seems to me that the PTSB/ESRI series, as represented by its historical indices, closely correlates with the performance of the CSO indices.

What’s surprising about the latest release? Prices nationally have risen for the third month in a row and the pace of increase has picked up – 0.2% in July, 0.5% in August and 0.9% in September The increase was focused on Dublin where house prices rose by 2.6% in the month, Dublin apartments were up by just 0.2% and outside Dublin, prices fell by 0.1%.

 Are prices still falling? No, prices are up 0.9% nationally in September 2012 following a 0.5% increase in August 2012 and 0.2% in July and a decline of 1.1% in June, an increase of 0.2% in  May following a decline of 1.1% in April 2012, it was flat in March 2012 which followed a 2.2% decline in February 2012, 1.9% monthly decline in January 2012, 1.7% decline in December 2011, 1.5% decline in November  2011, 2.2% decline in October 2011, 1.5% decline in September 2011 and 1.6% decline in August 2011.

How far off the peak are we? Nationally 49.6% (52.2% in real terms as we have had inflation of just 5.4% between February 2007 and September 2012). Interestingly, as revealed here, Northern Ireland is some 53% from peak in nominal terms and 59.5% off peak in real terms. Are forbearance measures by mortgage lenders, a draconian bankruptcy regime and NAMA’s (in)actions distorting the market? Or are cash transactions which are not captured by the CSO index so significant today that if they were captured, the decline in the Republic would be even greater?

How much further will prices drop? Indeed, will prices continue to drop at all? Who knows, I would say the general consensus is that prices will continue to drop. This is what I believe to be a comprehensive list of forecasts and projections for Irish residential property [house price projections in Ireland are contentious for obvious reasons and the following is understood to be a comprehensive list of projections but please drop me a line if you think there are any omissions].

What does this morning’s news mean for NAMA? The CSO index is used to calculate the NWL Index shown at the top of this page which aims to provide a composite reflection of price movements in NAMA’s key markets since 30th November 2009, the NAMA valuation date. Residential prices in Ireland are now down 29.9% from November, 2009.  The latest results from the CSO bring the index to 792 (26.3%) meaning that NAMA will need see a blended average increase of 26.3% in its various property markets to break even at a gross profit level.

The CSO index is a monthly residential property price index calculated from mortgage-based transactions. There are four other residential price surveys, based on advertised asking prices or agent valuations (see below, details here). In addition Phil Hogan’s Department of the Environment, Community and Local Government produces an index based on mortgage transactions, six months after the period end to which the transactions relate, and which is not hedonically analysed – it is next to useless, and as some might say is a reflection of Minister Hogan, the Department will continue to produce these indices at a “marginal cost”.

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