Archive for November 26th, 2012

In March 2012, it was reported on here that a NAMA developer, Holtglen won a case at the High Court against Dunnes Stores. Little was made of the case on here at the time, because Dunnes was merely ordered to fulfill its contract to pay €20.3m for its site in the the Ferrybank Shopping Centre in  Kilkenny and the assumption here was the sum would be paid, Dunnes would occupy the site and trade as normal – it didn’t seem like a life-or-death position for the Irish retailing giant. But fast forward eight months, and the NAMA developer Holtglen, backed by NAMA, is seeking the winding up of Dunnes Stores for non-payment of the €20.3m judgment.  Not only that, but RTE is reporting that a Dunnes “executive”, Margaret Heffernan has written to the NAMA chairman, Frank Daly and RTE today reports “in one letter, Ms Heffernan told Mr Daly it did not make sense for NAMA to seek the winding up of Dunnes Stores.” This looks suspiciously like lobbying to me, and if that is the case and if the contact doesn’t find exemption under NAMA’s rules, then NAMA is obliged to report the contact to An Garda Siochana.

Holtglen Limited, controlled by the McPhillips family from Kilkenny is itself insolvent and its loans relating to the Ferrybank Shopping Centre – pictured here – have been transferred to NAMA. In Dublin’s High Court today before Mr Justice Peter Kelly, Holtglen sought the winding up of Dunnes Stores and the case is set to be heard on 14th December 2012.

For its part, Dunnes claimed in court today that it was “robustly solvent” but according to RTE, “had not paid the debt amid concerns about the Ferrybank Shopping Centre in terms of its viability and planning issues” Given the judgment by Mr Justice Peter Kelly in March 2012, you might have doubts about this defence, and it seems that Judge Kelly today expressed the same doubts.

So how is Dunnes doing financially? It’s a private unlimited company, seemingly, and doesn’t publish accounts, though there seem to be separate limited companies for stores, and accounts are available for these.  It employs 18,000 according to RTE today, 16,000 according to the Dunnes Stores website and 2,500 according to other sources.  It has 116 stores in the (Republic of) Ireland,  23 stores in Northern Ireland, six in  England, five in Scotland and five in Spain. The Belfast Telegraph reported in April 2011 that the company’s turnover was GBP 194.7m (€240m) and its pre-tax profit was GBP 28m (€35m) though other sources suggest the overall annual turnover is €3.8bn. The company focuses on the sale of food, clothing and furnishings and faces competition from all angles with M&S at the higher end, Tesco/Musgrave/Superquinn/Supervalu in the middle and Aldi/Lidl at the lower end. A history of the company is available here. You would not have thought that a €20.3m bill would have caused it any real issues and that is why the judgment reported on here in March 2012 didn’t receive more attention.

Frank Dunne (69) is the managing director and Margaret Heffernan (70) is variously reported in the media as its “second biggest shareholder”, “chief” and an “executive” and “director of textiles”. She is listed as one of two directors of the private unlimited company, Dunnes Stores,  alongside Francis Dunne (Frank Dunne, 69).  NAMA’s anti-lobbying rules are available here. According to NAMA, “it is an offence to attempt to lobby NAMA. An officer or Board member of NAMA is obliged to report any such attempt to a member of the Garda Síochána and failure to do so is itself an offence.” The view on here is that it is practically impossible to legally fall foul of NAMA’s anti-lobbying rules because of all its exemptions, but when NAMA was being defended in its gestation by then finance minister, the late Brian Lenihan, he said on 10th September 2009 “the [NAMA] Bill includes a specific provision to outlaw lobbying of NAMA in relation to any of its decisions. Only a borrower and his or her agents will be authorised to deal with NAMA. It will be an offence to influence the Agency in the course of its work”

NAMA was asked for comment on the matter but had not responded at time of writing.

UPDATE: 14th December, 2012. At the 11th hour, Dunnes paid the €21.6m to Holtglen and in practice NAMA. The case returned to the commercial court today where Judge Kelly was no mood to indulge Dunnes Stores liberties. The barrister for Dunnes Stores said that the company had intended no discourtesy to the Court. The Irish Times reports “Mr Justice Kelly said he was glad to hear counsel say that because, on one view, the failure to pay could be regarded as a challenge to the court’s authority.”


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This morning has seen the publication of the Central Statistics Office (CSO) residential property price indices for Ireland for October 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 (October 2011)
  • the start of this year (end December 2011)
  • last month (September 2012)
  • this month (October 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 at the end of September 2012, 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, €157,360 (last month €158,322, peak €313,998)

In Dublin, €187,789 (last month €188,109, peak €431,016)

Outside Dublin, €142,733 (last month €143,981, 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? After three months of price rises, prices have declined and with the exception of apartments nationally, there have been declines right across the board.

 Are prices still falling? Seemingly so, based on October’s results of a 0.6% decline nationally after increases of 0.9% 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 49.9% (50.9% 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 55% from peak in nominal terms and 62% 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 30.4% from November, 2009.  The latest results from the CSO bring the index to 790 (26.7%) meaning that NAMA will need see a blended average increase of 26.7% 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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As Budget 2013 hoves into view on 5th December 2012, you can expect to see a lot more of Brian Hayes, the junior minister at Brendan Howlin’s Department of Public Expenditure and Reform. Which may not be good for your blood pressure as the €130,042 junior minister challenges us all to find ways to save the State money?

Brian is the junior minister that has had something of a Pauline conversion as regards the sustainability of Irish debt in the past year – a year ago, he swore blind that the debt was sustainable but as talks intensify with the Germans over a debt deal, Brian now swears blind that it’s not sustainable. Confused?

Well, with Brian’s latest soundbite, you are likely to be really confused. He is now telling people that okay, the €3.5bn adjustment that will be announced in the Budget in just over a week, will be tough, and that indeed we have a total of a further €8.5bn of adjustments to go, but we’re over the hump having already adjusted by €24bn. Seriously that is what he said more than once this weekend, most recently on RTE’s The Week in Politics.

The junior minister is talking rubbish.

In 2013, we are set to cut and tax €3.5bn, that much is true. But in 2014, we are set to cut and tax a further €3.1bn and in 2015 a further €2bn still. Yes that adds up to €8.5bn but the adjustments are INCREMENTAL. In other words, we have a deficit of €13bn today, in 2013 we will reduce that to €9.5bn, in 2014 we will reduce it to €6.4bn and in 2015 we will reduce it to €4.4bn.

So we are taking €3.5bn out in 2013, €3.5bn PLUS €3.1bn in 2014 and €3.5bn PLUS €3.1bn PLUS€2bn in 2015, that is, a total of €18.7bn. Yes, we are presently planning to take €18.7bn out in adjustments in the next three years. NOT €8.5bn.

That would be bad enough but when Brian refers to the €24bn already taken out in budget adjustments, he IS referring to the cumulative taken out since 2009. Remember at our peak, our deficit was about €25bn. So if we had taken out €24bn from the annual deficit, then we’d almost be balanced. So Brian is talking about cumulative with his €24bn but an annual incremental with his €3.5bn and €8.5bn. It like apples and crate loads of apples.

The  best comparison might be that by reference to 2008 we have to the end of 2012, taken an overall total of €24bn out through budget adjustments. And that by reference to 2012, we have a further €18.7bn of planned adjustments and even then we will still have an annual deficit but it will be less than 3% of our GDP. Or to put it in a simpler way, we have endured a lot of austerity since 2008 – €24bn in fact – but we have a lot more still to endure – €18.7bn planned.

Seriously, for €130,000 a year of public money, we should have better.

(Graphic above produced by Japlandic.com, contact here)



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