Archive for December 14th, 2012


Yesterday, the UK’s commercial property portal, CoStar reported that the Woolgate Exchange building in the City of London has finally been sold. Formerly owned by David Arnold and Siobhan Foley’s D2 Private and subject to significant lending from what was Anglo Irish Bank, CoStar is reporting the sale price as GBP 265m (€326m) and the buyer is the US investment group, David Bonderman’s TPG – the folks behind Burger King and which at one point were behind a bid for the Royal Liver portfolio of commercial property in Dublin city centre. TPG is joined by Canadian property investment group, Ivanhoe Cambridge. CoStar says the initial yield is 6% and that the purchase price works out at GBP 740 psf. The property was purchased for GBP 325m in 2006 and Anglo, or IBRC as it is now known, is likely to have taken a significant hit on its mezzanine finance for the property.


Today sees the publication of the November 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 0.5% in November 2012, which follows declines averaging 0.3% per month since December 2011. 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 have since been declining and are down by 3.9% in the last 12 months prices. Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 7.1%. Commercial prices in the UK are now 36.7% off their peak in June 2007. The NWL index  falls to 789 which means that NAMA needs to see a blended increase of 26.8% 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 three subsectors in UK commercial property with an index for all three at NAMA’s valuation date of 30th November 2009 of 100. Offices have been relatively buoyant whereas industrial premises like factories and warehouses have been relatively flat.


The UK economy is suffering difficulties almost every bit as challenging as those in the EuroZone and Ireland. Sure, they have their own currency and they’ve printed GBP 300bn of it in an economy with a GDP of 1.5tn, to help inflate their problems away. And yet they appear poised for a triple dip recession.  Last week, the UK’s independent Office for Budget Responsibility published its latest fiscal outlook which forecasts GDP for 2012 at -0.1%, 1.2%, 2.0%, 2.3%, 2.7% and 2.8% (but as with all economic forecasts in the long term, all forecasters forecast a peachy outlook). Deficit:GDP is forecast as -5.7%,-4.6%,-3.7%,-2.8%,-1.4% and -0.4% between 2012-2017. Debt:GDP is forecast at 90.3%, 93.5%, 96.3%, 97.4%, 96.6% and 94.4%. Inflation is forecast at 2.8%,2.5%,2.2% for 2012-2014. It expects commercial property to change -2.1%, 1.0%, 3.1%.3.6%, 3.9% and 3.5%  in 2012-2017.


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“When the government intervenes in the housing market, the question is not how much good it will do but how much damage” John Mulcahy, London, December 2012


Thank God it’s Friday – this will have you rolling on the floor laughing. NAMA’s most senior property man, its Head of Asset Management and NAMA board member, John Mulcahy has been offering his lifetime of property wisdom to UK politicians.  John was speaking at a property conference this week on a panel that included former London mayor, Ken Livingston and the mayor of the London borough of Newham – where much of the Olympics took place during the summer – Rob Wales.  It appears to have been an irony-free zone with John warning against government intervention in the property market.

NAMA is a major part of the Irish government’s response to the banking and property sector collapses. NAMA acquired €74bn of loans from banks, mostly secured on property. Given the UK economy is over 10 times bigger than the Irish economy, a proportionately sized agency in the UK might have GBP 600bn of loans. That’s how big NAMA is.

NAMA isn’t a normal commercial entity. It is funded with ultra cheap Irish government-backed securities and has a 10-year lifespan to work out its assets. Although it is supposed to be independent of Government interference, that independence has been seriously eroded under this present administration and now, TDs and senators have been given their own dedicated contact email address at NAMA – oir@nama.ie – to air their concerns. Minister Reilly met NAMA in April 2012 about primary care centres including Balbriggan, Minister Bruton had his views on BSkyB’s lease at Burlington Plaza made known to NAMA perhaps through intermediaries and politicians now contact NAMA in a manner which to most people looks like lobbying.

And what effect has NAMA had on the Irish property market? On the commercial side it controls a market-dominating portfolio worth over €6bn – €9.25bn by reference to November 2009 values – and in a market worth less than €1bn in 2012, that will take some time to shift especially when you consider NAMA is competing with other banks who are also offloading assets, banks like Bank of Scotland (Ireland) and Ulster Bank, not to mention IBRC, AIB and to an extent, Bank of Ireland. NAMA has introduced a so-called staple finance product which makes up to €2bn available for purchasers at cheap rates, so cheap that competitors look on enviously.

NAMA has committed to spending €2bn on its loans, finishing off developments and the like. Indeed last week, NAMA was reported to have been the unsuccessful bidder for a portfolio of CIE properties in Spencer Dock, and it might come as a surprise to people that NAMA is ACQUIRING property as well as disposing of it. Because NAMA is funded with government-backed bonds which cost the Agency the main ECB interest rate, 0.75% per annum at present, some might say that NAMA’s very low cost of capital gives it an unfair advantage.

NAMA has been criticized domestically for withholding property from the market and focusing its disposal efforts on other markets, notably London’s.

And on the residential front, NAMA is a major landlord with about 10,000 rented homes under its control and it is becoming obvious that private rents in the State are bucking price trends with fairly robust growth. There are over 300,000 rented homes in Ireland, so NAMA’s presence isn’t substantial in volume terms but as a single landlord in a market which is characterized by no large private landlords – biggest in State controls about 400 homes – NAMA’s impact on pricing can be substantial.

Elsewhere NAMA has introduced a special mortgage product which will compensate purchasers of selected homes for up to 20% of the value of those homes if they decline by that or more in five years. No other seller is offering such products.

So, on this wintry Friday in December, we might thank NAMA’s most senior property man for giving us all a good laugh after telling British politicians that government intervention in property markets is bad. And it’s not called NAMA wine lake for nothing!

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