Archive for February 6th, 2013

[The IBRC Bill 2013 is IBRC Bill 2013.pdf FINAL]

There have been rumours all afternoon of a major new development with the Anglo promissory notes and an hour ago, RTE broke the news that emergency legislation is planned which will liquidate IBRC imminently.

RTE reports “Under the plan, IBRC’s assets would be transferred to the National Assets Management Agency.”

This is what is believed will happen, but at time of writing, no-one is offering comment, save to confirm that TDs will be staying late tonight.

IBRC’s legacy loanbook of about €16bn will be acquired by NAMA using its un-used bond allocation as provided for in the NAMA Act – remember the European Commission approved NAMA to issue €54bn of bonds and to date, it has just issued €32bn (and indeed redeemed €5bn of those).

IBRC staff will be transferred to NAMA with NAMA doing to IBRC what Anglo did to Irish Nationwide two years ago, and you can expect NAMA staff to prevail.

The Government will issue a new sovereign bond, which may only be around €10bn to a new IBRC. Where did the other €16bn go? NAMA will buy the IBRC loans for €16bn and will pay off its bonds by 2020.

This is all highly fluid and updates will be posted as information is received.

UPDATE (1): 6th February, 2013. There is no official comment on what is proposed. I understand TDs are staying late and an announcement from Minister Noonan is expected. But what I am hearing is similar to a scheme that was proposed in confidence to certain parties last October 2012, and I reproduce it here. There’s a simplified balance sheet schematic at the bottom.

1. NAMA acquires the remaining c€20bn of loans in IBRC. Although these are not all development loans, under the NAMA Act, NAMA can pick and choose what loans it acquires and it can acquire non-development loans if it deems them in any way systemic, this was the argument used by NAMA at the Paddy McKillen court case. And overall the €20bn remaining loans in IBRC are “systemic” to the State.

NAMA issues new NAMA bonds for the loans. The NAMA Act and NAMA scheme approved by the EC allows NAMA to issue up to €59bn of bonds – €54bn for original loan acquisitions and up to €5bn for development funding. NAMA has in fact just issued €32bn and redeemed €2bn. So NAMA has spare of up to €29bn, and could therefore easily afford the €20bn of loans at IBRC. The ECB wouldn’t like it, but we have a NAMA Act approved by the EC so we can technically stick two fingers up to the ECB.

2. The IBRC operation is run down in 6 months because once it has transferred its €20bn of loans to NAMA, there is no IBRC business – staff are transferred to NAMA and there will be efficiency savings by removing duplication, and removing competition for resources and customers. IBRC would remain open as a business only to hold NAMA bonds which mature in 2020 and also to hold the infernal promissory notes and on the other side of the balance sheet would owe the Central Bank Exceptional Liquidity Assistance (ELA). Of course, here is clever part. IBRC exchanges the NAMA bonds with the ECB and as government guaranteed collateral they attract the lowest ECB haircut and the lowest interest rate, currently 0.75%.

3. With the cheap cash which IBRC gets from the ECB, it pay down the ELA owed to the Central Bank of Ireland. It is the Central Bank of Ireland which needed the promissory notes to have such a high rate of interest, about 8%, to approve the promissory notes as collateral to advance ELA.

4.Less ELA means the promissory notes do not need the same high interest rate. The State switches the promissory notes at IBRC with new promissory notes with a lower rate of interest. [Seems like instead of promissory note, there will be a government bond]


UPDATE (2): 6th February 2013. Am hearing that the Minister for Finance, Michael Noonan will make a statement to the Dail at 9pm. No comment from NAMA on this evenings reports. IBRC staff are alarmed at news, both of the liquidation and the take-over by NAMA. 250-odd of the 1,000 IBRC staff already work for NAMA on the smaller NAMA loans.


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In the premier league of (in hindsight) disastrous ambitions during the noughties building boom, we are all familiar with the €412m 25-acre Irish Glass Bottle site which can be rented today for €750,000 a year and the €380m paid by Sean Dunne for a few mid-market hotels and a run-down office building so that he could realize his vision of Knightsbridge in Ballsbridge, or the €180m an acre paid by the Grehan brothers just down the road from that. But in the lower divisions, there have been plenty of less prominent disasters and one must be the 193-home development in Priorland outside Dundalk on land known locally as Balmer’s Bog.

The BBC today reports that Ulster Bank has moved against the developer, Kinler Developments Limited, which apparently owes €28m in respect of the land. The development obtained planning permission in 2008 but there were further appeals before a plan was finalized in 2009, by which time the market had collapsed. So it would appear that Ulster Bank is left with a loan on bog land that equates to €145,000 per planned home.

It’s not premier league, but it’s up there.

Kinler is registered to an address in Dundalk but is controlled by John Curran, Kieran Haughey and Mark King and reported to be a Cookstown, county Tyrone developer.  Ulster Bank has also taken over Dublin property which was owned by a related company, Tiffen Developments (Irl) Limited, which the BBC reports to be a site with planning for 19 houses on Grace Park Road in Drumcondra and a site on Swords Road in Malahide for three blocks of 27 apartments. With new homes and apartments in Dublin falling by between 1.3-10.2% last year according to the SCSI this morning, and with developers moaning about build costs being less than market values, Ulster Bank is likely to be concerned about how much these latter sites are presently worth.

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The Society of Chartered Surveyors in Ireland has this morning published its annual report on Irish property prices – the report is here, the press release is here. By the tone of headlines at newspapers that had an advance copy, you would think that Dublin was enjoying a robust recovery but in truth, according to the SCSI, prices in 2012 in 12 of the 14 categories surveyed were down on 2011 prices, with one-bedroom apartments suffering most with a 10.2% decline.  Two categories, 3-bed and 4-bed semis rose in value in 2012 by 2.7% and 1.1% respectively.  The rest declined. This is the summary.


Elsewhere in the report, rents are up slightly in some regions, by 3% in Dublin though there was a decline of 3.2% in Connacht/Ulster.

Turning to commercial, office rents are showing as declining and even prime 3rd generation Dublin offices are down by 3%. Yields have widened up tom 9.5% for Georgian offices, though prime 3rd generation bucked the trend by narrowing from 7.5% to 7.4%.

Dublin prime retail rents are down 10%, retail warehouse rents are down a whopping 40%.

Industrial rents are down 5-10%.

Development land continues to decline, mostly by two-digits.

Whilst capital values for pubs continued to decline, hotels were up by 0.5%.

Agricultural land is up by single digit percent.

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Although he has refinanced his own personal loans out of NAMA, David Daly’s Albany Homes is understood to be still a customer of the Agency. Today, we learn via Jack Fagan in the Irish Times that David has sold two adjoining shops on Dublin’s Grafton Street to GLL Real Estate Partners, a German property investment group with a portfolio that spans Europe and the United States. Known to many of you as the River Island and Wallis stores at the Trinity College end of Grafton Street, the adjoining stores at 103 and 104 Grafton Street are reported to have fetched “just over €40m” representing a 65.2% decline from the €115m understood to have been paid by David Daly in 2007. The shops generate present rents of €2.94m – about €220 psf – and the present sale price of €40m represents an initial gross yield of 7.35% – Jack Fagan says 6.85% but that may take into account transaction and management fees.

The retail sq footage of 103 (River Island) is understood to be 10,000 sq ft and of 104 (Wallis) to be 3,300 sq ft. But there appears to be additional space on upper floors. River Island is subject to a long upwards only rent review lease and Wallis has a 10-year unexpired lease.

NAMA will be keenly watching the transaction, because we learned recently that the Agency was set to spend €1.5m remodeling 57 and 58 Grafton Street  in works that will provide another large floorplate retail space on what was once Dublin’s premier shopping street, but which these days has become somewhat grotty with newsagents, gift shops, fast food outlets, sandwich shops, ice cream shop and of course mobile phone shops.

David Daly and wife, Mary, are presently enjoying a litigation spree. Not only are they suing the publishers of the Independent for libel but at the end of last year, they launched an action in Dublin’s High Court against the Minister for Finance, the Minister for Education and Skills, the Minister for the Environment, Community and Local Government, the Government of Ireland, Ireland, the Attorney General and the Revenue Commissioners.

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Given the volume of US and other international investors kicking tyres on Irish property deals at present, the article on NAMA in today’s Wall Street Journal has both showcase and information value. The Agency will be overall pleased by the assessment.

Benson Elliot, the purchasers of the Grehan’s Arcadia shopping centre in Ealing late last year commend the Agency for being straight and ultimately fair but criticize its performance as cumbersome and slow as a result of internal procedures. NAMA says that it concludes deals in six months which it says is the market norm.

Jones Lang LaSalle which embodies the “we’re second so we try harder” approach that once applied in the car rental business, is also cited. Richard Stanley of JLL is full of plamas for the Agency, which is probably no bad thing given the potential volume of business coming his way. He compliments the teams at NAMA who “really know what they’re up to” and says that NAMA is now finally grasping the nettle and placing property on the market (through companies like Richard’s!).  You won’t hear Richard use the language of some developers, dismissing NAMA staff as a bunch of clowns responsible for the crash who now can’t get jobs elsewhere!

I don’t think JLL will be too happy about the way Irish property prices are being presented, with Dr Constantin Gurdgiev quoted as saying “The quality of assets in the pool NAMA holds is continually deteriorating” and even the WSJ says the commercial market is weak citing the overall JLL index. JLL will probably tell you that although commercial property generally continues to decline there has been stabilization in prime property with new leases, and the €600m of investment sales in 2012 is testament to this.

Economist for hire, Peter Bacon whose paper in 2009 led to the creation of NAMA, and whose Treasury Holdings-sponsored report on NAMA last year turned heads – and the odd stomach – is also quoted and he appears to be pressing NAMA to dispose of properties sooner rather than later.

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