Archive for February 14th, 2013

Great will-power is needed to suppress the jokes in reporting the news that Ryanair has today closed the purchase of a 90,000 sq ft office complex in David Daly’s Airside Business Park in Swords in north county Dublin. The price has not been published but is understood to be a shade over €9m for a building known as “The Concourse” Airside already hosts a range of bluechip companies including Kelloggs and Fujitsu.

Some 400 Ryanair staff, mostly presently housed in Dublin Airport, will move to the facility by the end of 2013, and Ryanair intends renting out 50,000 sq ft in the building to other companies. A back of the envelope calculation, assuming notional rent of €10 psf, indicates a 10% notional yield, which is about right for suburban Dublin office blocks at present.

Jones Lang LaSalle were the sellers and the new Ryanair head of communications, Robin Kiely is widely reported saying “This is a significant investment by Ryanair, allowing us the space and facilities to further develop our Dublin organisation, at much lower costs than the high rents on the Dublin Airport campus and allowing other staff currently housed in satellite offices to be brought together under one roof, resulting in a large reduction in rental expenses and further cost savings”

Ryanair is facing apparently bad news in its bid to take over rival airline Aer Lingus, with the European Commission indicating it will not approve the bid, though a final decision has not yet been made. David Daly financed his NAMA loans out of the Agency in December 2011.


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NAMA is continuing to dispose of its UK portfolio with gusto, and only this week, we learned of its imminent disposal of one of London’s most iconic buildings, the former Gillette European headquarters at Gillette Corner where commuters will often have admired the Grade II listed building whilst stuck in a traffic jam. The site is now on the market for €24m through Savills and Mason Owen & Lyons.


Today sees the publication of the January 2013 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 0.2% in January 2013, 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 4.0% in the last 12 months.

Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 6.7%. Commercial prices in the UK are now 36.9% off their peak in June 2007. The NWL index  falls to 780 which means that NAMA needs to see a blended increase of 28.2% 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.  In December 2012, 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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Pity the tenants of commercial properties that are presently subject to loans at Irish Bank Resolution Corporation. If they are struggling to survive and particularly if they are laboring with pre-February 2010 leases which provide for Upward Only Rent Reviews, and if they find themselves with rents perhaps as much as double current market rents, then they are stuck, because IBRC doesn’t have a scheme to deal with rent reduction requests from tenants.

Unlike NAMA.

NAMA set up in December 2011 its rent abatement initiative despite previously claiming that abolishing UORR clauses in pre-February 2010 leases would cost it billions – or “billens” as the NAMA CEO Brendan McDonagh would say. In its end of year review for 2012, NAMA it had approved €13.5m of rent abatement applications so far. Of the 276 applications received, 212 have been approved, 8 refused and 56 are currently being approved.

It has been revealed today that NAMA is processing rent abatement applications within an average of five days, which is pretty impressive.

Minister for Finance Michael Noonan was providing a belated response to a parliamentary question from the Fianna Fail finance spokesperson Michael McGrath. At the moment, I just have a graphical PDF of the response which includes Minister Noonan saying “I am advised by NAMA that an application for rent abatement is the equivalent of any other credit application and that once all the requisite information in received by NAMA, applications are currently processed within, an average, five working days. NAMA works to a target turnaround time for credit decisions of seven days”

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No, not another one but this week, after several months of telling us there was no merit to a merger between the two, the Minister for Finance has finally come out and said it

“Government took the view that it made little sense at this point to retain two State organisations performing broadly similar functions and that, in the interests of costs and efficiency, it was appropriate for NAMA to purchase the assets of IBRC”

This blogpost reminds us of the Minister’s statements on a merger between IBRC and NAMA since September 2012.  In summary, this is the timeline of the past six months and the abrupt U-turn by the Minister last week.

August 2012this blog examines IBRC and NAMA’s business and operating costs and recommends a merger

September 2012 – Minister Noonan says “NAMA and IBRC are actively engaged in reducing their respective portfolio of debts and debtors. They are not in direct competition with each other for customers and resources. The board of NAMA and the IBRC actively monitor all cost headings and are driving efficiencies and substantial savings through their procurement processes. Due to funding and operational considerations it is not considered appropriate to merge the two agencies at this time.”

October 2012CEO of IBRC Mike Aynsley confirms that there is competition for staff amongst state banking sector including NAMA. Minister Noonan again claims “They are not in direct competition with each other for customers and resources.” It later transpires that NAMA has recruited 14 staff to date from IBRC.

December 2012Minister Noonan fields a lengthy series of questions on the similarity between NAMA and IBRC and the competition between the two before concluding “I would not characterise the level of competition for resources between IBRC and NAMA as anything other than normal market competition”

And then this week, this is what Minister Noonan said in the Dail in response to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty (emphasis added)

Deputy Pearse Doherty: To ask the Minister for Finance further to the announcement by the National Asset Management Agency on 7 February 2013, if he will provide an assessment of the merit in directing NAMA to acquire all legacy loans at the Irish Bank Resolution Corporation today..

Minister for Finance, Michael Noonan : The recent enactment of the IBRC Act 2013 together with the replacement of the Promissory Notes with a portfolio of Irish Government Bonds puts in place a permanent, finite and viable solution in terms of a significant portion of the shortfall in banking financing that has emerged through the Irish financial crisis. Following an independent valuation process, the Special Liquidators will sell the assets of IBRC (which are subject to a floating charge which secures IBRC debt to the Central Bank which will be sold to NAMA) to third parties at or above their independent valuation and failing that the Special Liquidators will sell the assets to NAMA at their valuation price.

The measure has the further advantage of achieving efficiencies by housing all legacy assets in one vehicle.  Government took the view that it made little sense at this point to retain two State organisations performing broadly similar functions and that, in the interests of costs and efficiency, it was appropriate for NAMA to purchase the assets of IBRC

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The inconsistency in approach by the State in the management of its involvement in the banking sector just serves to show how out of its depth it is.

NAMA as we well know, is precluded by the NAMA Act from selling assets to defaulting debtors. As part of its pre-sale procedures, NAMA gets potential buyers to confirm that they are not associated with defaulting debtors.

On the other hand, there is no such proscription at IBRC, and because Minister for Finance, Michael Noonan won’t tell us, we don’t know the number of properties or loans that have thus far been sold by IBRC to defaulting debtors. Minister Noonan says “I have been advised that it is not possible to compile the type of information requested”

What we do know, is that IBRC recently sold a building on London’s Oxford Street to one of the two companies in the joint venture that originally bought the building with loans from . The buyer was David Pearl’s Structadene. We know from Simon Carswell’s book Anglo Republic that Anglo had an outstanding loan balance of an astonishing €683m to David Pearl’s Vendart in November 2007.

So, has there been 100% repayment of Vendart’s loans, loans which placed David Pearl at number six in the league table of the 23 top Anglo borrowers at November 2007? And if there hasn’t been 100% repayment or if there has been default, then how does IBRC’s action sit with the NAMA framework which proscribes sales to defaulting debtors? At this point, we don’t know.

NAMA debtors who find themselves unable to buy NAMA assets might be justified in feeling discriminated against.

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For the first time on Monday last, we learned via RTE of the Top 30 borrowers at the Irish Nationwide Building Society. There have been a few private messages received requesting a comparison with the top borrowers at Anglo Irish Bank, and this is a brief blogpost setting out both. The source of the Anglo top borrowers is Simon Carswell’s book Anglo Republic.

So, here are the Top 30 at INBS at December 2006


Here are the Top 23 at Anglo (Simon says Top 20) ar November 2007. Simon sorts his league table by loan approved amount, but the table below shows amount drawn down, which seems more relevant. Paddy McKillen’s Belfast Office Properties had approvals of over €400m but had only drawn down €140m.


There is very little intersection between the two lists, just three borrowers in fact. Ballymore which between the two owed €1,312.6m, Gerry Gannon €1,046,4 and Michael O’Flynn and companies €737.2m. Remember though that AIB and Bank of Ireland also had €30bn of loans acquired by NAMA.

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