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Archive for April 17th, 2013

This week saw the publication of the March 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.

IPDMar13Summary

The Index shows that capital values fell by 0.2% in March 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 3.8% in the last 12 months.

Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 6.3%. Commercial prices in the UK are now 37.1% off their peak in June 2007. The NWL index  falls to 778.1 which means that NAMA needs to see a blended increase of 28.5% 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.

IPDMar13Detail

It was September 2011 – 18 months ago – when the UK index last saw an increase and really since August 2010, has been flat and declining.  The prediction for 2013 is for flat prices, though there is an expectation of increases next year and beyond (see below)

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.  On 20th March 2013, the UK’s independent Office for Budget Responsibility published its latest fiscal outlook which forecasts GDP for 2013-2017 at 0.6%, 1.8%, 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 for 2013-2017 as 6.8%, 6.0%, 5.2%, 3.5% and 2.3%. Debt:GDP is forecast in 2013-2017 at 94.9%, 98.6%, 100.8%, 100.8% and 99.4%. Inflation is forecast for 2013-2017 at 2.8%, 2.4%, 2.1%, 2.0% and 2.0%. It expects residential prices to increase 0.9%, 1.9%. 3.6%, 4.0% and 4.0% in 2013-2017 and commercial property to change -0.1%, 2.6%, 3.6%, 3.8% and 3.4%.

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NAMA’s foreclosure activity is continuing at a steady pace. Yesterday’s edition to Iris Oifigiuil reveals that the Agency had receivers appointed to three companies last week.

First up, and reported in some detail in last weekend’s Sunday Business Post – not available online without subscription – is Belmayne Ireland Limited, which was behind the north Dublin development famous for its provocative advertising and being launched amid much fanfare with Jamie and Louise Rednapp flown in specially. The original asking prices for the apartments were equally famous, over €600 psf in a sprawling housing estate. What were we thinking?!

The estate was believed to be the first of those under NAMA’s control to be offered on a rent-to-buy basis and it is also understood that some of the Priory Hall evacuees ended up in some of the properties in a move overseen by NAMA. NAMA finally pulled the plug last week and had Anne O’Dwyer and Patrick Brennan of RSM Farrell Grant Sparks appointed receivers on 10th April 2013. The directors of the company are listed as Leo Meenagh (52) and Donal Caulfield (45) who together own the company.

The second two companies to which NAMA had receivers appointed are Precinct Developments Limited and Ardhale Developments Limited. Simon Coyle of Mazars was appointed as receiver to both companies on 11st April 2013.The directors of both companies are Seamus McHale (61) and Sandra McHale (33). The company is owned by Matsack Nominees Limited which is in turn owned by Matsack Trust Limited which is shown as being owned by Liam Quirke. This may not be as clear cut as it looks. Matsack will be familiar to some of you as the buyer of Walford on Shewsbury Road for €58m in 2005 and it has widely been associated with Sean Dunne though ownership has never been publicly established.

Remember you can see the list of NAMA’s enforcement actions here and in this regularly updated spreadsheet.

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It will be next week when we are set to finally get Sean Dunne’s financial statements which he is required to submit to the US bankruptcy court, and because it is the US, these are public documents and will be reported on here; there is much anticipation, though presumably it will be old hat to NAMA, to which Sean has previously provided a statement of affairs.

Meantime, we can bring you exclusive pictures of Sean’s home as set out in his bankruptcy filing – 526 Indian Field Road, Greenwich, CT 06830. Taken yesterday from the chopper – no, there were no speakers blaring out Wagner – and from a height of more than 800 feet so as to comply with local privacy laws, the pictures show an expansive home set in its own grounds in the enclave of Belle Haven in Greenwich Connecticut.

No-one was home yesterday, and indeed it emerged in the High Court in Dublin this week that Ulster Bank has been experiencing what were described as “difficulties” in serving bankruptcy papers seeking to make Sean bankrupt in Ireland. A red sedan was visible in the front forecourt though the property has three garages on one wing. Sean is understood to be still driving the Lexus SUV and Gayle, what NAMA described as a “luxurious” Cherokee.

The house is presently listed for sale by Sotheby’s International with an asking price of USD 8m (€6.2m).  It sits on 2.5 acres. Sotheby’s says it has “a double-height great room w/fireplace, gourmet kitchen, formal dining room, family/theatre room, double offices. 8 bedrooms including a master suite w/marble bath, 3 dressing rooms, & balcony. First floor staff quarters. Lower level gym, storage space, laundry area, & bonus room. Pool, hot tub, & pool house w/full bath. Association private beach.” It has 24/7 security (no, not an alarm silly but a man in a sentry box). The property is owned by Alex and Irina Knaster who live in Kensington, west London.

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The position on here remains skeptical about the ability of our banks to deal with our own mortgage crisis where one in four mortgages is in some form of difficulty. There is a target whereby 20% of distressed mortgages are to have resolution plans by the end of June 2013, but that equates to 25,000 mortgages out of the 125,000-odd buy to let and owner occupier mortgages in arrears at the end of December 2013.  The disgrace is that we’ve known about the crisis for over two years, with the Keane report initiated in August 2011 and President Clinton acknowledging mortgage debt as the number one economic challenge facing the country, something accepted by An Taoiseach.

Ireland is not the only country in which there is a mortgage crisis.

Greece has put together proposals which are being sent to the ECB now, and which are expected to come before the Greek parliament before the end of May 2013. The Greek original is here and there is a pigeon translation here. You will recognize many of the elements of the scheme!

If

(1) You have net household income of €25,000 or less (for large families or where there is disability, the limit rises to €30,000)

(2) And your household income has declined by at least 20% since January 2010

(3) Mortgage and other lending of less than €180,000, mortgage lending of less than €150,000

(4) The value of the property is less than €250,000

(5) Total cash deposits are less than €10,000

Then

(1) You get a 48-week, that is, 4-year “umbrella” period

(2) Repayment of debt is limited to 30% of your net monthly income

(3) After the 4-year umbrella, repayments kick back in on the original terms

There are two additional measures

(1) If income is less than €15,000 then the interest rate during the 4-year period is capped at 0.75% over the ECB rate, or 1.5% at present

(2) If you are unemployed then you get an interest holiday during the first 6 months of the 4-year period

The ECB needs to be involved because these measures which are expected to apply to 200,000 households will have a negative impact on the banks, with both reductions in revenues and losses. There is no published estimate of these impacts.

These proposals may be shot down by the ECB, but it demonstrates the Greek government is at least trying to progress solutions, even if they have an impact on the banks. Let’s see how we get on in Ireland at the end of June 2013.

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