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Wednesday, 29 February 2012
Thursday, 23 February 2012
Court challenge to Irish property agency Nama
By Jamie Smyth
Ireland’s National Asset Management Agency faces a court challenge on Tuesday from property developer Treasury Holdings that could have significant implications for Ireland’s “bad banks” business model if it loses. The legal challenge in Dublin’s High Court takes place amid increasing political concern over the performance of Nama, one of the biggest property companies in the world with a portfolio worth €30bn.
Treasury, which is co-owned by businessman Johnny Ronan and his partner Richard Barrett, is one of Ireland’s biggest developers with a multi-billion euro property empire stretching across Ireland, China, France, Sweden and Russia.
The company is challenging a decision by Nama last month to appoint receivers to assets linked to €1.5bn of loans that the state agency acquired from the company. Treasury alleges the enforcement action by Nama will destroy the value of the property assets placed in receivership and could threaten Treasury’s wider businesses, according to people familiar with the case. It also claims Nama misled the company by continuing negotiations with Treasury on its overall business plan while privately making a decision in December to place its properties in receivership. Nama also rejected without sufficient consideration an offer by third party investors to acquire its loans, says Treasury. The prospective investors were the Australian
investment bank Macquarie and global real estate group Hines, which Treasury claims, were willing to pay Nama more for the loans than it originally paid the banks to acquire them.
Nama would not comment for this article ahead of the court case. The agency is expected to robustly defend its authority to appoint receivers even when a developer claims a bidder will pay more for its loans than Nama paid for them.
The agency released a statement on Monday claiming some parties were spreading unfounded and damaging stories about Nama to frustrate it carrying out its business. “Nama wants to place on record that it will continue to be resolute in fulfilling its legislative mandate and will not be swayed by inaccurate and misleading commentary,” it said.
If the court rules in favour of Treasury then Nama’s enforcement powers, which enable it to appoint receivers to developers’ property assets could be curtailed. This, Nama argues, would make it more difficult for the “bad bank” to recoup money for Irish taxpayers. Nama was set up by the Irish government in 2009, after a property crash, to purge the country’s banks of
toxic property loans in an attempt to restore credit flows to the wider economy. It paid €31bn to buy loans with a face value of €74.2bn, which represents an average discount of 57 per cent. Over 10 years Nama must sell the loans or assets to recoup the state’s original investment and pay back any working capital advanced to developers to complete projects and its own
operating costs. Nama has stepped up enforcement action against developers, appointing receivers to 1,093 properties during 2011. In December it appointed receivers to Treasury’s £400m Battersea power station development, a move which signalled that its relationship with the developer was breaking down.
The court challenge by Treasury comes amid growing political concern in Dublin that Nama does not have the commercial skills to recoup the money it spent on the loans. Last week the “bad bank” announced a significant shake-up of its business and said it would appoint a chief financial
officer. This followed a highly critical report by Michael Geoghegan, the former HSBC group chief executive, which was commissioned by the government.
The chief architect of Nama, economist Peter Bacon, who was commissioned by the previous government to design an asset management body, is now critical of the agency. “Rather than managing the assets it seems Nama is focusing on debt collection but you can’t draw blood from a stone. It needs to work more to maximise value,” he told The Financial Times. While in opposition Enda Kenny, Ireland’s prime minister, criticised the lack of transparency
surrounding Nama, describing it as a secret society that needed an injection of competence and openness. This week’s court challenge will give a rare view of the workings of an institution that must succeed for Ireland to recover.
Ireland’s National Asset Management Agency faces a court challenge on Tuesday from property developer Treasury Holdings that could have significant implications for Ireland’s “bad banks” business model if it loses. The legal challenge in Dublin’s High Court takes place amid increasing political concern over the performance of Nama, one of the biggest property companies in the world with a portfolio worth €30bn.
Treasury, which is co-owned by businessman Johnny Ronan and his partner Richard Barrett, is one of Ireland’s biggest developers with a multi-billion euro property empire stretching across Ireland, China, France, Sweden and Russia.
The company is challenging a decision by Nama last month to appoint receivers to assets linked to €1.5bn of loans that the state agency acquired from the company. Treasury alleges the enforcement action by Nama will destroy the value of the property assets placed in receivership and could threaten Treasury’s wider businesses, according to people familiar with the case. It also claims Nama misled the company by continuing negotiations with Treasury on its overall business plan while privately making a decision in December to place its properties in receivership. Nama also rejected without sufficient consideration an offer by third party investors to acquire its loans, says Treasury. The prospective investors were the Australian
investment bank Macquarie and global real estate group Hines, which Treasury claims, were willing to pay Nama more for the loans than it originally paid the banks to acquire them.
Nama would not comment for this article ahead of the court case. The agency is expected to robustly defend its authority to appoint receivers even when a developer claims a bidder will pay more for its loans than Nama paid for them.
The agency released a statement on Monday claiming some parties were spreading unfounded and damaging stories about Nama to frustrate it carrying out its business. “Nama wants to place on record that it will continue to be resolute in fulfilling its legislative mandate and will not be swayed by inaccurate and misleading commentary,” it said.
If the court rules in favour of Treasury then Nama’s enforcement powers, which enable it to appoint receivers to developers’ property assets could be curtailed. This, Nama argues, would make it more difficult for the “bad bank” to recoup money for Irish taxpayers. Nama was set up by the Irish government in 2009, after a property crash, to purge the country’s banks of
toxic property loans in an attempt to restore credit flows to the wider economy. It paid €31bn to buy loans with a face value of €74.2bn, which represents an average discount of 57 per cent. Over 10 years Nama must sell the loans or assets to recoup the state’s original investment and pay back any working capital advanced to developers to complete projects and its own
operating costs. Nama has stepped up enforcement action against developers, appointing receivers to 1,093 properties during 2011. In December it appointed receivers to Treasury’s £400m Battersea power station development, a move which signalled that its relationship with the developer was breaking down.
The court challenge by Treasury comes amid growing political concern in Dublin that Nama does not have the commercial skills to recoup the money it spent on the loans. Last week the “bad bank” announced a significant shake-up of its business and said it would appoint a chief financial
officer. This followed a highly critical report by Michael Geoghegan, the former HSBC group chief executive, which was commissioned by the government.
The chief architect of Nama, economist Peter Bacon, who was commissioned by the previous government to design an asset management body, is now critical of the agency. “Rather than managing the assets it seems Nama is focusing on debt collection but you can’t draw blood from a stone. It needs to work more to maximise value,” he told The Financial Times. While in opposition Enda Kenny, Ireland’s prime minister, criticised the lack of transparency
surrounding Nama, describing it as a secret society that needed an injection of competence and openness. This week’s court challenge will give a rare view of the workings of an institution that must succeed for Ireland to recover.
Monday, 20 February 2012
Home Sales in U.S. Probably Climbed in January to Highest Level Since 2010
Home sales in the U.S. probably climbed in January to the highest level since May 2010, adding to evidence the housing market is regaining its footing, economists said reports this week will show.
Combined purchases of new and existing houses rose to a 4.97 million annual rate from 4.92 million in December, according to the median forecast in a Bloomberg News survey. Claims for jobless benefits held near the lowest level since 2008, bolstering consumer confidence, other reports may show.
A strengthening job market, combined with record affordability driven by the drop in home prices and mortgage rates, will probably keep underpinning demand. Nonetheless, the Federal Reserve and Obama administration are striving to find ways to lend the industry additional assistance amid concern that mounting foreclosures will continue to hinder the recovery.
“Home sales have bottomed, and from here on, we should see a moderate pickup,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. “Hiring is improving slowly, so that’s helping.” More policy efforts are needed as “we still can’t rely on housing to recover on its own,” she said.
The National Association of Realtors will release data on existing house sales on Feb. 22. Purchases increased 0.9 percent to a 4.65 million annual rate, following a 4.61 million pace in December, according to the Bloomberg survey median.
Sales of new homes climbed to a 315,000 annual rate from 307,000 the prior month, the survey median showed. The report is due from the Commerce Department on Feb. 24. Last year marked a record low for the industry in data going back to 1963, as builders sold 302,000 homes, down 6.2 percent from 2010.
More Homebuilding
Reports last week indicated housing is on the mend. Builders broke ground on more homes than forecast in January, helped by warmer weather, and construction permits also advanced. The National Association of Home Builders/Wells Fargo index of builder confidence climbed in February to the highest level since May 2007.
Beazer Homes USA Inc. (BZH) reported that orders jumped 36 percent in the final three months of 2011 from a year earlier, and closings on new houses surged more than 60 percent. The Atlanta-based builder said it expects to sell more properties this year than last.
“While our visibility into the economic conditions for the remainder of the year is limited, I believe that we will benefit from a gradually improving housing market,” Allan Merrill, chief executive officer, said on an earnings call on Feb. 2.
Build Shares
Investors also are upbeat about prospects. The Standard & Poor’s Supercomposite Homebuilding Index (S15HOME) has advanced 21 percent since the end of last year, outpacing an 8.2 percent gain in the broader S&P 500.
Policy makers are working to help distressed homeowners. The top five mortgage lenders this month reached a $25 billion settlement with 49 states and the U.S. government over the use of faulty paperwork in foreclosures.
Fed Chairman Ben S. Bernanke said the central bank’s efforts to spur growth are being blunted by impediments to mortgage lending, and called for more steps to heal the housing industry.
“The economic recovery has been disappointing in part because U.S. housing markets remain out of balance,” Bernanke told homebuilders on Feb. 10 in Orlando, Florida. “We need to continue to develop and implement policies that will help the housing sector get back on its feet.”
One asset has been the improvement in employment. The jobless rate fell in January to a three-year low of 8.3 percent, and payrolls rose by 243,000 workers.
Fewer Firings
Firings are also waning, Labor Department figures may show on Feb. 23. Initial jobless claims rose last week to 355,000 after reaching a four-year low the prior week, according to the median forecast in the Bloomberg survey.
Greater affordability is also supporting home demand. The National Association of Realtors’ measure of whether households earning the median income can afford a median-priced house at current interest rates reached a record in the last three months of 2011.
Among other reports this week, the Thomson Reuters/University of Michigan final index of consumer sentiment rose to 72.8 in February from a preliminary reading of 72.5, economists in the Bloomberg survey predicted. The data will be released Feb. 24.
Thursday, 16 February 2012
Westfield: buy-back a missed opportunity
(Westfield, the Australian listed entity listed by Steve Lowy, built Westfield (White City) in London and also opened the new Westfield Stratford in the East End of London in October last year.)
February 15, 2012
Faster, higher, stronger is the Olympic slogan. Add bigger into the mix and you get Westfield, developer of the expansive shopping centre that hugs London's Olympic site in Stratford. But now the Australian property group, the world's biggest shopping mall developer by market capitalisation, is busy trimming its portfolio. On Wednesday, the controlling Lowy family said it would spin off a 45 per cent stake in some of its US malls to Canada Pension Plan Investment Board for nearly $2bn, and shed three malls in the UK to asset manager Hermes. In a tough retail market, the sensible move sent Westfield's share price up 5 per cent.
It is all part of the company's post-crisis slimline strategy. Westfield has already spun off a stake in its Australian and New Zealand malls and this latest move reduces its exposure in its next biggest market. It also frees up cash to invest as well as to fund a share buy-back for up to 10 per cent of shares (or about A$2bn at current prices). All told, Westfield has freed up A$9bn of capital since 2010, much of which it has spent on properties in Milan, New York's World Trade Center site, and chasing higher return opportunities in Brazil.
Having kept its head down during the financial crisis, which was particularly severe on Australian property groups, Westfield's re-emergence has relieved investors - its shares are up 13 per cent so far this year having fallen by half since 2007. The share buy-back, however, is a sideshow and, all else equal, boosts leverage. Net debt is currently a manageable 36 per cent of assets, and the new joint venture will offset some exposure. But if the Lowy family is so confident of the opportunities in emerging markets and other global centres, then rather than pointlessly handing cash back to shareholders, perhaps it should spend even more of its money to pursue them
February 15, 2012
Faster, higher, stronger is the Olympic slogan. Add bigger into the mix and you get Westfield, developer of the expansive shopping centre that hugs London's Olympic site in Stratford. But now the Australian property group, the world's biggest shopping mall developer by market capitalisation, is busy trimming its portfolio. On Wednesday, the controlling Lowy family said it would spin off a 45 per cent stake in some of its US malls to Canada Pension Plan Investment Board for nearly $2bn, and shed three malls in the UK to asset manager Hermes. In a tough retail market, the sensible move sent Westfield's share price up 5 per cent.
It is all part of the company's post-crisis slimline strategy. Westfield has already spun off a stake in its Australian and New Zealand malls and this latest move reduces its exposure in its next biggest market. It also frees up cash to invest as well as to fund a share buy-back for up to 10 per cent of shares (or about A$2bn at current prices). All told, Westfield has freed up A$9bn of capital since 2010, much of which it has spent on properties in Milan, New York's World Trade Center site, and chasing higher return opportunities in Brazil.
Having kept its head down during the financial crisis, which was particularly severe on Australian property groups, Westfield's re-emergence has relieved investors - its shares are up 13 per cent so far this year having fallen by half since 2007. The share buy-back, however, is a sideshow and, all else equal, boosts leverage. Net debt is currently a manageable 36 per cent of assets, and the new joint venture will offset some exposure. But if the Lowy family is so confident of the opportunities in emerging markets and other global centres, then rather than pointlessly handing cash back to shareholders, perhaps it should spend even more of its money to pursue them
Tuesday, 14 February 2012
Redundancies bite as City office costs drop
14 February 2012 | By Mike Phillips
Increased job losses caused City of London occupancy costs to drop 7.3% in
2011, but the West End again showed its economic resilience, with costs
rising 12.5%. The disparity in London's two main office markets came as
overall office occupancy costs in the Uk dropped by 0.3%, according to a
report from DTZ.
There were marked regional differences, however, with occupiers in
Birmingham benefitting from the largest cost savings with a year-on-year
decrease of 11.5% to £4,250 a year. This was followed by Edinburgh which
witnessed a decrease of 4.2% to £4,790. At the other end of the scale,
London's West End remains the most expensive business district in Europe,
and second only to Hong Kong globally, with occupancy costs climbing to
£14,530 per workstation. Behind the West End, the UK's next largest
year-on-year movers were Glasgow and Manchester, both with 2.4% increases to
£4,630 and £4,680, respectively.
The report highlights that 2011 saw minimal pressure on headline rents in
all of the covered UK markets - with the exception of London where rents
rose slightly. Therefore, where occupancy costs fell, this was largely
attributable to improved space use. Birmingham witnessed the greatest
year-on-year fall in utilisation space standard, which explains its sharp
fall in total occupancy costs. Similarly, London City witnessed a 7.3%
decrease in occupancy costs to £8,720, driven largely by corporate occupiers
consolidating their available workspace.
Looking ahead, UK occupancy costs are expected to grow by an average of 1.8%
over the next five years, reaching £6,356 per annum per workstation.
However, this will be just below UK average inflation of 1.9%, indicating no
increase in average real occupancy costs.
Karine Woodford, head of occupier research at DTZ, said: "After a year of
relative respite, cost-cutting has returned in a big way with occupiers
awaiting developments in the eurozone and looking to reduce space per
employee. Consolidation has been a theme across the country particularly
within the banking and insurance sectors. They are increasingly seeking
occupational densities of one person per eight square metres, down from 10
square metres seen previously
Increased job losses caused City of London occupancy costs to drop 7.3% in
2011, but the West End again showed its economic resilience, with costs
rising 12.5%. The disparity in London's two main office markets came as
overall office occupancy costs in the Uk dropped by 0.3%, according to a
report from DTZ.
There were marked regional differences, however, with occupiers in
Birmingham benefitting from the largest cost savings with a year-on-year
decrease of 11.5% to £4,250 a year. This was followed by Edinburgh which
witnessed a decrease of 4.2% to £4,790. At the other end of the scale,
London's West End remains the most expensive business district in Europe,
and second only to Hong Kong globally, with occupancy costs climbing to
£14,530 per workstation. Behind the West End, the UK's next largest
year-on-year movers were Glasgow and Manchester, both with 2.4% increases to
£4,630 and £4,680, respectively.
The report highlights that 2011 saw minimal pressure on headline rents in
all of the covered UK markets - with the exception of London where rents
rose slightly. Therefore, where occupancy costs fell, this was largely
attributable to improved space use. Birmingham witnessed the greatest
year-on-year fall in utilisation space standard, which explains its sharp
fall in total occupancy costs. Similarly, London City witnessed a 7.3%
decrease in occupancy costs to £8,720, driven largely by corporate occupiers
consolidating their available workspace.
Looking ahead, UK occupancy costs are expected to grow by an average of 1.8%
over the next five years, reaching £6,356 per annum per workstation.
However, this will be just below UK average inflation of 1.9%, indicating no
increase in average real occupancy costs.
Karine Woodford, head of occupier research at DTZ, said: "After a year of
relative respite, cost-cutting has returned in a big way with occupiers
awaiting developments in the eurozone and looking to reduce space per
employee. Consolidation has been a theme across the country particularly
within the banking and insurance sectors. They are increasingly seeking
occupational densities of one person per eight square metres, down from 10
square metres seen previously
Thursday, 9 February 2012
Banks forced out of property sector, fund warns
By Ed Hammond, Property Correspondent
The head of the world’s largest manager of property funds has warned that the pressure being placed on banks by governments is forcing them out of the property market.
In an interview with the Financial Times, Brett White, chief executive of CBRE, which has almost $100bn under management, said that the scrutiny on banks, the traditional source of finance to the industry, was helping pave the way for a greater involvement of private equity funds.
“It is not that [banks] don’t want to play in the real estate market any more, but rather that they cannot as they come under so much scrutiny from their governments,” Mr White said.
The pressure on clearing banks, many of which are still nursing multibillion-dollar distressed-property loan books, has already led to some selling off or moth-balling of their commercial property divisions.
France’s Société Générale and Germany’s Commerzbank both announced a moratorium on new lending to the sector at the end of last year. Meanwhile, CBRE’s own purchase of ING Real Estate, which it bought from ING Group for $940m last year, had been driven by the Dutch lender’s desire to slash its exposure to the global property sector.
Mr White added, however, that the sell-off of non-performing property loans by US and European banks had not unfolded as many had expected.
“Logically, it should be a buyer’s market as the banks want to sell this stuff and there is a lot of money on the sidelines waiting to buy. But the armageddon people predicted hasn’t happened; the banks are not putting their foot down, but are instead selling slowly and very carefully,” he said.
On the prospects for the wider global property market, Mr White said that a quiet year would be a “wonderful result” for 2012, adding that low levels of new buildings coming to market in the US and Europe would lead to a surge in rents once the market started to recover.
CBRE, which is also the world’s largest property services group by revenues, reported a 15 per cent increase in revenues during the year to December 31 to $5.9bn. Net income for the period, after the costs of integrating ING, came to $239.2m, up from $200.3m in 2010. The increase generated earnings per share of $0.74, compared to $0.63
JLL Commercial Real Estate Report: “It’s a Great Time to Be a Borrower” | Area Development Online
JLL Commercial Real Estate Report: “It’s a Great Time to Be a Borrower”
Jones Lang LaSalle (2/8/2012)
Jones Lang LaSalle's Tom Fish dissects the market financing requirements borrowers have in today's lending environment. A new proprietary survey defines the likely universe of capital available for commercial real estate lending in 2012. Conducted by Jones Lang LaSalle (JLL) and Penton Media Research, it compiled direct feedback from 186 borrowers and 136 lenders who together comprise a median $73.3 million in commercial real estate asset value. Specifically, the "2012 Borrower Sentiment" report details the borrowers' sentiments for 2012 funding aims. In the last 12 months, these respondents borrowed a median $21.1 million for commercial real estate ventures. While borrowers used to bemoan the slow loan closing speed and the post-closing service process, "both areas have improved as of late," shared Tom Melody, co-head and executive managing director of JLL's real estate investment banking business. "We anticipate that improvement will continue throughout the year. It is a great time to be a borrower."  The increasing level of available credit is music to borrowers’ ears as 44 percent of borrowers and 56 percent of lenders expect credit to increase in 2012.It "makes sense" that a majority of borrowers still need more capital lending in 2012, added Tom Fish, co-head and executive managing director of JLL's real estate investment banking business, noting there is $415 billion of mortgage maturities on the horizon in 2012 alone "and opportunistic plays in the market." Even with the existing global economic concerns, he predicts debt financing "will remain very strong in the core space from life companies and domestic banks, and we expect the CMBS market to continue to regain footing in 2012." Here are some report highlights:
Regarding financing requirements, the survey found that in 2012, "debt in all forms, deleveraging, bank stability and currency movements will dominate the global financial picture." Domestic borrowers indicated the majority of their 2011 financing needs (51 percent) were used for refinancing, followed by 42 percent for financing acquisitions where opportunistic buys existed. "Contrary to typical wisdom, a large portion of borrowers' funding in the last year went to new development (24 percent)," said the report . The market is expecting rates to remain low during 2012 with generally favorable commercial loan pricing, said Melody. “We're at an absolute 25-year low for fixed rate loans on the best, low leveraged, quality assets. Borrowers with core, well-located properties will have a lot of competition and bidding wars from lenders willing to be aggressive on their pricing even though absolute rates are low given the spreads to those benchmark interest rates are still extremely attractive." |
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