National Australia Bank is to abandon commercial property lending in the UK and cut 1,400 jobs,
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Showing posts with label UK Property. Show all posts
Showing posts with label UK Property. Show all posts
Monday, 30 April 2012
Sunday, 29 April 2012
Friday, 27 April 2012
9.8% total return for Commercial Real Estate in 2011
Commercial Property has delivered a return of 9.8% globally in 2011, Please read article below for the full story...
Global commercial property delivered a 9.8% total return in 2011; Irish returns in Q1 2012 were at 0.6%
Global commercial property delivered a 9.8% total return in 2011; Irish returns in Q1 2012 were at 0.6%
Monday, 23 April 2012
UK Update
The total value of UK commercial property investment transactions
in Q1 2012 was £7.53 billion, down 27% on the same period for 2011. Central
London office investment broke £4 billion for the quarter – the highest
figure since the financial crisis. Overseas investors spent £3 billion
during the first quarter – representing 42% of all purchases. Retail
investment fell from £3.15 billion in Q1 2011 to £1.42 billion in the latest
quarter
- Hedge funds are increasingly looking outside the traditional
locations of Mayfair and St James’s for London offices, according to new
research by Jones Lang LaSalle, but the West End still remains their
preferred location. JLL research published this week, called “Hedging the
Risk”, said the location preferences of hedge funds had “expanded”, and that
they would look further afield to north of Oxford Street – pushing prime
rents in the area to record-breaking levels. The report said hedge funds,
which have traditionally been comfortable paying rents of £100/sq ft or more
because of their high margins and low staff numbers, were now also
considering prime buildings in Knightsbridge, as well central London “Trophy
Buildings” such as the Heron Tower and The Shard. Nonetheless, the report
confirmed that the West End was still the number one destination for hedge
funds in Europe, and said rents would increase in the area, primarily due to
the lack of space available. Andrew Barnes, director in Jones Lang LaSalle’s
West End agency team, said: “There has been a definite change in where hedge
fund managers will consider looking, with some now prepared to consider
alternative locations to keep occupational costs in check, particularly if
the building has a high profile. However, for some, Mayfair will always
remain the premier choice despite costs.”
- Barratt Homes, Taylor Wimpey and the London Development Agency
have been given the green light for the final phase of their 780-apartment
scheme next to London’s Thames Barrier. At a Newham Council meeting on
Tuesday night the developers were given planning consent for the fifth phase
of the Barrier Park East development, also known as Waterside Park. The
fifth phase comprises 192,000 sq ft of residential space across 193 flats as
well as 4,250 sq ft of commercial space and a 1,550 sq ft crèche. Consent
was granted following issues previously raised by the Newham council over
layout, appearance, scale access and landscaping. A report before the
council on Tuesday said the council’s concerns had been alleviated. Barrier
Park East, located in Newham’s Royal Docks, was first given outline planning
approval in December 2009. It comprises 780 homes as well as retail, leisure
and community uses. Occupation of homes in the first phase began in December
last year and the second phase, Connaught House, is complete and occupied.
The third phase, Meadow View, will be available for occupation at the end of
this year and fully complete in February 2013. The whole scheme is due to be
completed by March 2016.
- William Hill confident as profit rises 19%: (WILLIAM HILL IS A
TENNANT IN OUR ALDERSGATE PROPERTY INVESTMENT IN LONDON - NICO) William Hill
said that it was “confident” of its prospects for the year ahead, as it
announced that operating profits rose 19 per cent in the first quarter,
fuelled by high margins in its retail business and the growing popularity of
online betting. With smartphone use on the rise, the company’s Sportsbook
mobile app was downloaded 190,000 times from the Apple App Store during the
quarter, bringing William Hill around 57,000 new customers, and helping its
online division to post £38.3m in operating profits, up 29 per cent on the
year before. Ralph Topping, chief executive, said that he was “pleased” with
the results. “Our investments in marketing and innovations continue to
deliver benefits, with our Sportsbook exceeding £50m in turnover in a single
week for the first time during the quarter and mobile turnover reaching
almost £11m in a single week,” he said, adding that the success of the
company’s online operations highlighted the importance of its multi-channel
offering. Operating profits from the group’s retail operations were up 8 per
cent, as gross win margins rose from 18.1 to 19.4 per cent, thanks in part
to a string of bookmaker-friendly football results. Analysts at Investec
said they were upgrading their earnings forecasts for William Hill following
the announcement, and described its margin performance as “exceptional”.
“The 220 bps margin outperformance versus Ladbrokes is eye-catching (19.4%
vs 17.2%) and, we think, reflects a higher proportion of football wagering
at William Hill (higher underlying and first quarter seasonal margin than
horseracing) and a superior trading operation,” they wrote. Ladbrokes, a
rival UK-based bookmaker, said on Thursday that its operating profits rose
by 3.9 per cent in the first quarter. Shares in the company, which have
risen 35 per cent this year, were up 3.19 per cent at 275.3p in early
morning trading in London, a level not seen since 2008.
- IMF sees banks deleveraging by $2.6tn: A drastic contraction of
European bank balance sheets during the next 18 months could jeopardise
financial stability and economic growth in Europe and beyond, according to
forecasts from the International Monetary Fund. In its Global Financial
Stability Report, published on Wednesday, the fund warned that European
banks looked set to shrink their balance sheets by $2.6tn (€2tn) over that
period. Unless officials improved their policy response, the IMF said,
European banks would dump almost 7 per cent of their assets by the end of
next year. The IMF expects most of the deleveraging to come from sales of
securities and non-core assets. However, it also sees credit supply
shrinking by 1.7 per cent as banks rein in lending to businesses and
households hitting the broader economy. After examining the efforts of the
continent’s 58 largest banks to boost their capital ratios, shed
unprofitable businesses and cut their reliance on wholesale funding, the
fund’s analysts predicted the deleveraging process would be more severe than
previously anticipated. While acknowledging that balance sheets needed to
shrink after the financial excess seen in the run-up to the crisis, the IMF
warned that the risk of a “synchronised and large-scale deleveraging” could
spark financial instability and hit economic growth. “The highly uncertain
European policy backdrop is driving banks to keep shrinking, even if we
avoided a disorderly and abrupt crunch,” warns Huw van Steenis, banking
analyst at Morgan Stanley. The fund said better policies – such as a
consideration of more easing by the European Central Bank and further
structural reforms, as well as progress on bank restructuring and resolution
– would prompt a smaller, 6 per cent contraction in banks’ balance sheets,
which would boost euro-area growth by 0.6 per cent. IMF assessments assume
the bulk of deleveraging will occur through the form of asset sales, rather
than a drop-off in lending. Andrea Enria, chair of the European Banking
Authority, said earlier this month less than 1 per cent of the deleveraging
represented true cuts to lending. The IMF also vindicates the EBA’s
controversial call for banks to hold at least 9 per cent capital by finding
evidence that higher equity buffers and capital ratios boosted banks’ share
prices. “Banks with higher tier one capital outperformed other sample banks
during the European sovereign debt crisis,” it said, adding that a 1
percentage point increase in a bank’s capital ratio during the past two
years added 0.5 per cent to monthly stock returns. Elsewhere in the report,
the fund warned of the risks presented by an ever-decreasing stock of “safe”
assets. “The number of sovereigns whose debt is considered safe is declining
– taking potentially $9tn in safe assets out of the market by 2016, which is
roughly 16 per cent of the projected total.” It expects this trend to
inflate prices for the few remaining assets deemed to be safe.
- Tesco announced it will reduce new net space growth by 38% and
spend £1bn revamping its existing estate in a preliminary results statement
released this morning. (TESCO IS ALSO A TENNANT IN OUR ALDERSGATE PROPERTY
INVESTMENT IN LONDON AND WAS ALSO IN OUR SHEFFIELD RETAIL ACQUISITION WHICH
NETTED INVESTORS AN IRR OF 101% - NICO) The supermarket giant reported a
1.6% rise in underlying pre-tax profits to £3.9bn for the year to February
25, 2012. Group sales went up 7.4% to £72bn. A store refurbishment programme
will start this year as part of a £1bn commitment to improve the Tesco
shopping experience for customers. The programme will start with 430 stores,
which will see warmer colours, better lighting and a stronger emphasis on
fresh food. This includes around £400m of capital investment and will focus
on service, store formats, pricing, range and rolling out click and collect.
However, the company said overall group capital expenditure would be lower
this financial year, down from £3.8bn in 2011/12 to £3.3bn in 2012/13,
mainly driven by the reduced new store opening programme in the UK. Profits
from the UK business were down 1% for the period to £2.5bn, as customers
continued to be squeezed by falling incomes and high petrol prices. Chief
executive Philip Clarke admitted that investing more into the UK store
estate would affect profits in the short term. “These are decisive steps and
this cost investment – as we have already announced – will constrain our
near-term profitability. We are also focusing our lower overall capital
expenditure more into our existing stores and in building our online
businesses. We are adapting our UK capital plans so that we have the right
store base for the future, to underpin the returns that create long term
value for our shareholders. Together these steps are the right things to do
both to improve the shopping trip for customers and to secure a return to
profitable growth in the UK.” Tesco issued its first profit warning in 20
years in January after suffering a disappointing Christmas sales period.
- Jamie Oliver will open his fifth Union Jacks restaurant in
London’s Covent Garden, it was announced today. The restaurant, which
debuted at Central St Giles in Midtown last year, will occupy a 3,500 sq ft
unit at the Market Building in Covent garden’s piazza. It will occupy two
floors in the north hall of the building, providing seating for 158 diners.
Oliver said: “The Piazza at Covent Garden is one of the most buzzing parts
of the city, with Londoners and tourists visiting all day and night. So this
Union Jacks needs to be special and it will be – the restaurant will look
fantastic.” Beverley Churchill, brand director for Covent Garden, said:
“Over the past few months Covent Garden has become London’s new foodie hot
spot attracting fantastic new concept restaurants such as Jamie’s Union
Jacks and international icons including Balthazar.”
- Swiss watchmaker Breitling has agreed a deal to open its first
standalone store on New Bond Street at what is expected to be a record rent
of £1m. The retailer will move into a store at 130 New Bond Street after US
retailer Diesel surrendered its lease to the private landlord. The
watchmaker is expected to open 6,000 sq ft store in the new year and is
understood to have agreed a deal with the landlord to return the first floor
of the building for office use. It is understood that Diesel, which has
traded on Bond Street since 2006, is now looking to open a 15,000 sq ft
store on Regent Street.
- Regional property services firms are to be given a much-needed
boost to fee income through the chance to advise the government on its
£280bn estate. The government is reviewing its prized Estates Professional
Services framework, which is worth millions in fees to the UK’s biggest
property services firms, as part of the prime minister’s drive to award more
government contracts to small and medium-sized businesses. The framework is
to be retendered in September and officials at the Government Procurement
Service have held a series of meetings with incumbent firms to discuss the
shake-up. GVA, DTZ, Drivers Jonas Deloitte, Jones Lang LaSalle, Colliers,
Lambert Smith Hampton, Knight Frank and BNP Paribas are the incumbents,
- although GVA, DTZ and Drivers Jonas Deloitte are thought to carry
out more than 80% of the work. A Cabinet Office spokeswoman said: “The
current framework is due to expire in September, so the time is right to
review it and make sure that it is delivering the expertise the public
sector needs at the right cost, as well as supporting innovation and
simplifying processes. “The Government Procurement Service is now reviewing
the framework and engaging with the property industry as part of this
process. The government has been clear that opening up its contracts to SMEs
is a priority.” GVA carries out around 46% of the work and boasts the
coveted position as sole property adviser to the Ministry of Defence. It is
understood to earn more than £6m a year in fees from the framework. Among
the options being mooted is a split of advisory and transaction work, so
less substantial transactions can be pooled for which regional companies can
pitch. Other options are to split frameworks into smaller pieces, divided by
region, or maintain a core roster of eight to 10 companies, which will be
forced to abide by a threshold of jobs that they must subcontract to smaller
firms. The Estates Professional Services framework is a list of
“pre-approved providers” public sector bodies use to manage their estate.
Bodies ranging from central government departments and local councils to the
emergency services and the NHS use the framework to procure work, tasking
firms with cutting the estate’s £25bn-a-year running costs. “Anyone who
isn’t losing sleep about failing to get on a framework of this size at the
moment is crazy,” said one agent. Prime minister David Cameron announced a
series of measures to help small firms compete for billions of pounds of
government contracts in February, and said the aim was to give businesses
greater access to the bidding process by eliminating “excessive bureaucracy
and petty regulation”. Long-term departmental contracts, such as the
Ministry of Justice’s five-year north of England property management
contract, which GVA won a year ago, will be unaffected, and the new rules
are to be applied following retendering in September.
- UK private sector improves in March. This week saw the release of
the March Purchasing Managers’ Indices (PMI) - a key survey of private
sector activity. The UK’s services, manufacturing and construction sectors
all showed improvement. The manufacturing sector gave the highest reading
since last May and the construction sector rose to the highest level since
October 2007. Most importantly the services PMI rose from 53.8 to 55.3 (a
reading above 50 signals expansion), which is in line with the historical
average and points to a decent pace of expansion within the sector. The
surveys suggest that the UK economy rounded off Q1 on a positive note and
economic contraction over the quarter is increasingly unlikely.
- Weak output figures are at odds with improving survey data. UK
manufacturing output fell 1.0%m/m in February after a 0.3%m/m drop in
January. This is the largest fall in 10 months. In annual terms production
fell 1.4% compared to February 2011. Production data can be volatile and are
frequently revised, but it’s odd that it differs so much from the PMI. The
PMI is more forward looking so hopefully the improved data translates into a
better manufacturing output figure in March.
in Q1 2012 was £7.53 billion, down 27% on the same period for 2011. Central
London office investment broke £4 billion for the quarter – the highest
figure since the financial crisis. Overseas investors spent £3 billion
during the first quarter – representing 42% of all purchases. Retail
investment fell from £3.15 billion in Q1 2011 to £1.42 billion in the latest
quarter
- Hedge funds are increasingly looking outside the traditional
locations of Mayfair and St James’s for London offices, according to new
research by Jones Lang LaSalle, but the West End still remains their
preferred location. JLL research published this week, called “Hedging the
Risk”, said the location preferences of hedge funds had “expanded”, and that
they would look further afield to north of Oxford Street – pushing prime
rents in the area to record-breaking levels. The report said hedge funds,
which have traditionally been comfortable paying rents of £100/sq ft or more
because of their high margins and low staff numbers, were now also
considering prime buildings in Knightsbridge, as well central London “Trophy
Buildings” such as the Heron Tower and The Shard. Nonetheless, the report
confirmed that the West End was still the number one destination for hedge
funds in Europe, and said rents would increase in the area, primarily due to
the lack of space available. Andrew Barnes, director in Jones Lang LaSalle’s
West End agency team, said: “There has been a definite change in where hedge
fund managers will consider looking, with some now prepared to consider
alternative locations to keep occupational costs in check, particularly if
the building has a high profile. However, for some, Mayfair will always
remain the premier choice despite costs.”
- Barratt Homes, Taylor Wimpey and the London Development Agency
have been given the green light for the final phase of their 780-apartment
scheme next to London’s Thames Barrier. At a Newham Council meeting on
Tuesday night the developers were given planning consent for the fifth phase
of the Barrier Park East development, also known as Waterside Park. The
fifth phase comprises 192,000 sq ft of residential space across 193 flats as
well as 4,250 sq ft of commercial space and a 1,550 sq ft crèche. Consent
was granted following issues previously raised by the Newham council over
layout, appearance, scale access and landscaping. A report before the
council on Tuesday said the council’s concerns had been alleviated. Barrier
Park East, located in Newham’s Royal Docks, was first given outline planning
approval in December 2009. It comprises 780 homes as well as retail, leisure
and community uses. Occupation of homes in the first phase began in December
last year and the second phase, Connaught House, is complete and occupied.
The third phase, Meadow View, will be available for occupation at the end of
this year and fully complete in February 2013. The whole scheme is due to be
completed by March 2016.
- William Hill confident as profit rises 19%: (WILLIAM HILL IS A
TENNANT IN OUR ALDERSGATE PROPERTY INVESTMENT IN LONDON - NICO) William Hill
said that it was “confident” of its prospects for the year ahead, as it
announced that operating profits rose 19 per cent in the first quarter,
fuelled by high margins in its retail business and the growing popularity of
online betting. With smartphone use on the rise, the company’s Sportsbook
mobile app was downloaded 190,000 times from the Apple App Store during the
quarter, bringing William Hill around 57,000 new customers, and helping its
online division to post £38.3m in operating profits, up 29 per cent on the
year before. Ralph Topping, chief executive, said that he was “pleased” with
the results. “Our investments in marketing and innovations continue to
deliver benefits, with our Sportsbook exceeding £50m in turnover in a single
week for the first time during the quarter and mobile turnover reaching
almost £11m in a single week,” he said, adding that the success of the
company’s online operations highlighted the importance of its multi-channel
offering. Operating profits from the group’s retail operations were up 8 per
cent, as gross win margins rose from 18.1 to 19.4 per cent, thanks in part
to a string of bookmaker-friendly football results. Analysts at Investec
said they were upgrading their earnings forecasts for William Hill following
the announcement, and described its margin performance as “exceptional”.
“The 220 bps margin outperformance versus Ladbrokes is eye-catching (19.4%
vs 17.2%) and, we think, reflects a higher proportion of football wagering
at William Hill (higher underlying and first quarter seasonal margin than
horseracing) and a superior trading operation,” they wrote. Ladbrokes, a
rival UK-based bookmaker, said on Thursday that its operating profits rose
by 3.9 per cent in the first quarter. Shares in the company, which have
risen 35 per cent this year, were up 3.19 per cent at 275.3p in early
morning trading in London, a level not seen since 2008.
- IMF sees banks deleveraging by $2.6tn: A drastic contraction of
European bank balance sheets during the next 18 months could jeopardise
financial stability and economic growth in Europe and beyond, according to
forecasts from the International Monetary Fund. In its Global Financial
Stability Report, published on Wednesday, the fund warned that European
banks looked set to shrink their balance sheets by $2.6tn (€2tn) over that
period. Unless officials improved their policy response, the IMF said,
European banks would dump almost 7 per cent of their assets by the end of
next year. The IMF expects most of the deleveraging to come from sales of
securities and non-core assets. However, it also sees credit supply
shrinking by 1.7 per cent as banks rein in lending to businesses and
households hitting the broader economy. After examining the efforts of the
continent’s 58 largest banks to boost their capital ratios, shed
unprofitable businesses and cut their reliance on wholesale funding, the
fund’s analysts predicted the deleveraging process would be more severe than
previously anticipated. While acknowledging that balance sheets needed to
shrink after the financial excess seen in the run-up to the crisis, the IMF
warned that the risk of a “synchronised and large-scale deleveraging” could
spark financial instability and hit economic growth. “The highly uncertain
European policy backdrop is driving banks to keep shrinking, even if we
avoided a disorderly and abrupt crunch,” warns Huw van Steenis, banking
analyst at Morgan Stanley. The fund said better policies – such as a
consideration of more easing by the European Central Bank and further
structural reforms, as well as progress on bank restructuring and resolution
– would prompt a smaller, 6 per cent contraction in banks’ balance sheets,
which would boost euro-area growth by 0.6 per cent. IMF assessments assume
the bulk of deleveraging will occur through the form of asset sales, rather
than a drop-off in lending. Andrea Enria, chair of the European Banking
Authority, said earlier this month less than 1 per cent of the deleveraging
represented true cuts to lending. The IMF also vindicates the EBA’s
controversial call for banks to hold at least 9 per cent capital by finding
evidence that higher equity buffers and capital ratios boosted banks’ share
prices. “Banks with higher tier one capital outperformed other sample banks
during the European sovereign debt crisis,” it said, adding that a 1
percentage point increase in a bank’s capital ratio during the past two
years added 0.5 per cent to monthly stock returns. Elsewhere in the report,
the fund warned of the risks presented by an ever-decreasing stock of “safe”
assets. “The number of sovereigns whose debt is considered safe is declining
– taking potentially $9tn in safe assets out of the market by 2016, which is
roughly 16 per cent of the projected total.” It expects this trend to
inflate prices for the few remaining assets deemed to be safe.
- Tesco announced it will reduce new net space growth by 38% and
spend £1bn revamping its existing estate in a preliminary results statement
released this morning. (TESCO IS ALSO A TENNANT IN OUR ALDERSGATE PROPERTY
INVESTMENT IN LONDON AND WAS ALSO IN OUR SHEFFIELD RETAIL ACQUISITION WHICH
NETTED INVESTORS AN IRR OF 101% - NICO) The supermarket giant reported a
1.6% rise in underlying pre-tax profits to £3.9bn for the year to February
25, 2012. Group sales went up 7.4% to £72bn. A store refurbishment programme
will start this year as part of a £1bn commitment to improve the Tesco
shopping experience for customers. The programme will start with 430 stores,
which will see warmer colours, better lighting and a stronger emphasis on
fresh food. This includes around £400m of capital investment and will focus
on service, store formats, pricing, range and rolling out click and collect.
However, the company said overall group capital expenditure would be lower
this financial year, down from £3.8bn in 2011/12 to £3.3bn in 2012/13,
mainly driven by the reduced new store opening programme in the UK. Profits
from the UK business were down 1% for the period to £2.5bn, as customers
continued to be squeezed by falling incomes and high petrol prices. Chief
executive Philip Clarke admitted that investing more into the UK store
estate would affect profits in the short term. “These are decisive steps and
this cost investment – as we have already announced – will constrain our
near-term profitability. We are also focusing our lower overall capital
expenditure more into our existing stores and in building our online
businesses. We are adapting our UK capital plans so that we have the right
store base for the future, to underpin the returns that create long term
value for our shareholders. Together these steps are the right things to do
both to improve the shopping trip for customers and to secure a return to
profitable growth in the UK.” Tesco issued its first profit warning in 20
years in January after suffering a disappointing Christmas sales period.
- Jamie Oliver will open his fifth Union Jacks restaurant in
London’s Covent Garden, it was announced today. The restaurant, which
debuted at Central St Giles in Midtown last year, will occupy a 3,500 sq ft
unit at the Market Building in Covent garden’s piazza. It will occupy two
floors in the north hall of the building, providing seating for 158 diners.
Oliver said: “The Piazza at Covent Garden is one of the most buzzing parts
of the city, with Londoners and tourists visiting all day and night. So this
Union Jacks needs to be special and it will be – the restaurant will look
fantastic.” Beverley Churchill, brand director for Covent Garden, said:
“Over the past few months Covent Garden has become London’s new foodie hot
spot attracting fantastic new concept restaurants such as Jamie’s Union
Jacks and international icons including Balthazar.”
- Swiss watchmaker Breitling has agreed a deal to open its first
standalone store on New Bond Street at what is expected to be a record rent
of £1m. The retailer will move into a store at 130 New Bond Street after US
retailer Diesel surrendered its lease to the private landlord. The
watchmaker is expected to open 6,000 sq ft store in the new year and is
understood to have agreed a deal with the landlord to return the first floor
of the building for office use. It is understood that Diesel, which has
traded on Bond Street since 2006, is now looking to open a 15,000 sq ft
store on Regent Street.
- Regional property services firms are to be given a much-needed
boost to fee income through the chance to advise the government on its
£280bn estate. The government is reviewing its prized Estates Professional
Services framework, which is worth millions in fees to the UK’s biggest
property services firms, as part of the prime minister’s drive to award more
government contracts to small and medium-sized businesses. The framework is
to be retendered in September and officials at the Government Procurement
Service have held a series of meetings with incumbent firms to discuss the
shake-up. GVA, DTZ, Drivers Jonas Deloitte, Jones Lang LaSalle, Colliers,
Lambert Smith Hampton, Knight Frank and BNP Paribas are the incumbents,
- although GVA, DTZ and Drivers Jonas Deloitte are thought to carry
out more than 80% of the work. A Cabinet Office spokeswoman said: “The
current framework is due to expire in September, so the time is right to
review it and make sure that it is delivering the expertise the public
sector needs at the right cost, as well as supporting innovation and
simplifying processes. “The Government Procurement Service is now reviewing
the framework and engaging with the property industry as part of this
process. The government has been clear that opening up its contracts to SMEs
is a priority.” GVA carries out around 46% of the work and boasts the
coveted position as sole property adviser to the Ministry of Defence. It is
understood to earn more than £6m a year in fees from the framework. Among
the options being mooted is a split of advisory and transaction work, so
less substantial transactions can be pooled for which regional companies can
pitch. Other options are to split frameworks into smaller pieces, divided by
region, or maintain a core roster of eight to 10 companies, which will be
forced to abide by a threshold of jobs that they must subcontract to smaller
firms. The Estates Professional Services framework is a list of
“pre-approved providers” public sector bodies use to manage their estate.
Bodies ranging from central government departments and local councils to the
emergency services and the NHS use the framework to procure work, tasking
firms with cutting the estate’s £25bn-a-year running costs. “Anyone who
isn’t losing sleep about failing to get on a framework of this size at the
moment is crazy,” said one agent. Prime minister David Cameron announced a
series of measures to help small firms compete for billions of pounds of
government contracts in February, and said the aim was to give businesses
greater access to the bidding process by eliminating “excessive bureaucracy
and petty regulation”. Long-term departmental contracts, such as the
Ministry of Justice’s five-year north of England property management
contract, which GVA won a year ago, will be unaffected, and the new rules
are to be applied following retendering in September.
- UK private sector improves in March. This week saw the release of
the March Purchasing Managers’ Indices (PMI) - a key survey of private
sector activity. The UK’s services, manufacturing and construction sectors
all showed improvement. The manufacturing sector gave the highest reading
since last May and the construction sector rose to the highest level since
October 2007. Most importantly the services PMI rose from 53.8 to 55.3 (a
reading above 50 signals expansion), which is in line with the historical
average and points to a decent pace of expansion within the sector. The
surveys suggest that the UK economy rounded off Q1 on a positive note and
economic contraction over the quarter is increasingly unlikely.
- Weak output figures are at odds with improving survey data. UK
manufacturing output fell 1.0%m/m in February after a 0.3%m/m drop in
January. This is the largest fall in 10 months. In annual terms production
fell 1.4% compared to February 2011. Production data can be volatile and are
frequently revised, but it’s odd that it differs so much from the PMI. The
PMI is more forward looking so hopefully the improved data translates into a
better manufacturing output figure in March.
Wednesday, 28 March 2012
Relevant economics of the past week (for intermediaries)
- Tesco, the world's third-biggest retailer by sales, has priced the initial public offering of its Thailand property fund at Bt10.4 per unit, at the top of an indicative range, according to people involved in the deal, the FT reports. The IPO is set to raise Bt18.4bn ($602m), which would make it Thailand's largest property fund and its biggest offering since Rayong Refinery's $710m listing in 2006.
- UK manufacturing performance was 'good in parts' in February. The Purchasing Managers' Index (PMI) survey of UK manufacturing showed that the sector expanded for the second month in a row, but the rate of growth slowed. Factory production increased, leading to a rise in employment, but this is due to work on backlogs rather than new orders. Less good news is that UK domestic demand is still low and the boost from better exports to
Asia and the US has been offset by poor Eurozone demand for UK goods. News on prices wasn't good either. The surge in oil prices caused input prices to rise at their fastest monthly rate in over 19 years.
- UK housing market data were stronger. The price of a typical house in the UK increased by 0.6%m/m in February, which brought the annual rate of growth up to 0.9%. This may seem at odds with the current difficult
economic conditions, but it concurs with other recent data. Mortgage approvals for house purchases reached their highest level in more than two years in January, up 36%y/y. Some of this is due to particularly weak levels
in January 2011, but the improvement in prices and approvals is more likely
due to activity brought forward to beat the end of the stamp duty concession later this month.
- Eurozone banks were eager to take up the ECB's second dose of long-term funding. 800 banks took advantage of the ECB's liquidity operation, compared with 523 in December, as collateral rules were loosened.
The move has reduced tensions on bond yields in the most vulnerable countries. But it's unlikely ECB Chairman Mario Draghi will offer another dose. He is eager for banks to begin to operate 'normally' again by borrowing from each other. Jitters about bank solvencies in the face of the sovereign debt problems are preventing this happening at the moment.
- Inflation increased and Eurozone unemployment reached a record high rising 10.7% in January. Spain is suffering with an unemployment rate of 22.3% and a youth unemployment rate just under 50%. And Eurozone
inflation rose to 2.7% in February up from 2.6% in January. Oil is the main culprit as prices rise because of increased political tensions in the Middle East. This remains as another threat to economic recovery, in the Euro and globally.
- Savills expands list of property lenders - Savills today names 21 active "bigger ticket" property lenders, an increase of two in the last six months. The firm said the named lenders had completed at least three deals of more than £30m over the last six months or were well advanced in doing so. The four new entries to the list are AIG, Citigroup, Deutsche Postbank and Lloyds Banking Group, while Aareal and Eurohypo have disappeared.
Savills' list includes all the UK clearing banks (Barclays, HSBC, Lloyds and RBS), eight German banks and five insurance companies, AIG, Aviva, Axa, MetLife and M&G Investments. Other emerging insurance or life companies are Canada Life and Legal & General. William Newsom, Savills' UK head of valuation, said: "There is no shortage of organisations seeking to provide both senior debt and mezzanine. However, the real issues are firstly that lenders are very selective, and, secondly, tighter lending terms. "Of the lenders listed, they are looking to provide finance to selected borrowers with track record, secured against good quality commercial investment
properties, let to strong tenants on long term leases in good locations, preferably located inside the M25." Savills confirmed that loan to values had fallen over the past eight months and interest rate margins had increased by 100 basis points to 325 basis points for prime investment. Loan-to-value ratios against prime investment are around 55-60% with some banks having difficulty lending above 50%. Savills also identifies a further 50 senior debt providers, who are active at the small and medium-sized ends of the spectrum, and 30 providers of mezzanine finance. "The number of lenders in the market is encouraging to see, but the further reduction in loan to value ratios means that borrowers may increasingly access the mezzanine market in order to bridge the funding gap," Newsom added. The 21 bigger ticket lenders are: AIG, Aviva, Axa, Barclays Bank, Bayern LB, Citigroup, Deka Bank, Deutsche Bank, Deutsche Hypo, Deutsche Pfandbriefbank, Deutsche Postbank, Helaba, HSBC, ING REF, Landesbank Berlin, Lloyds Banking Group, Met Life, M&G Investments, Royal Bank of Scotland, Santander
- UK regulators and global banks are discussing a potentially far-reaching overhaul of the calculation and regulation of interbank lending rates, amid claims that the benchmark for $350tn contracts worldwide may have been subject to manipulation
- Lloyds Banking Group is lining up its second loan sale in the space of six months, PropertyWeek.com can reveal, with a £600m portfolio being put together. A sale would come on the back of the successful disposal
of £923m of loans to Lone Star in December, the Project Royal portfolio. Lloyds has not yet given the final green light to the sale, but is understood to be working with adviser JP Morgan Cazenove, which handled the
Royal sale, to decide which loans to put into the portfolio, in a process some in the market are calling Project Launcelot. A sale would be part of the range of options being considered by Lloyds to reduce its property
exposure. It is understood that this portfolio will eventually total around £600m, and that the loans will have similar characteristics to those in the Royal portfolio, where the average lot size was around £4m, and the loans
were secured against office, retail and industrial properties around the country. If the Launcelot portfolio does come to market, it will likely be bought by one of the large US private equity firms which have raised tens of
billions of dollars of equity to buy loan packages. The final two bidders on Project Royal were Lone Star and Cerberus Capital Management, both of which are looking to step up their European distressed loan acquisitions.
Blackstone has also recently set up a new division, Blackstone Real Estate Debt Advisers, to manage the £1.4bn Isobel portfolio in which it bought a stake from Royal Bank of Scotland last year, alongside other loan portfolios
Blackstone is looking to buy. It is expected that Launcelot will be the last UK loan portfolio sale undertaken by Lloyds in the medium term, because it will then have exhausted the type of loan which can be packaged up and sold. Loans that can be sold in a portfolio need to have a certain characteristic, such as no change of control covenants and minimal swap liabilities. Lloyds has a portfolio of more than £21bn of loans that are managed by its business support unit, headed by Richard Dakin, that need to be restructured or sold. Last year Lloyds achieved the difficult task of reducing its property exposure by £13.5bn to £68bn while at the same time nearly halving its losses on property to £1.3bn. This process was partly due to loan sales like Royal. Lloyds sees the Royal sale as a success, having sold the portfolio completely, without providing vendor finance, at a discount of around 40% in a process that took roughly six months. But it is thought that it is not wedded to the idea of a loan portfolio sale, having used other workout strategies in the past three years such as putting together portfolios of
assets for sale, and setting up platforms to asset manage properties over the longer term.
- UK manufacturing performance was 'good in parts' in February. The Purchasing Managers' Index (PMI) survey of UK manufacturing showed that the sector expanded for the second month in a row, but the rate of growth slowed. Factory production increased, leading to a rise in employment, but this is due to work on backlogs rather than new orders. Less good news is that UK domestic demand is still low and the boost from better exports to
Asia and the US has been offset by poor Eurozone demand for UK goods. News on prices wasn't good either. The surge in oil prices caused input prices to rise at their fastest monthly rate in over 19 years.
- UK housing market data were stronger. The price of a typical house in the UK increased by 0.6%m/m in February, which brought the annual rate of growth up to 0.9%. This may seem at odds with the current difficult
economic conditions, but it concurs with other recent data. Mortgage approvals for house purchases reached their highest level in more than two years in January, up 36%y/y. Some of this is due to particularly weak levels
in January 2011, but the improvement in prices and approvals is more likely
due to activity brought forward to beat the end of the stamp duty concession later this month.
- Eurozone banks were eager to take up the ECB's second dose of long-term funding. 800 banks took advantage of the ECB's liquidity operation, compared with 523 in December, as collateral rules were loosened.
The move has reduced tensions on bond yields in the most vulnerable countries. But it's unlikely ECB Chairman Mario Draghi will offer another dose. He is eager for banks to begin to operate 'normally' again by borrowing from each other. Jitters about bank solvencies in the face of the sovereign debt problems are preventing this happening at the moment.
- Inflation increased and Eurozone unemployment reached a record high rising 10.7% in January. Spain is suffering with an unemployment rate of 22.3% and a youth unemployment rate just under 50%. And Eurozone
inflation rose to 2.7% in February up from 2.6% in January. Oil is the main culprit as prices rise because of increased political tensions in the Middle East. This remains as another threat to economic recovery, in the Euro and globally.
- Savills expands list of property lenders - Savills today names 21 active "bigger ticket" property lenders, an increase of two in the last six months. The firm said the named lenders had completed at least three deals of more than £30m over the last six months or were well advanced in doing so. The four new entries to the list are AIG, Citigroup, Deutsche Postbank and Lloyds Banking Group, while Aareal and Eurohypo have disappeared.
Savills' list includes all the UK clearing banks (Barclays, HSBC, Lloyds and RBS), eight German banks and five insurance companies, AIG, Aviva, Axa, MetLife and M&G Investments. Other emerging insurance or life companies are Canada Life and Legal & General. William Newsom, Savills' UK head of valuation, said: "There is no shortage of organisations seeking to provide both senior debt and mezzanine. However, the real issues are firstly that lenders are very selective, and, secondly, tighter lending terms. "Of the lenders listed, they are looking to provide finance to selected borrowers with track record, secured against good quality commercial investment
properties, let to strong tenants on long term leases in good locations, preferably located inside the M25." Savills confirmed that loan to values had fallen over the past eight months and interest rate margins had increased by 100 basis points to 325 basis points for prime investment. Loan-to-value ratios against prime investment are around 55-60% with some banks having difficulty lending above 50%. Savills also identifies a further 50 senior debt providers, who are active at the small and medium-sized ends of the spectrum, and 30 providers of mezzanine finance. "The number of lenders in the market is encouraging to see, but the further reduction in loan to value ratios means that borrowers may increasingly access the mezzanine market in order to bridge the funding gap," Newsom added. The 21 bigger ticket lenders are: AIG, Aviva, Axa, Barclays Bank, Bayern LB, Citigroup, Deka Bank, Deutsche Bank, Deutsche Hypo, Deutsche Pfandbriefbank, Deutsche Postbank, Helaba, HSBC, ING REF, Landesbank Berlin, Lloyds Banking Group, Met Life, M&G Investments, Royal Bank of Scotland, Santander
- UK regulators and global banks are discussing a potentially far-reaching overhaul of the calculation and regulation of interbank lending rates, amid claims that the benchmark for $350tn contracts worldwide may have been subject to manipulation
- Lloyds Banking Group is lining up its second loan sale in the space of six months, PropertyWeek.com can reveal, with a £600m portfolio being put together. A sale would come on the back of the successful disposal
of £923m of loans to Lone Star in December, the Project Royal portfolio. Lloyds has not yet given the final green light to the sale, but is understood to be working with adviser JP Morgan Cazenove, which handled the
Royal sale, to decide which loans to put into the portfolio, in a process some in the market are calling Project Launcelot. A sale would be part of the range of options being considered by Lloyds to reduce its property
exposure. It is understood that this portfolio will eventually total around £600m, and that the loans will have similar characteristics to those in the Royal portfolio, where the average lot size was around £4m, and the loans
were secured against office, retail and industrial properties around the country. If the Launcelot portfolio does come to market, it will likely be bought by one of the large US private equity firms which have raised tens of
billions of dollars of equity to buy loan packages. The final two bidders on Project Royal were Lone Star and Cerberus Capital Management, both of which are looking to step up their European distressed loan acquisitions.
Blackstone has also recently set up a new division, Blackstone Real Estate Debt Advisers, to manage the £1.4bn Isobel portfolio in which it bought a stake from Royal Bank of Scotland last year, alongside other loan portfolios
Blackstone is looking to buy. It is expected that Launcelot will be the last UK loan portfolio sale undertaken by Lloyds in the medium term, because it will then have exhausted the type of loan which can be packaged up and sold. Loans that can be sold in a portfolio need to have a certain characteristic, such as no change of control covenants and minimal swap liabilities. Lloyds has a portfolio of more than £21bn of loans that are managed by its business support unit, headed by Richard Dakin, that need to be restructured or sold. Last year Lloyds achieved the difficult task of reducing its property exposure by £13.5bn to £68bn while at the same time nearly halving its losses on property to £1.3bn. This process was partly due to loan sales like Royal. Lloyds sees the Royal sale as a success, having sold the portfolio completely, without providing vendor finance, at a discount of around 40% in a process that took roughly six months. But it is thought that it is not wedded to the idea of a loan portfolio sale, having used other workout strategies in the past three years such as putting together portfolios of
assets for sale, and setting up platforms to asset manage properties over the longer term.
Friday, 2 March 2012
Relevant UK Commercial Property information this week
- Retail vacancy drops to 12.7%: Vacant retail units and floorspace have continued to fall for 18 months according to research by Colliers International. Colliers’ seventh National Retail Barometer report has found that despite the third successive half year fall in retail vacancies, the levels of vacant shops remains well ahead of pre-recession levels. In October 2011, 12.7% of units across the sample of 15 towns and cities were empty, down from 13.3% last April. Some 9% of retail floorspace was vacant in October compared with 9.7% six months earlier. Richard Doidge, director of research consultancy at Colliers International, said: “The overall amount of vacant floorspace in our sample of towns has risen by 570,000 sq ft, or just over 51%, in five years. However, over the same period total retail floorspace stock increased by 1,421,000 sq ft or 8% (adding in new development and subtracting demolitions). Therefore, the total occupied retail floorspace actually increased by 851,000 sq ft (or 5%) through the recession. Although our sample does include a couple of major shopping
centre openings, the headline vacancy rates do tend to mask the broader picture which is not as negative.”
- Axa is gearing up to lend €2bn to European property companies during 2012 as one of Europe’s largest insurers bids to cash in on the regulatory pressure curtailing bank financing across the continent. Axa Real
Estate, the French group’s property arm, raised the funds from its parent company and a club of other institutional investors last year. The group intends to accelerate investment during 2012 in what it has called
“exceptional market conditions for senior lending”. The €2bn Axa intends this year to divert into debt provision, in both primary and secondary markets, compares with 1.5bn it spent in 2011. Isabelle Scemama, head of commercial real estate at Axa, said the focus would be on Germany and France because banks in the two countries “follow their UK peers in adjusting down their lending strategies”. Ms Scemama added that Axa would concentrate on senior debt, secured against high-quality commercial property, rather than mezzanine or junior debt. She said the shortage of supply in new lending to the sector meant senior loans “currently offer by far the most attractive risk-adjusted returns”. The move to increase its lending activities comes after Axa last month said it had raised €2.5bn for a separate fund targeting the development of new offices and shopping centres, highlighting the growing role of insurers in the property sector. Other insurers, such as Legal & General, have recently launched lending platforms to take up some of the slack in the market. The acceleration in investment by insurers coincides with a slowdown in bank lending to the sector. Germany’s Eurohypo
and France’s Société Générale both announced a moratorium on commercial property lending at the end of last year. Banks are shrinking their exposure to the sector ahead of changes under the Basel III rules, which will
increase the amount of capital they will have to hold against property loans. Insurance companies were historically an important source of finance to the property sector. But, during the 1980s, more aggressive banks wrested
control of the market. The result was that many banks were left nursing billions of euros in non-performing loans when the financial crisis precipitated a collapse in property values. This led insurers to forecast a
greater role for themselves in the property-lending market. They face a challenge over how to structure loans to match their needs and include clauses that prevent early repayment.
- When Royal Bank of Scotland launched an exercise on Tuesday to buy back £5.4bn of outstanding bonds, with the aim of profiting from the gap between their trading price and par value, it made sure to add a line of
explanation: “Any profits made by the issuer on the exchange offer will be subject to UK tax in accordance with normal rules.” It may have been a swipe at Barclays, or just a statement of standard practice. Either way, it was
probably a wise move to stress the point, given the furore that surrounded Barclays after it emerged that the bank had tried to deprive HM Revenue & Customs of as much as £500m, largely by avoiding a tax liability on a
December debt buyback. On December 5 Barclays moved to buy back £3.7bn of outstanding debt for up to £2.5bn. The gain of about £1.2bn should normally have been taxable, generating £300m under normal circumstances for Treasury coffers. But according to people briefed on the affair, Barclays sought to avoid that tax by replicating a traditional mechanism used by near-failing companies when buying back old debt. The buyback was Barclays’ first since new rules were introduced in 2009 ending an effective tax break on the
practice. In the immediate aftermath of the 2008 financial crisis, banks across the world made billions of pounds of capital gains through these so-called liability management exercises. Both RBS and Lloyds Banking Group – harder hit by the financial crisis, and therefore with more of an incentive to buy back cheap debt to book as profits – have done the most. According to data compiled by analysts at Nomura, RBS has launched an aggregate £23.6bn of debt buybacks over the past two years, with Lloyds buying back £6.4bn. Both banks said they had either paid tax on the gains, or had been exempt from paying it because of overall pre-tax losses across
their businesses. Both banks reported last week that they were making heavy losses in 2011. The balance of the lost tax targeted by HMRC was the result of the use by Barclays, and a “very small number of [other] large financial groups” of so-called authorised investment funds designed to create tax credits that can be repaid or offset against a bank’s other income where the tax in question has not been paid. Blocking this scheme – widely described by tax advisers as highly aggressive – would save £140m of tax, said HMRC. Tax experts said the HMRC crackdown would have a minimal impact on banks’ tax regimes.
- Taxpayers will have to wait up to 15 years to recoup the money spent on rescuing Northern Rock, according to the first official analysis of potential returns from one of the highest-profile bail-outs of the financial crisis. A report published on Tuesday by UK Financial Investments, which manages the government’s stakes in banks, forecast an eventual profit of up to £11.2bn from Northern Rock. However the bulk of that will be absorbed by
funding costs on the loans provided to the bank since its nationalisation in 2007. Overall UKFI expected to extract £46bn-£48bn from the £36.8bn of government funds that have been pumped into the bank. It said this amounted to an annual return of 3.5 per cent to 4.5 per cent excluding tax. After estimated annual funding costs of 3.9 per cent, which will eat into that return, the taxpayer is expected to break even on its investment. “Taxpayers are going to get every pound back from their investment in Northern Rock,” said Keith Morgan, who oversees the government’s stakes in Northern Rock and Bradford & Bingley. He stressed that UKFI also expected the government to make up to £21.8bn from B&B, taking its eventual return from the two failed banks to £33bn. This could take 10-15 years, however, as it is dependent on borrowers gradually repaying their mortgages. Nevertheless, the research will be a relief for the government, which came under fire last year for
selling the “good” part of Northern Rock - its branches, retail deposits and some mortgages - to Virgin Money for a £400m loss. The government received £747m in cash for the Northern Rock business – far below the £1.4bn of equity it injected – and is in line for further payments based on future performance. Deutsche Bank, which advised on the sale expects it to ultimately deliver £863m-£977m for taxpayers. That compared favourably with other disposal options, including floating or remutualising the bank, both of which would have generated less than £500m, according to UKFI. Justifying the timing of the sale, the group said that waiting until 2013 would have reduced the proceeds to £650m-£735m as a result of the deteriorating economic environment. While the sale to Virgin Money was considered a symbolic moment in the rehabilitation of Northern Rock, the vast bulk of
taxpayer returns – £45bn-£47bn – will come from the bank’s old loan book. This legacy business has been merged with the mortgage portfolio of Bradford & Bingley, which ran out of money in 2008. UKFI expected to recoup £49bn from the £27.2bn it injected into B&B following its collapse. The group revealed it paid out £3.2m in fees relating to the sale of Northern Rock. Deutsche Bank took £1.84m, which UKFI said was a low price compared with demands of up to £7m from other banks. The remainder was distributed among
firms including lawyers, accountants and PR advisers.
- Capital & Counties has announced strong results for 2011 with a hike in net asset value of 11.7%, to 166p per share. In a further display of the strength of the London economy, the value of the company’s portfolio
rose by 9.2% to £1.6bn with a loan-to-value ratio of 29%. Highlights of theyear included the £300m refinancing of its Covent Garden development and the submission of planning applications for its 10m sq ft Earls Court
Masterplan. The company also announced this morning that it had sold its half share in £150m worth of West End property to Great Portland Estates, from the pair’s Great Capital Partnership. The deal includes five properties in Regent Street, Broadwick Street and Dufours Place. Ian Hawksworth, chief executive of Capital & Counties Properties, said: “The transformation of Covent Garden into one of the most vibrant retail and leisure destinations in London continues to create value and attract new brands, whilst the recent resolution to grant planning consent for our Seagrave Road development is an important milestone in our progress with the Earls Court Masterplan following the submission of our planning applications in June. “I am confident that Capco’s place-making vision, creative teams and central London-focused assets will provide considerable opportunities in both the retail and residential markets during 2012.” Ian Durant, chairman of Capital & Counties Properties, said: “Capco is well positioned to maintain itsmomentum following a year of progress and value creation in 2011. Strong total returns were generated by energetic and profitable activity in line with the strategy articulated at the time of establishing Capco as an independent company in 2010. Carefully targeted acquisitions and the drive
towards creative regeneration have established a solid platform from which to continue to create value from Capco’s assets.”
- Five of the most dominant fund managers in the UK property market have started pooling data on more than £10bn of property in a bid to chart how the green attributes of buildings affect rental growth and capital values. As part of the most in-depth study of its kind to date, described as “game-changing” by valuers and fund managers, Aviva Investors, Prupim, Legal & General Property, Henderson Global Investors and Hermes REIM have pooled fifteen funds. CBRE UK head of valuation Michael Brodtman and the Royal Institute of Chartered Surveyors have compiled a framework of sustainability information, named EcoPas, which will be gathered and fed into the Investment Property Data Bank, which tracks the performance of funds. Brodtman expects to be able to track how sustainability performance affects the performance of all fifteen funds as early as autumn this year, alongside which sustainability features affect performance the most. It is understood that seven further fund managers are likely to commit to the scheme imminently. “There has long been a link between why sustainable properties perform better, but in the UK this has been impossible to prove,” said John Symes-Thompson, senior director, valuation and advisory at CBRE. Bill Hughes, managing director, Legal & General Property said: “Current metrics systems are designed to look at all aspects of ‘sustainability’ rather than
the different and more narrow issue of ‘the investment implications of sustainability’. “As such, they cannot do this very necessary job for investors in the way that EcoPAS can. In time, this critical project will bring the impact of sustainability upon investment performance into the Boardroom.” Call for rethink on third runway at Heathrow
- The head of International Airlines Group, parent of British Airways, has challenged ministers to have the “political balls” to reconsider the case for allowing a third runway at Heathrow airport.
- Christian Candy’s CPC Group has returned to the UK development scene with the cash purchase of the Sugar Quay site in the City of London. CPC has exchanged contracts for the site on the north bank of the Thames
with administrators at KPMG. It is CPC’s first purchase of a development asset since it bought Chelsea Barracks with backing from Qatari Diar for £959m in January 2008. There is a 110,000 sq ft office building on Sugar Quay, and planning consent for another of up to 231,000 sq ft. The building is vacant and is leased to Tate & Lyle. Nevertheless, the site is a complex development prospect. Candy said: “This is a unique site directly on the river, with potential for redevelopment. We are reviewing the possibilities for the site, which could potentially be an existing office upgrade, or redeveloped for commercial or residential use, subject to freeholder consent
and planning.” However, the City of London does not encourage new homes except in areas of existing residential development, such as the Barbican or on the fringes of the Square Mile. If the planning consent cannot be revised, CPC could proceed with the office plan. The ownership structure of the property adds a further layer of complexity. The Fishmongers Company owns the freehold, and the site is held on an 80-year lease, which would need to be regeared for a complete redevelopment. If this is not possible, the office building could be refurbished instead. The purchase price is not known, but accounts for Tilemead, the special-purpose vehicle that owns the property, show a £34m loan to Lloyds Banking Group, and this is expected to be the region of the purchase price. CPC Group has bought more than £150m of property for redevelopment this year. It includes: Two houses in Chester Square, Belgravia. A penthouse in Connaught Place, Bayswater. A penthouse in
Arlington Street, St James’s. A house in Cornwall Terrace overlooking Regents Park. An apartment in Park Mansions overlooking its One Hyde Park scheme. Real estate in New York
centre openings, the headline vacancy rates do tend to mask the broader picture which is not as negative.”
- Axa is gearing up to lend €2bn to European property companies during 2012 as one of Europe’s largest insurers bids to cash in on the regulatory pressure curtailing bank financing across the continent. Axa Real
Estate, the French group’s property arm, raised the funds from its parent company and a club of other institutional investors last year. The group intends to accelerate investment during 2012 in what it has called
“exceptional market conditions for senior lending”. The €2bn Axa intends this year to divert into debt provision, in both primary and secondary markets, compares with 1.5bn it spent in 2011. Isabelle Scemama, head of commercial real estate at Axa, said the focus would be on Germany and France because banks in the two countries “follow their UK peers in adjusting down their lending strategies”. Ms Scemama added that Axa would concentrate on senior debt, secured against high-quality commercial property, rather than mezzanine or junior debt. She said the shortage of supply in new lending to the sector meant senior loans “currently offer by far the most attractive risk-adjusted returns”. The move to increase its lending activities comes after Axa last month said it had raised €2.5bn for a separate fund targeting the development of new offices and shopping centres, highlighting the growing role of insurers in the property sector. Other insurers, such as Legal & General, have recently launched lending platforms to take up some of the slack in the market. The acceleration in investment by insurers coincides with a slowdown in bank lending to the sector. Germany’s Eurohypo
and France’s Société Générale both announced a moratorium on commercial property lending at the end of last year. Banks are shrinking their exposure to the sector ahead of changes under the Basel III rules, which will
increase the amount of capital they will have to hold against property loans. Insurance companies were historically an important source of finance to the property sector. But, during the 1980s, more aggressive banks wrested
control of the market. The result was that many banks were left nursing billions of euros in non-performing loans when the financial crisis precipitated a collapse in property values. This led insurers to forecast a
greater role for themselves in the property-lending market. They face a challenge over how to structure loans to match their needs and include clauses that prevent early repayment.
- When Royal Bank of Scotland launched an exercise on Tuesday to buy back £5.4bn of outstanding bonds, with the aim of profiting from the gap between their trading price and par value, it made sure to add a line of
explanation: “Any profits made by the issuer on the exchange offer will be subject to UK tax in accordance with normal rules.” It may have been a swipe at Barclays, or just a statement of standard practice. Either way, it was
probably a wise move to stress the point, given the furore that surrounded Barclays after it emerged that the bank had tried to deprive HM Revenue & Customs of as much as £500m, largely by avoiding a tax liability on a
December debt buyback. On December 5 Barclays moved to buy back £3.7bn of outstanding debt for up to £2.5bn. The gain of about £1.2bn should normally have been taxable, generating £300m under normal circumstances for Treasury coffers. But according to people briefed on the affair, Barclays sought to avoid that tax by replicating a traditional mechanism used by near-failing companies when buying back old debt. The buyback was Barclays’ first since new rules were introduced in 2009 ending an effective tax break on the
practice. In the immediate aftermath of the 2008 financial crisis, banks across the world made billions of pounds of capital gains through these so-called liability management exercises. Both RBS and Lloyds Banking Group – harder hit by the financial crisis, and therefore with more of an incentive to buy back cheap debt to book as profits – have done the most. According to data compiled by analysts at Nomura, RBS has launched an aggregate £23.6bn of debt buybacks over the past two years, with Lloyds buying back £6.4bn. Both banks said they had either paid tax on the gains, or had been exempt from paying it because of overall pre-tax losses across
their businesses. Both banks reported last week that they were making heavy losses in 2011. The balance of the lost tax targeted by HMRC was the result of the use by Barclays, and a “very small number of [other] large financial groups” of so-called authorised investment funds designed to create tax credits that can be repaid or offset against a bank’s other income where the tax in question has not been paid. Blocking this scheme – widely described by tax advisers as highly aggressive – would save £140m of tax, said HMRC. Tax experts said the HMRC crackdown would have a minimal impact on banks’ tax regimes.
- Taxpayers will have to wait up to 15 years to recoup the money spent on rescuing Northern Rock, according to the first official analysis of potential returns from one of the highest-profile bail-outs of the financial crisis. A report published on Tuesday by UK Financial Investments, which manages the government’s stakes in banks, forecast an eventual profit of up to £11.2bn from Northern Rock. However the bulk of that will be absorbed by
funding costs on the loans provided to the bank since its nationalisation in 2007. Overall UKFI expected to extract £46bn-£48bn from the £36.8bn of government funds that have been pumped into the bank. It said this amounted to an annual return of 3.5 per cent to 4.5 per cent excluding tax. After estimated annual funding costs of 3.9 per cent, which will eat into that return, the taxpayer is expected to break even on its investment. “Taxpayers are going to get every pound back from their investment in Northern Rock,” said Keith Morgan, who oversees the government’s stakes in Northern Rock and Bradford & Bingley. He stressed that UKFI also expected the government to make up to £21.8bn from B&B, taking its eventual return from the two failed banks to £33bn. This could take 10-15 years, however, as it is dependent on borrowers gradually repaying their mortgages. Nevertheless, the research will be a relief for the government, which came under fire last year for
selling the “good” part of Northern Rock - its branches, retail deposits and some mortgages - to Virgin Money for a £400m loss. The government received £747m in cash for the Northern Rock business – far below the £1.4bn of equity it injected – and is in line for further payments based on future performance. Deutsche Bank, which advised on the sale expects it to ultimately deliver £863m-£977m for taxpayers. That compared favourably with other disposal options, including floating or remutualising the bank, both of which would have generated less than £500m, according to UKFI. Justifying the timing of the sale, the group said that waiting until 2013 would have reduced the proceeds to £650m-£735m as a result of the deteriorating economic environment. While the sale to Virgin Money was considered a symbolic moment in the rehabilitation of Northern Rock, the vast bulk of
taxpayer returns – £45bn-£47bn – will come from the bank’s old loan book. This legacy business has been merged with the mortgage portfolio of Bradford & Bingley, which ran out of money in 2008. UKFI expected to recoup £49bn from the £27.2bn it injected into B&B following its collapse. The group revealed it paid out £3.2m in fees relating to the sale of Northern Rock. Deutsche Bank took £1.84m, which UKFI said was a low price compared with demands of up to £7m from other banks. The remainder was distributed among
firms including lawyers, accountants and PR advisers.
- Capital & Counties has announced strong results for 2011 with a hike in net asset value of 11.7%, to 166p per share. In a further display of the strength of the London economy, the value of the company’s portfolio
rose by 9.2% to £1.6bn with a loan-to-value ratio of 29%. Highlights of theyear included the £300m refinancing of its Covent Garden development and the submission of planning applications for its 10m sq ft Earls Court
Masterplan. The company also announced this morning that it had sold its half share in £150m worth of West End property to Great Portland Estates, from the pair’s Great Capital Partnership. The deal includes five properties in Regent Street, Broadwick Street and Dufours Place. Ian Hawksworth, chief executive of Capital & Counties Properties, said: “The transformation of Covent Garden into one of the most vibrant retail and leisure destinations in London continues to create value and attract new brands, whilst the recent resolution to grant planning consent for our Seagrave Road development is an important milestone in our progress with the Earls Court Masterplan following the submission of our planning applications in June. “I am confident that Capco’s place-making vision, creative teams and central London-focused assets will provide considerable opportunities in both the retail and residential markets during 2012.” Ian Durant, chairman of Capital & Counties Properties, said: “Capco is well positioned to maintain itsmomentum following a year of progress and value creation in 2011. Strong total returns were generated by energetic and profitable activity in line with the strategy articulated at the time of establishing Capco as an independent company in 2010. Carefully targeted acquisitions and the drive
towards creative regeneration have established a solid platform from which to continue to create value from Capco’s assets.”
- Five of the most dominant fund managers in the UK property market have started pooling data on more than £10bn of property in a bid to chart how the green attributes of buildings affect rental growth and capital values. As part of the most in-depth study of its kind to date, described as “game-changing” by valuers and fund managers, Aviva Investors, Prupim, Legal & General Property, Henderson Global Investors and Hermes REIM have pooled fifteen funds. CBRE UK head of valuation Michael Brodtman and the Royal Institute of Chartered Surveyors have compiled a framework of sustainability information, named EcoPas, which will be gathered and fed into the Investment Property Data Bank, which tracks the performance of funds. Brodtman expects to be able to track how sustainability performance affects the performance of all fifteen funds as early as autumn this year, alongside which sustainability features affect performance the most. It is understood that seven further fund managers are likely to commit to the scheme imminently. “There has long been a link between why sustainable properties perform better, but in the UK this has been impossible to prove,” said John Symes-Thompson, senior director, valuation and advisory at CBRE. Bill Hughes, managing director, Legal & General Property said: “Current metrics systems are designed to look at all aspects of ‘sustainability’ rather than
the different and more narrow issue of ‘the investment implications of sustainability’. “As such, they cannot do this very necessary job for investors in the way that EcoPAS can. In time, this critical project will bring the impact of sustainability upon investment performance into the Boardroom.” Call for rethink on third runway at Heathrow
- The head of International Airlines Group, parent of British Airways, has challenged ministers to have the “political balls” to reconsider the case for allowing a third runway at Heathrow airport.
- Christian Candy’s CPC Group has returned to the UK development scene with the cash purchase of the Sugar Quay site in the City of London. CPC has exchanged contracts for the site on the north bank of the Thames
with administrators at KPMG. It is CPC’s first purchase of a development asset since it bought Chelsea Barracks with backing from Qatari Diar for £959m in January 2008. There is a 110,000 sq ft office building on Sugar Quay, and planning consent for another of up to 231,000 sq ft. The building is vacant and is leased to Tate & Lyle. Nevertheless, the site is a complex development prospect. Candy said: “This is a unique site directly on the river, with potential for redevelopment. We are reviewing the possibilities for the site, which could potentially be an existing office upgrade, or redeveloped for commercial or residential use, subject to freeholder consent
and planning.” However, the City of London does not encourage new homes except in areas of existing residential development, such as the Barbican or on the fringes of the Square Mile. If the planning consent cannot be revised, CPC could proceed with the office plan. The ownership structure of the property adds a further layer of complexity. The Fishmongers Company owns the freehold, and the site is held on an 80-year lease, which would need to be regeared for a complete redevelopment. If this is not possible, the office building could be refurbished instead. The purchase price is not known, but accounts for Tilemead, the special-purpose vehicle that owns the property, show a £34m loan to Lloyds Banking Group, and this is expected to be the region of the purchase price. CPC Group has bought more than £150m of property for redevelopment this year. It includes: Two houses in Chester Square, Belgravia. A penthouse in Connaught Place, Bayswater. A penthouse in
Arlington Street, St James’s. A house in Cornwall Terrace overlooking Regents Park. An apartment in Park Mansions overlooking its One Hyde Park scheme. Real estate in New York
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