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Dublin housing crisis, yet NAMA sells 800 apts to investor group for 211 Mil...

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  • 29-08-2014 12:17pm
    #1
    LordNorbury
    Closed Accounts Posts: 1,143 ✭✭✭


    I actually couldn't believe what I was reading this morning when I read this over my Cornflakes. This country has a very serious housing crisis in the capital, what in the name of all that is serious, are this government thinking, when a decision is made to sell 800 residential properties, to a Canadian investment group?

    Have we learnt absolutely NOTHING in this country in the last 10-15 years???

    Where is the concern for the common good here, which I would argue is best served by getting as far away as we possibly can, from this ridiculous mindset that has us in this very economic mess that we currently still stand in, that our national stock of residential apartments and houses and not actually for our citizens to live in, but are STILL commodities to be traded internationally. Why should an international property group benefit from a rise in the price of these assets, instead of irish citizens who could badly use the same increase in future equity value to trade up?!?

    http://www.independent.ie/business/irish/nama-sells-800-apartments-in-dublin-for-211m-30546629.html

    The units at Charlestown near Finglas, Lansdowne Gate in Drimnagh, Beacon South Quarter in Sandyford, and Bakers Yard in the city centre, are being sold to Irish Residential Properties (IRES) Reit.
    Chief executive David Ehrlich said the Canadian-backed investment trust expects to build further in size and scale.
    "With the closing of this transaction, our property portfolio will grow to a total of 1,202 apartment suites, transforming I-RES into Ireland's largest non-governmental residential landlord,” he said.
    “All of our properties acquired to date are located in Dublin, in good letting locations, and with the benefit of proximity to public transport infrastructure and nearby employment. Also we are pleased to note that all these assets are recently constructed to a very high standard."
    Homes shortage changed the game
    Contracts are expected to be exchanged imminently to acquire the 761 units. In addition, a total of approximately 3,180 square meters of commercial space will be acquired in two of the properties.
    The apartment portfolio is currently over 98pc occupied and has gross passing residential rents of €10.6m and commercial rents of €0.3m.
    By unit type, the residential suites comprise 70pc 2-bed, 17pc 3-bed, and 13pc 1-bed units.
    These assets comprise the so called "Orange" portfolio, which is the first residential portfolio brought to the market by NAMA.
    Nama sells former Royal and Sun Alliance HQ
    It said the purchase price of approximately €211.3m, excluding transaction costs will be funded by the company's own cash and a €130m loan it recently secured from Barclays.
    Real estate investment trusts (Reits) are tax-efficient vehicles used to raise cash on the stock market to buy property. Since the first Irish Reit hit the market last year more than €1bn has been raised from investors, mainly outside Ireland, to buy assets here.
    IRES Reit was set up by Canada's Capreit, one of that country's biggest residential landlord's with an interest in 41,429 residential units.
    Irish Independent
    - See more at: http://www.independent.ie/business/irish/nama-sells-800-apartments-in-dublin-for-211m-30546629.html#sthash.7zk2TrSG.dpuf


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    #2
    gaius c
    Registered Users Posts: 3,528 ✭✭✭gaius c


    I don't see a huge problem with the ownership of the block. What matters is that they are not sitting empty and the REIT will move to let them out asap.


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    #3
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    LordNorbury wrote: »
    I actually couldn't believe what I was reading this morning when I read this over my Cornflakes.

    Did you read that the apartments are 98% occupied? That they are an international property company and this is their raison d'etre (unlike some of the chancers that own rental property here)?

    Did the possibility cross your mind that it might be better for the tenants to have a stable company behind their property?


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    #4
    LordNorbury
    Closed Accounts Posts: 1,143 ✭✭✭LordNorbury


    gaius c wrote: »
    I don't see a huge problem with the ownership of the block. What matters is that they are not sitting empty and the REIT will move to let them out asap.

    Yes, and who gets the benefit of the profit, by way of an improvement in equity in future years??? A big corporation with huge property interests!!! Why should Irish citizens not be allowed the opportunity to buy these properties, seeing as it is their money that they were bought with by NAMA in the first place?

    How on earth could it be argued that the common good is being best served by allowing a mega landlord make a premium yield off tenants in this way? The same goes for the increase in value for each property, instead of an Irish residential mortgage holder being allowed to benefit from this, the smart money is on getting 211 million Euro today, rather than looking at what is clearly in the longer term national good, which is that houses are for living in, not for speculating upon?!? Have we not even learnt that must in the last 6 years?!?


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    #5
    comongethappy
    Registered Users Posts: 2,753 ✭✭✭comongethappy


    Struggling to see the outrage here?

    Company let's apartments
    Tennant pays rent.
    World keeps turning.

    Also, the price isn't a bad deal for the taxpayer.
    It was never the goal of NAMA to be a landlord.


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    #6
    LordNorbury
    Closed Accounts Posts: 1,143 ✭✭✭LordNorbury


    antoobrien wrote: »
    Did you read that the apartments are 98% occupied? That they are an international property company and this is their raison d'etre (unlike some of the chancers that own rental property here)?

    Did the possibility cross your mind that it might be better for the tenants to have a stable company behind their property?

    It just seems that we have missed the bigger picture here. Why could we not have put these on the market and ring-fenced them for people who are buying with a residential mortgage?!?

    Instead of doing what is the right thing to do in terms of national economic housing policy, we have given a huge investment vehicle complete preference with regard to access to the Irish property market, Irish people wanting to buy and live near where they might work, don't have a chance to buy these properties. This is absolute insanity to me.


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    #7
    LordNorbury
    Closed Accounts Posts: 1,143 ✭✭✭LordNorbury


    comongethappy wrote: »
    Struggling to see the outrage here?

    Company let's apartments
    Tennant pays rent.
    World keeps turning.

    Also, the price isn't a bad deal for the taxpayer.
    It was never the goal of NAMA to be a landlord.

    It is a feature of the legislation that NAMA exists upon, that it has a role to play in the formation of a stable national property market. How this is best achieved by selling a huge property portfolio at a discount to an internationally trading investment company, I just cannot figure out.


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    #8
    comongethappy
    Registered Users Posts: 2,753 ✭✭✭comongethappy


    LordNorbury wrote: »
    Yes, and who gets the benefit of the profit, by way of an improvement in equity in future years??? A big corporation with huge property interests!!! Why should Irish citizens not be allowed the opportunity to buy these properties, seeing as it is their money that they were bought with by NAMA in the first place?

    How on earth could it be argued that the common good is being best served by allowing a mega landlord make a premium yield off tenants in this way? The same goes for the increase in value for each property, instead of an Irish residential mortgage holder being allowed to benefit from this, the smart money is on getting 211 million Euro today, rather than looking at what is clearly in the longer term national good, which is that houses are for living in, not for speculating upon?!? Have we not even learnt that must in the last 6 years?!?

    People can purchase individual properties held by NAMA.


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    #9
    comongethappy
    Registered Users Posts: 2,753 ✭✭✭comongethappy


    LordNorbury wrote: »
    It is a feature of the legislation that NAMA exists upon, that it has a role to play in the formation of a stable national property market. How this is best achieved by selling a huge property portfolio at a discount to an internationally trading investment company, I just cannot figure out.

    What discount?

    What was the price paid by NAMA for that portfolio?


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    #10
    gaius c
    Registered Users Posts: 3,528 ✭✭✭gaius c


    antoobrien wrote: »
    Did you read that the apartments are 98% occupied? That they are an international property company and this is their raison d'etre (unlike some of the chancers that own rental property here)?

    Did the possibility cross your mind that it might be better for the tenants to have a stable company behind their property?

    Eh...if you really believe that, I have a nice bridge that you might be interested in.

    LordNorbury is correct in one sense and it's that bargain buys are being made available to everybody except Joe Soap. He has to dig into his pockets and pay rapidly increasing prices in order to bail out the banks by the back door.

    If there's no institutional buyer interested, properties are mothballed until the distortion of prices caused by the artificial scarcity gets them interested.

    I don't mind REITs buying up large blocks but I do mind that stuff is getting mothballed if REITs are not interested. Between this and the refusal to repossess properties in arrears, it's pretty clear that ordinary taxpayers not getting their hands on short sales is government policy.


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    #11
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    LordNorbury wrote: »
    It just seems that we have missed the bigger picture here. Why could we not have put these on the market and ring-fenced them for people who are buying with a residential mortgage?!?

    Why would we?
    LordNorbury wrote: »
    Instead of doing what is the right thing to do in terms of national economic housing policy, we have given a huge investment vehicle complete preference with regard to access to the Irish property market. This is absolute insanity to me.

    The taxpayer (through NAMA) are getting an average of 260k per apartment.

    Check daft, apartments in Finglas are going for about 125k. Drimnagh for about 120k. Bakers Yard is somewhere near the NCR, which is in about 200k. The sandyford ones are the only ones that look cheap, the prices are 280k-300k

    If we were to follow your plan, we'd ringfence losses of up to 50% on these apartments. That is insanity.

    Plus, this is a good deal as the asking price for the portfolio was 160m


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    #12
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    LordNorbury wrote: »
    Why should Irish citizens not be allowed the opportunity to buy these properties, seeing as it is their money that they were bought with by NAMA in the first place?

    Irish citizens/residents are getting the opportunity to rent these apartments which sounds reasonable enough considering the shortage of decent rental stock in Dublin.


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    #13
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    gaius c wrote: »
    Eh...if you really believe that, I have a nice bridge that you might be interested in.
    LordNorbury wrote: »
    The apartment portfolio is currently over 98pc occupied and has gross passing residential rents of €10.6m and commercial rents of €0.3m.

    They might be lying about it, but it would take NAMA 20 years to see returns of that scale.


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    #14
    wally79
    Registered Users Posts: 2,933 ✭✭✭wally79


    antoobrien wrote: »
    They might be lying about it, but it would take NAMA 20 years to see returns of that scale.

    I don't know enough about this so could someone explain.

    While they were always going to sell these I don't see why they are selling now. Property prices are increasing so why not wait and maximise profit while taking €10m per year in rental

    Surely what this Canadian company intends to do.


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    #15
    mickdw
    Registered Users Posts: 23,307 ✭✭✭✭mickdw


    I would be in favour of NAMA keeping the books straight in terms of trying to get the best price for the properties and and not muddying the waters between making a profit and providing cheap public housing.
    I see no issue with the sale of properties to large foreign companies. I have an issue with the manner if which these deals are packaged. They are effectively removing everyone bar the multinational property companies due to the scale of the package of properties. Sure, I can see that this is an effective way of handling sales given the huge volume of properties owned by Nama but one would think that surely there was a way to release these apartments to the ordinary man or small time investors.
    Having said that, the price seems quite good for such a large deal. Over 260k on average per apartment. Nama would surely be making large profits on those.


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    #16
    LordNorbury
    Closed Accounts Posts: 1,143 ✭✭✭LordNorbury


    comongethappy wrote: »
    What discount?

    What was the price paid by NAMA for that portfolio?

    Of course there is a discount, someone taking out a chequebook and writing a cheque for 211 million is going to be expecting a discount!

    It doesn't matter what NAMA paid for it, we all know NAMA took these properties off the banks at big discounts. What matters is the long term value of the portfolio and the current market value. A residential property buyer buying one of these properties to live in, wouldn't expect a discount, they'd be paying the market value for the property, so the return to NAMA (i.e the taxpayer, would be higher, albeit that it would take more effort to deal with 800 buyers than just one). This is just a lazy way of selling property to what is a huge vested interest in the property market.


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    #17
    comongethappy
    Registered Users Posts: 2,753 ✭✭✭comongethappy


    LordNorbury wrote: »
    Of course there is a discount, someone taking out a chequebook and writing a cheque for 211 million is going to be expecting a discount!

    Assuming a discount is not the same as knowing a discount existed.

    Unless you know what NAMA paid for these properties vs what they sold them for you or anyone can't claim "discount".

    Its unlikely though anyone will know as Im not sure the amounts paid by NAMA to the banks for every single property is available.


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    #18
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    LordNorbury wrote: »
    Of course there is a discount, someone taking out a chequebook and writing a cheque for 211 million is going to be expecting a discount!

    The asking price was 160m, it was sold for 211m.

    The "discount" was to pay up to 51m over the odds.

    http://www.irishtimes.com/business/sectors/commercial-property/over-160m-for-761-apartments-in-dublin-1.1819019
    In the largest sale yet of Dublin apartments, the National Asset Management Agency (Nama) is to seek buyers for 761 homes, that are all rented, in four separate suburban developments.

    Dómhnaill O’Sullivan of Savills and David Cantwell of Hooke and MacDonald are guiding in excess of €160 million for the portfolio, which is to be sold as a single entity or in lots.

    The net initial yield from the residential element alone is likely to be about 6.64 per cent.

    The apartments, owned by four different vendors, are at Beacon South Quarter in Sandyford, Dublin 18; Charlestown, at the junction of the North Road and the M50, in Dublin 11; Lansdowne Gate in Drimnagh, Dublin 12; and Bakers Yard at North Circular Road, Dublin 1.

    LordNorbury wrote: »
    It just seems that we have missed the bigger picture here. Why could we not have put these on the market and ring-fenced them for people who are buying with a residential mortgage?!?

    So you want to evict 761 families from these apartments?


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    #19
    AlekSmart
    Registered Users Posts: 14,005 ✭✭✭✭AlekSmart


    LordNorbury wrote: »
    It just seems that we have missed the bigger picture here. Why could we not have put these on the market and ring-fenced them for people who are buying with a residential mortgage?!?

    Instead of doing what is the right thing to do in terms of national economic housing policy, we have given a huge investment vehicle complete preference with regard to access to the Irish property market, Irish people wanting to buy and live near where they might work, don't have a chance to buy these properties. This is absolute insanity to me.

    From my perspective this IS "the right thing to do" particularly IF The Government can move to rapidly modernize Private Rental Accomodation regulation and oversight.

    Facilitating large (particularly foreign) Corporate Landlords to set up and invest in the Irish Residential Letting market at reasonable rates of return should be a cornerstone of Irelands Housing Policy going forward.

    That 6.64% yield would appear to be towards the top end of European market,but to our native Landlordy entrepreneur's,it sounds fierce small altogether...this sector had become used to well padded double figure yields,before flipping them on to a different gouger to continue the ever upward trend.

    The reality in modern Ireland,is that our economic activity cannot fund the levels of Residential Property ownership which we had come to expect as being "normal".

    If this new arrival brings a level of order and rent stability then it will be of far greater benefit to our "National Economic Housing Policy" than stitching 761 people and their families into barely affordable 30 year mortgages.

    However...the Caveat remains for me,that the Government MUST move to address the issues continuing to bedevil and restrict Long Term Residential Rental in Ireland.


    Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.

    Charles Mackay (1812-1889)



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    #20
    sarkozy
    Registered Users Posts: 1,476 ✭✭✭sarkozy


    The outrage might be more understandable if NAMA sold the blocks for to little. Market price? Firesale price? Below firesale price? It's gambling with our money.


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    #21
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    antoobrien wrote: »
    The asking price was 160m, it was sold for 211m.

    http://www.irishtimes.com/business/sectors/commercial-property/over-160m-for-761-apartments-in-dublin-1.1819019

    A quick bit of analysis based the linked article and prices from the property price register on 3 of the lots (no sales recorded for Bakers Yard so used average unit price for the whole portfolio), the total market price of the apartments is €165.783m, meaning NAMA made over 45m more (27%) than it would have, had they taken the O.P.'s preferred course of action and sold them individually.


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    #22
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,482 Mod ✭✭✭✭johnnyskeleton


    LordNorbury wrote: »
    Of course there is a discount, someone taking out a chequebook and writing a cheque for 211 million is going to be expecting a discount!

    It doesn't matter what NAMA paid for it, we all know NAMA took these properties off the banks at big discounts. What matters is the long term value of the portfolio and the current market value. A residential property buyer buying one of these properties to live in, wouldn't expect a discount, they'd be paying the market value for the property, so the return to NAMA (i.e the taxpayer, would be higher, albeit that it would take more effort to deal with 800 buyers than just one). This is just a lazy way of selling property to what is a huge vested interest in the property market.

    800 apartments for 211m is roughly 260-265k per apartment. Assuming there are some nice 3 bds in good areas and some poor 1 beds in outer suburbs, id say they are possibly overpaying


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    #23
    Godge
    Closed Accounts Posts: 21,727 ✭✭✭✭Godge


    antoobrien wrote: »
    A quick bit of analysis based the linked article and prices from the property price register on 3 of the lots (no sales recorded for Bakers Yard so used average unit price for the whole portfolio), the total market price of the apartments is €165.783m, meaning NAMA made over 45m more (27%) than it would have, had they taken the O.P.'s preferred course of action and sold them individually.

    I agree, in essence a person buying an individual apartment is buying a home or an investment. A company buying the whole lot is buying a business.

    The risk of bad tenants reducing rent to zero for a single landlord is a high risk. The risk that all apartments have bad tenants reducing rent to zero for a business is a low risk. The capacity and ability to do something about it is low for a single landlord, high for a business.


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    #24
    Icepick
    Registered Users Posts: 2,454 ✭✭✭Icepick


    This is what we need - large professional landlords.


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    #25
    comongethappy
    Registered Users Posts: 2,753 ✭✭✭comongethappy


    Icepick wrote: »
    This is what we need - large professional landlords.

    What is wrong with it?
    (Unless my sarcasm detector has failed me)


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    #26
    AlekSmart
    Registered Users Posts: 14,005 ✭✭✭✭AlekSmart


    comongethappy wrote: »
    What is wrong with it?
    (Unless my sarcasm detector has failed me)

    I'm going with the sarcasm-free option....Yes this is EXACTLY what Ireland requires.

    The hope has to be that Professionalising this sector can reverse-engineer the craziness out of current Government policy.

    Ever since we followed Lady Thatcher's example and withdrew State Direct Housing Provision (Via the Local Authorities),we have been dependent upon the "Financial Sector" to fund everybody's desire to purchase a Place of their Own.....whether they could actually afford it or not.

    Nobody dared suggest ANY role for the Long Term Renter....either as Landlord OR Tenant !

    There will always be a place for a good businesslike individual Landlord,serving a niche market perhaps,and these people should be facilitated by Government policy too,particularly by revising and implimenting leglislation to facilitate supporting Long Term Resedential tenancy,with protections inbuilt for BOTH Landlord and Tenant.

    However,what I suspect is that NAMA's deal revealed today is a one-off,designed to send a fuzzy signal that opportunities do exist in Ireland,but without understanding the need for the Bigger Picture to be addressed !


    Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.

    Charles Mackay (1812-1889)



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    #27
    barneystinson
    Registered Users Posts: 4,683 ✭✭✭barneystinson


    In addition to the other reasons already set out as to why this is good news, does it not actually bring €211m into the economy?


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    #28
    mr_seer
    Registered Users Posts: 130 ✭✭mr_seer


    I don't necessarily think it is a bad thing. Institutional investors are a heck of a lot better landlords than retired teachers/gardai etc. The issue I have is that the government, Nama, the Central Bank and the Irish banks are actively in collaboration in an effort to drive up property prices. While the advantage is that the tax payer theoretically gets a better return from its investment in Nama and the banks, the issue is that current prices are unsustainable. Average residential property prices are running at a factor of >10x the average gross salary. This makes them unsustainable. This is why we have a housing crisis. Noonan and co know that people do not have the incomes to support these prices, hence not releasing any properties for sale on the open market. This blatantly unfair manipulation is going to end in another collapse at some point


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    #29
    Head The Wall
    Registered Users Posts: 2,892 ✭✭✭Head The Wall


    barneystinson wrote: »
    In addition to the other reasons already set out as to why this is good news, does it not actually bring €211m into the economy?

    Not really considering that the money gained will effectively just be paying back debt. I have no doubt that NAMA will try and mention it as profit in some report but that doesn't change the fact that the taxpayers have to stump up the difference.

    Does anyone know who these properties were taken over from and was there any mention of the initial value of the investment to build them?


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    #30
    barneystinson
    Registered Users Posts: 4,683 ✭✭✭barneystinson


    Head The Wall wrote: »
    Not really considering that the money gained will effectively just be paying back debt. I have no doubt that NAMA will try and mention it as profit in some report but that doesn't change the fact that the taxpayers have to stump up the difference.

    Well maybe I'm being thick, but if a foreign investor is paying €211m in cash presumably financed somewhere outside of the state, to what is effectively a State body, that's €211m less that the taxpayers have to come up with.

    The OP wanted the properties to be sold to domestic individual property buyers - in that case they would either be using money already held in savings in the state, or borrowing from one of the domestic banks (who in turn would be borrowing from elsewhere).

    Whatever way I look at it, it seems to me that this way the country's coffers are actually up by €211m (or a sizeable % of that amount) relative to the other proposal.


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    #31
    rankingelite
    Registered Users Posts: 53 ✭✭rankingelite


    Call me simple but all these properties are state owned. Why are they not being held onto, as assets and rented out to Irish people who need homes, We own the properties and we as a nation have all the time in the world to be paid back.
    There is no long term planning in this country. It is the headless chicken money grab all the time.


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