Irish Property Market chat II - *read mod note post #1 before posting*

Donald Trump

https://www.boards.ie/discussion/comment/120204276#Comment_120204276

The more interesting thing is that they are willing to give you their capital for you to take on whatever risk they are currently exposed to...................

Villa05

https://www.boards.ie/discussion/comment/120204334#Comment_120204334

Which wouldn't be too far off 6% and rising. A game of pass the risk parcel before it blows up.

2 major US real estate funds have cancelled redemptions to prevent selling and price discovery. This may work as the markets are kiddy expecting a reverse in interest rates.

A reverse in interest rates will likely lead to much higher inflation. Very dangerous year ahead for assets

Donald Trump

https://www.boards.ie/discussion/comment/120204365#Comment_120204365

Those funds have likely capped, rather than cancelled, redemptions btw. And it was likely in the terms under which investors gave their money. What you saw was probably reports that the caps were hit.

Same effect to the investor wanting to get their money out. The nuance is that it is not the fund that are changing their conditions, rather that "too many" investors are trying to cash out at the same time. So it points more towards investor sentiment.

The risk that they are more likely worried about would be the price of houses falling.

Bass Reeves

https://www.boards.ie/discussion/comment/120204242#Comment_120204242

The figures do not add up. It's 106 bed spaces. They will cost 128/unit. The yield( with an estimated summer yield ) is 13.5k/ bed space.

The telling part is they are only willing to finance 55% of the purchase price themselves. Pricing is stupid 35% of purchase price will protect them from any downside.

Timing belt

https://www.boards.ie/discussion/comment/120204334#Comment_120204334

they reduce their risk from 100% to 55% while realising any gains on appreciation of the property price

This wouldn’t be uncommon activity for a fund

Villa05

I'd say we are not too far away from this in Ireland also

https://www.wsj.com/articles/in-battle-for-workers-companies-build-houses-11653217201

Jonnyc135

https://www.boards.ie/discussion/comment/120204895#Comment_120204895

JBS meats building houses, some how I doubt Larry Goodman will start that, mobile homes and caravans for migrant workers would be more like it in the form of housing

Donald Trump

https://www.boards.ie/discussion/comment/120204765#Comment_120204765

The vendor is getting out of 100% their investment in the property and then buying debt instead. Completely different asset class.

It isn't a property company realising some gain in one property to use to develop their next project.

Timing belt

https://www.boards.ie/discussion/comment/120205049#Comment_120205049

They are realising the gain on investment and issuing debt which will no doubt be secured on the property and as a result reducing their risk to a fall in value of the underlying secured asset in the event of the debt defaulting. This is quite common in PE funds.

Donald Trump

https://www.boards.ie/discussion/comment/120205847#Comment_120205847

All you are doing is rephrasing what I already said. The salient point however appears to have gone over your head - which is that certain professionals (whether "investors" or developers) are cashing out. The fact that they are providing vendor financing (whether that be in the form of a formal loan or in the form of delayed payment) shows that they are not doing it because they need the capital (or alternatively due to the cost of capital - the interest)

In 2006/2007 the major banks here entered into sale and leaseback agreements on portfolios of their branches that they owned.

lordleitrim

https://www.boards.ie/discussion/comment/120204895#Comment_120204895

I've heard a few of the larger hotels in Killarney already have or are submitting planning applications for onsite staff accommodation as their staff simply can't get alternative accommodation.

Timing belt

https://www.boards.ie/discussion/comment/120205909#Comment_120205909

PE funds have always done this…it’s nothing new…as for the sale and lease back of bank branches that was driven by the desire to get the assets off their balance sheet so they didn’t need to hold capital for reg purposes. It saved the banks money and allowed them to lend more. Accounting rules today wouldn’t allow this but the loophole existed back then.

Donald Trump

Anyway, it's going round in circles at this point.

Timing belt

I am delighted you worked in the industry for the last decade….Some people have worked a lot longer than that.

The fact you have only worked in the industry for the past decade would probably explain your post.

When Basel 2 was being implemented there was a lot of questions and concerns because for the first time non credit assets were being taken into account in calculating the capital requirements. It looked like banks would have a rwa requirement on property and because of this a lot of banks set up sale and lease agreements.

As for PE funds there are lots of examples but most of these are never written about in the papers due to the ‘private’ element of Private Equity funds.

herbalplants

https://www.boards.ie/discussion/comment/120206142#Comment_120206142

Timing Belt, who are you replying to??

Donald Trump

https://www.boards.ie/discussion/comment/120206142#Comment_120206142

As for PE funds there are lots of examples but most of these are never written about in the papers due to the ‘private’ element of Private Equity funds.

It is a housing development for sale on the open market where vendor finance is being provided. You said this was a common scenario. It isn't.

No equity is being bought or sold.

Timing belt

https://www.boards.ie/discussion/comment/120206253#Comment_120206253

Donal trump who changed his post afterwards. The screenshot shows his original post

herbalplants

https://www.boards.ie/discussion/comment/120206305#Comment_120206305

Ah OK sorry didn't see the initial post

Timing belt

https://www.boards.ie/discussion/comment/120206303#Comment_120206303

What is common is for a fund to undertake a partial divestment in an investment which is what this is. Whether the structure of the investment is in property / debt / equity is irrelevant. As per my initial post the fund has a reduced risk exposure to property as a result.

herbalplants

https://www.daft.ie/for-sale/detached-house-seaview-house-inchinaleega-sneem-co-kerry/4613660

Definitely sign of the time. You would never seen this type of house in Sneem for that price, it would have been close to 500k previously.

Donald Trump

https://www.boards.ie/discussion/comment/120206342#Comment_120206342

The structure of the investment matters very much. That is the point. That is why they are doing it.

"As per" your "initial post" is apparently a copy and paste of what I had already said. So I don't know what you are trying to get out of trying to argue a point, that someone made already, back at them.

https://www.boards.ie/discussion/comment/120204334#Comment_120204334

Timing belt

https://www.boards.ie/discussion/comment/120206929#Comment_120206929

If I am saying the same thing then why are you arguing and making stupid “Do you not know who I am posts…I have a decade of experience remember that before you reply I am so Important!!” That post in itself says everything.

Donald Trump

https://www.boards.ie/discussion/comment/120206994#Comment_120206994

You are the one going on about PE when it is irrelevant. Trying to win an "argument" which has nothing to do with the original point. You do understand the difference between buying something from your local shop, and buying a share in your local shop?

Timing belt

https://www.boards.ie/discussion/comment/120207026#Comment_120207026

Your original post claimed funds are doing the same as what banks did in ‘06-‘08. I pointed out the reason why banks entered sale and lease back agreements. If they were planning for a crash in property then they would have pulled back on lending which the didn’t do. As for funds all I pointed out was they reduced their risk to the underlying property. As for your question on buying something from a shop. It’s just stupid if you wanted to compare it would be buying a share or making a loan to a shop.

Bass Reeves

https://www.boards.ie/discussion/comment/120207049#Comment_120207049

''It’s just stupid if you wanted to compare it would be buying a share or making a loan to a shop''

You have to allow for the fact you are debating with DT. You have to allow for stupidly all the time

Donald Trump

https://www.boards.ie/discussion/comment/120207049#Comment_120207049

I did not say anything about funds. There is nothing in the article to indicate what the owner is. It was a simple point where people who are professionals in that area, rather than holding an asset, are prepared to lend others their capital to buy it from them.

In the mid-2000's, a number of banks did the same in Ireland. Banks should not be speculating directly on property, however in that case it was their own premises they were off-loading. Ok, they wanted full access to the capital but the point still remains that they felt that they could earn more by releasing it and loaning money to others, than they could by keeping the properties. They might have looked at the market and decided "it can't really go higher". It wouldn't necessarily have been "it is going to crash tomorrow"

Timing belt

It has to be a fund how else could they provide 55% finance…. With your decade of experience you surely can work that out. Even if a developer had enough cash it would be structured in a fund for tax purposes. Keep going the more you write the more “we know who you are” 🤣🤣

Bass Reeves

https://www.boards.ie/discussion/comment/120207070#Comment_120207070

Do you know once again you are spouting about something you have not got a clue about

Sell and lease back was flavour of the month back in the noughties. It was not just banks. Many private firms did it as well. The whole point was to release equity. It was not just property but vehicles and machinery as well.

Leasing became the defacto way of expansion. We had Eddie Hobbs and other financial advisor's telling farmers and other businesses that this was the way to go.

What the fund is doing is totally different. First they are only willing to give 55% of the price and guess what they will hold the deeds. They are looking for a patsy.

The banks were actually willing to enter 20+year leases for the buildings. Harvey Norman an Debenhams were set up like this expanding fast using leasing as a mechanism for rapid expansion as were a number of other businesses. There was business made offers for there property where it made no sense to keep the property. The Royal Dublin Hotel was one, there was Newsoms in Limerick and other similar properties.

Harvey Normans survived but Debenhams went bust.

combat14

interesting to see ECB report focusing in on "dominant" funds "control" of 40% of 9 dublin post code rentals - wonder will this quasi control of segments of the market be used as a stick to beat funds down the line .. Dominant funds could set rents in several areas of Dublin

Research shows that in nine postcodes, property investors control 40 per cent of rental properties, and that they buy far more second-hand than new-build homes

(The author of the report, Pierce Daly, a financial stability expert at the European Central Bank (ECB), said institutional)

https://www.businesspost.ie/news/dominant-funds-could-set-rents-in-several-areas-of-dublin/

Villa05

https://www.boards.ie/discussion/comment/120207129#Comment_120207129

Game of monopoly in practice