8th August (Issue 108)
Welcome to the Origin Capital Weekly Irish Property Review. This update is designed to provide you with a full recap of the latest property news from the media over the last seven days.
LOAN / PORTFOLIO SALES
Shoreline Portfolio: The Sunday Independent reports that Bank of Ireland has agreed to buy a portfolio of ‘re-performing loans’ from Lone Star. Mortgage holders have received letters in recent weeks advising them that an agreement had been reached between Bank of Ireland and the Lone Star entity Shoreline. It is understood that the loans in the portfolio were previously in difficulty, but are now performing again after engagement between the borrowers and the loan acquirer. The purchase of portfolios from investment funds provides a mechanism for banks to grow their loan books in a market where housing supply remains tight. The Irish Independent, 6th August
RETAIL
Lidl Expansion: Lidl could increase its presence in Ireland to as many as 200 stores, in a potential investment of at least €300m. The company currently has 152 outlets in the Republic of Ireland, and is opening further stores this year in a variety of locations including Cabra and Portmarnock in Dublin and Wilton and Bantry in Cork. In an interview with the Irish Independent, Lidl Ireland Managing Director John Paul Scally stated that the company would continue expanding until there was a Lidl store in close proximity to everyone in the country. The potential €300m spend would be in addition to the €400m the company is investing in its network in Ireland between 2016 and 2018, including c. €80m on a substantial distribution centre the company is hoping to develop in Newbridge, Co. Kildare. The Irish Independent, 3rd August
OFFICE
One Molesworth Street: Green REIT has confirmed that it has signed an agreement with Barclays Bank which could see the bank lease up to 45,000 sq. ft. of space in their new One Molesworth Street development in Dublin city centre. The bank has initially signed a 20-year lease for 37,000 sq. ft. of space, which equates to two and a half floors out of the total of five available floors. The bank also has an option for a further half floor, which, if taken, would bring the letting to 45,000 sq. ft. Barclays will pay a rent of €2.35m p.a., with the bank entitled to a market level rent-free period at the start of the lease. There is also a break option in the lease in year 12. The Irish Times reports that the One Molesworth Street development is set to generate an overall rental income of c. €5m p.a. for Green REIT, and cites a Goodbody client note which states the scheme could add c. €34m of profits once completed, ahead of earlier expectations of c. €29m. The Irish Times, 2nd August
HOTEL
Carton House Resort: The Sunday Business Post provides an update on the bidding for Carton House Hotel, Spa & Golf Resort, reporting that billionaire John Malone and the Guinness family are among those considering bids for the resort. In addition, several Chinese investors have reportedly sought access to the data room. It is also noted that a number of the usual bidders for large scale Irish hotel and resort assets such as Tetrarch, Dalata and Tifco, are not planning to make a bid. It is believed that the earnings after tax of c. €2m against a price tag of €60m – €65m is deterring several players, and several well-known hotel investors also consider the detail available in the data room to be insufficient for progressing a bid. The Sunday Business Post, 6th August
Average Room Rates: New figures from the travel research company STR show that the average daily rate (ADR) for a hotel room in Dublin city in H1 2017 was €132.60. For the State as a whole, the ADR was €122.85. STR also anticipate that the ADR in Dublin will rise by between 5.5% and 7.5% before the end of 2017, increasing the ADR to somewhere between €132 and €140. With regards to occupancy rates, Dublin currently has an occupancy rate of 80.71%, ahead of Paris, Zurich, London and Rome. The occupancy figure for Ireland as a whole (75.4%) was also above cities such as Paris, Zurich and Rome, with occupancy in hotels outside of Dublin rising by 3% in H1 2017 to 67.3%. The Irish Times, 7th August
RESIDENTIAL / LAND
Cork Development Site: The O’Flynn Group, of which Michael O’Flynn is the Managing Director, has sought planning permission for 515 homes, a crèche, retail units and a community centre on a c. 76-acre site in Ballinglanna, which is to the east of Glanmire in Cork. The development has a value of c. €130m. Under the new fast-track planning legislation, the group can expect a final decision of the planning application within 16 weeks. The Irish Independent, 8th August
EBS / DKM Affordability Index: The latest EBS / DKM Affordability Index shows that the cost of servicing a mortgage, as a percentage of after-tax income, continues to rise. By the end of 2017, a single-person will spend c. 34.5% of their income servicing their mortgage, a level not seen since 2008. For a first-time buyer couple, mortgage repayments accounted for c. 21.2% of their after-tax income in May 2017, having been at c. 18.7% in May 2015. First-time buyer couples in Dublin were spending c. 27.4% of their after-tax income servicing their mortgage in May 2017, up from 25.5% in May 2016 and a low of c. 17% in 2012. The Irish Times, 8th August
Government Mortgage-To-Rent Scheme: The Government has received clearance from Eurostat, the EU’s statistics agency, to proceed with a plan that will allow private equity funds to acquire distressed mortgages from the Irish banks. Under the proposed scheme, private sector entities will be able to purchase the mortgages of thousands of distressed mortgage holders, who can then apply to become social housing tenants, with the State paying a rent top-up to the private sector operators on top of what the mortgage holder can pay. While the borrower will lose ownership of their home under the scheme, instead becoming a tenant of the State, they will be able to re-purchase their home in the future if their circumstances improve. To date, several private sector entities and advocacy groups have expressed an interest in the scheme, including iCare Housing, Merrion Capital, Beacon Capital and Arizun. The Sunday Business Post, 6th August
Mortgage Approvals Vs Drawdowns: The Irish Independent reports on the increasing gap between the number of people who obtain mortgage approval and those who actually drawdown a mortgage. According to figures from the Banking and Payment Federation Ireland (BPFI), c. 8,000 more people were approved for a mortgage than those who actually drew one down in the year ending June 2017 (c. 35,000 vs. c. 27,000). However, both approvals and drawdown numbers continue to rise. The disparity, which is the greatest in percentage terms since the data began in 2011, is attributed to both the chronic shortage of properties for sale, and the fact that many buyers get approval from a number of mortgage lenders in the hope that some will offer them a higher mortgage. The figures from the BPFI show that c. 8,000 mortgages were drawn down in Q2 2017, with a combined value of c. €1.65bn, representing a 17.6% increase YoY. The Irish Independent reports that the first time buyers are driving the rise in the mortgage market, having been boosted by the relaxation of deposit rules from the Central Bank and the introduction of the Government’s Help-to-Buy scheme. First-time buyers and mover-purchasers combined accounted for 85% of the total value of mortgages drawn down. The Irish Independent, 3rd August
Apartment Sales: According to the latest investment property report from estate agents Lisney, over €300m worth of rental apartment blocks and portfolios are expected to be sold in H2 2017. Lisney reports that strong demand has seen the sector become the best performing sector in the year ending June 2017. The yields from private rental sector (PRS) investments dropped by 75 basis points in the year ending June 2017, as the prices being paid for investments rose even more rapidly than the increases in rents. However, at 5.75% gross, yields are still higher than both prime retail and offices. The Irish Independent, 7th August
Dublin Residential Development Scheme: Victoria Asset Management, a UK company connected to Dublin-based property developer Victoria Homes, is reportedly planning to raise up to €50m by issuing bonds, to fund the construction of up to 4,000 new homes around Dublin. The company has said it will work in conjunction with Victoria Homes, which it says has created a robust pipeline of development sites around the capital over the last five years. These sites are located in areas including Enniskerry, Killiney, Foxrock, Ballsbridge, Mount Merrion, Stillorgan, Rathfarnham, Portmarnock and Malahide. The Irish Independent, 4th August
Benbulben Suites: Colliers are guiding €2.5m for ‘the Benbulben Suites’ a residential, tourist and industrial investment in Sligo. The investment consists of two buildings. The first building contains 54 two-bedroom suites and extends to 74,000 sq. ft. (gross). The second building, the industrial building, extends to c. 12,000 sq. ft. (gross). The suites are currently used as serviced accommodation, with a mixture of student accommodation and short-term tourist lettings. In 2016 the suites generated turnover of c. €481k and income of c. €186k. The industrial building is to the rear of the suites and is currently being used by the HSE as a regional laundry, at a rent of c. €63k p.a. The HSE has been in situ since 1992, although their lease has expired. The Irish Independent, 3rd August
OTHER
Construction Projects: According to the Construction Industry Federation, an audit of every public and private sector construction project in the State (excluding one-off housing) by Construction Information Services has shown that of the new construction projects commencing, 27% are in Dublin, 24% are in the rest of Leinster, 28% are in Munster, 13% are in Connaught and 8% are in Ulster (Republic of Ireland). The report also found that after a 29% increase in the number of projects starting between 2015 and 2016, the number of projects which commenced in H1 2017 was almost static (at 1,325) when compared with the same period in 2016 (1,317). Also notable is that the volume of planning permissions granted in H1 2017 (2,672) was below the corresponding period in 2016, with the number down by 312 projects (10.4%). The Irish Independent, 6th August
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