F&C to Make ‘Brave’ Foray Into Ireland’s Ailing Property Mar

[discostu]

businessweek.com/news/2010-0 … arket.html

Someone sees a bottom

March 26 (Bloomberg) – F&C REIT Asset Management spent 1 billion pounds ($1.5 billion) buying offices and stores in England and Scotland in 2009. The money manager now is turning to Ireland, western Europe’s worst-performing property market

The real estate business of London-based F&C Asset Management Plc is trying to buy Liffey Valley, a mall in west Dublin with retailers including Marks & Spencer Group Plc and Starbucks Corp., Managing Director Kevin McGrath said.

“It’s a brave move, but sometimes fortune favors the brave,” said McGrath, 46, who helps oversee about 8 billion pounds on behalf of clients including Cambridge University. “The Irish market has suffered the most. It will probably suffer the longest, but it will come through this.”

‘Biggest Bubble’

Ireland “was the biggest bubble out there,” McGrath said in an interview in London. “It would have been madness to buy three years ago. Now, it’s worth thinking about.”

F&C REIT, together with Area Property Managers, may pay 350 million euros ($467 million) for Liffey Valley mall, the Irish Independent reported

in January, without saying where it got the information. McGrath declined to comment on the report.

McGrath’s company, created in 2008 by a merger between F&C Asset Management’s property business and REIT Asset Management, took advantage of the drop in U.K. prices last year following the collapse of Lehman Brothers Holdings Inc.

“We said this is the worst it’s ever been; there are people out here who are weak and desperate to sell,” said McGrath. “This is our opportunity, our time.”

[mr_anderson]

This doesn’t surprise me.
In terms of commercial and retail units, there is value out there.
Basicially, the net yield is positive.

What a REIT like this needs to do, is a thorough examination of the tenant in order to access the strength of the underlying covenant. They have the benefit of a 3-4 year slump to shake out those with good credit from those with bad.

With a positive yield, the danger of falling capital values is minimised as the cashflow will keep the bank loans paid.

I still think it’s too early though.
€20 billion annual government borrowings paper over a lot of cracks in the economy.
Caveat emptor.

A bit of added perspective, last year AIB sold some more of its branch network.
These yielded between 6%-7%.
The market has since fallen further, meaning the yield has increased.
Currently, SCD residential is still yielding sub 4%.

[The_Unwelcome_Guest]

Ah, I was just bemoaning the lack of evil FOREIGN investors coming in yesterday… Interesting spin on it now, a year or two down the line… “Brave”?

Brave isn’t the word for it!

[Duplex]

If they can get 7% net; on a long lease, where the passing rent isn’t twice the current going rate and where there isn’t a massive oversupply of empty space. It might be worth considering.

[The_Unwelcome_Guest]

@Duplex

If they can get 7% net; on a long lease, where the passing rent isn’t twice the current going rate and where there isn’t a massive oversupply of empty space. It might be worth considering.

Well, you’d need to have a really good handle on your tenant’s business and likely long term financial health, to be honest, in terms of the general economy, stabilisation seems a long way off.

[Inis_Man]

@mr_anderson

This doesn’t surprise me.
In terms of commercial and retail units, there is value out there.
Basicially, the net yield is positive.

What a REIT like this needs to do, is a thorough examination of the tenant in order to access the strength of the underlying covenant. They have the benefit of a 3-4 year slump to shake out those with good credit from those with bad.

With a positive yield, the danger of falling capital values is minimised as the cashflow will keep the bank loans paid.

I still think it’s too early though.
€20 billion annual government borrowings paper over a lot of cracks in the economy.
Caveat emptor.

A bit of added perspective, last year AIB sold some more of its branch network.
These yielded between 6%-7%.
The market has since fallen further, meaning the yield has increased.
Currently, SCD residential is still yielding sub 4%.

Concerning value, today’s Indo reports that

@The Indo

Two Dundalk shops sell for undisclosed sum

Two Dundalk shops have recently sold at a yield of around 10pc.
The Jack & Jones and Vera Moda shops on Clanbrassil Street have been bought by a private investor for an undisclosed sum.

HTF can the Indo know the yield if the sum paid was undisclosed???
Uh oh, they’re not taking the agent’s word for it again, are they?

[Duplex]

Interesting Inis Man.

TENURE:
The property is let to Jack & Jones & Vera Moda on a 25 x 5 F.R.I. Lease at €90,000 p.a. At the first rent review the landlord agreed to a rent reduction for the years 2009 and 2010 as follows:

€60,000 for year 2009

€67,000 for year 2010

€90,000 per annum to next rent review in 2014.

feeauctioneers.ie/84-clanbra … -moda.aspx

Edited to add.

‘This street has gone to hell’ says Clanbrassil Street trader as more stores on famous Dundalk street close.

AS another two stores pulled their shutters down for the last time on what was once Dundalk’s premier shopping street at the weekend, one Clanbrassil Street businesswoman said the street had “gone to hell”.

Last week was another dark one for Clanbrassil Street businesses with Hughes & Hughes Booksellers shutting down after going into receivership on Friday evening. They were followed by nearby House of Shoes, which also stopped trading at the weekend.

Their closures mean that roughly a fifth of all stores on the street are now vacant and this has left many of the remaining traders struggling to survive.

dundalkdemocrat.ie/dundalkne … 6117316.jp

[tea_drinker]

As we speak, brendan o connor is looking to invest in this smart, ballllllllsy company.

[Daniel_Plainview]

The owners of Jack & Jones and Vera Moda (same group own both) are not in great financial shape at all… I’d be wanting significantly better than a 10% yield.

[Ireland_is_different]

@tea drinker

As we speak, brendan o connor is looking to invest in this smart, ballllllllsy company.

Well anyone that has an investment product/pension with Friends First Life Assurance Company has their money invested with Foreign and Colonial (F&C).
friendsfirst.ie/InvestmentConf.shtml

[DSE3Br]

@mr_anderson

A bit of added perspective, last year AIB sold some more of its branch network.
These yielded between 6%-7%.
The market has since fallen further, meaning the yield has increased.
Currently, SCD residential is still yielding sub 4%.

The yield did not change for those who bought. Only those who kept their powder dry could hope for an increased yield. It’s important to have blue chip tenants who can’t liquidate out of their leases to get out of upwards only rent reviews. The increased yield is to compensate for the increasing risk of this risk event and also the risk of legislation negatively effecting upwards only rent reviews.