Office and Retail survey - Optimism returns?

From the Sunday Business Post, Michelle Devane reports on a return to guarded optimism.

A survey by the Society of Chartered Surveyors (SCS) indicates increased optimism in the office and retail markets, but the volume of enquiries from prospective tenants still remains low compared to historic

averages.

The quarterly survey shows that the pace of decline in the volume of lettings being completed in the

commercial property market in the first three months of the year has slowed, compared to the last quarter

in 2009, indicating that the market is stabilising.

The volume of available vacant property is continuing to rise, according to the findings, and rents and the

length of new leases are potentially set to fall further this year while the value of inducements will increase.

While the number of retail lettings fell during the first quarter of the year, it did so at a much slower pace

than in the last quarter of 2009.

The office market was more positive with the number of lettings being completed during the first quarter

of the year holding steady following a large decline in the last quarter of 2009.

As with the retail sector, the survey indicated that increasing office vacancy levels will force rents for the

sector to fall at a faster pace in the second quarter, than at the beginning of the year.

The findings are based on the responses of chartered surveyors in general practice and valuations to a

detailed questionnaire completed earlier this month.

Almost all respondents believe the bottom of the property market had not yet been reached.

The respondents also believe that further general declines in rents and capital values may occur during

in the second quarter of this year. Peter Stapleton, president of the SCS, said the results were not surprising, given the relative inactivity in the market, but he said the fall-off in the level of enquiries along with the

clear oversupply of offices was making a definitive contribution to Irish competitiveness.

‘‘Occupancy cost s are clearly re-adjusting at a level which is bringing us more into focus on the global stage

for inward investment and we believe that in time we will see positive results in this regard," Stapleton said.

More than half of the survey respondents believe Nama will assist in the recovery of the property market.

But almost a quarter said it would not assist. Stapleton said it was heartening to see that most surveyors felt Nama would help the property market recover.

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Who was doing the valuations...nobody!

From the Sunday Business Post, Pat Leahy and Ian Kehoe tell a staggering story of how they

(now us taxpayers) arrived at a valuation to tender for the Glass Bottle site...or guessed, as the case may be.

The nearest bidder to the purchasers was up to €100million (yes €100,000,000) lower than the "winning" consortium!

The consortium that bought the Irish Glass Bottle site in Dublin in 2006 paid up to €100 million more than any other bidder offered, The Sunday Business Post has learned.

The purchase of the site for €412 million has led to investigations into the activities of the Dublin Docklands Development Authority (DDDA),which formed the Becbay consortium with property developers Derek Quinlan and Bernard McNamara.

The purchase price for the site is expected to be central to a new investigation into the DDDA by the

Comptroller & Auditor General, sources familiar with the inquiries said.

The C&AG will attempt to ascertain how the consortium arrived at the €412 million valuation. It has already emerged that the DDDA did not get a professional valuation of the site before entering the deal with the property developers.

Evidence has emerged in recent weeks that the underbidder, believed to be developer Sean Mulryan, offered between €70 million and €100 million less than the Becbay bid.

The site is now valued at around €60 million and sources said the National Ass et Management Agency

(Nama) would devalue it further by imposing a 'haircut' of between 80 and 90 per cent on the related loans.

The investigation comes as the DDDA considers its future options for the site. A report commissioned by the government from accountancy firm FGS has outlined a number of options, including offloading the DDDA's stake in the site on the open market.

Regardless of what option it takes, FGS has warned that the agency will be forced to take a massive hit on

its investment. Last week, the government published three reports into the DDDA, highlighting serious

failures within the agency.

The site was part-owned by the Dublin Port Company, which was a major beneficiary of the Becbay buyout.

Its former chairman, Joe Burke, has confirmed that some of the proceeds were used to fill a €73 million hole

in the company's pension fund.

The Dublin Port Company's annual report for 2005 shows that the pension fund was short by €72.7 million.

A year later, it declared a once-off profit of €109 million from the sale of the Irish Glass Bottle site, which was used to top up the pension fund, pay off borrowings and support its capital investment plans.

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IAVI and SCS to merge

Members of both the Society of Chartered Surveyors and the Irish Auctioneers and Valuers Institute have voted in favour of the creation of a single professional body to represent the members of both

organisations.

The organisation, which will be called the Society of Chartered Surveyors Ireland (SCSI), will represent up to 4,000 property and construction professionals.

The merger was approved at two separate EGM’s in Dublin last evening.

88% of IAVI members voted in favour of the merger and 54% of SCS members voted in favour.

In a statement, the Presidents of the two bodies, Kersten Mehl (IAVI) and Peter Stapleton (SCS) described

the vote as a landmark decision.

“The Society of Chartered Surveyors Ireland (SCSI) will enhance and advance the profession by combining

our existing strengths and promoting the highest professional, ethical and educational standards. SCSI will also be in a position to provide quality research, informed market information and expert advice to Government in the public interest,” they said.

Both said the creation of the Society of Chartered Surveyors Ireland would;

- enhance the brand of Chartered Surveyors in Ireland

- ensure high and uniform educational standards for the property and construction sectors

- produce a higher and clearer profile for the profession and its members

- enhance and augment services to members through a pooling of resources


Stapleton and Mehl also pointed out that in the current economic climate coming together in one body

made even greater sense.

The joint Presidents said they were delighted to be leading their respective organisations into the Society

of Chartered Surveyors Ireland and were looking forward to working together for the remainder of the year

to ensure a smooth transition to SCSI.

They also pointed out that SCSI will maintain its strong relationship with RICS, the leading internationally recognised body for professionals in the construction and property sectors.

It’s expected that SCSI will be based in 38 Merrion Square in Dublin when it becomes operational on the 1st

of January 2011.

Upward-only Rent Reviews, what next?

Rob Kitchin from Ireland after NAMA reports on Upward Only rent reviews. Are their days numbered?
Inside Ireland reports that Retail Excellence Ireland (REI) has published a survey which reveals that 97% of the 187 companies (representing 2,200 stores) they contacted have sought a rent reduction from their landlord. More than 30% have recieved an outright rejection to their request. 25% of retailers claimed they will be forced out of business in the next 12 months if rent is not reduced and almost 80% claim they require a rent reduction of more than 15% in order to break even. REI argues that 35,000 jobs have so far been lost in the retail sector, and many more are under threat given the drop in both the volume and value of sales and the fact that many retailers are unable to renegotiate rental terms to a more favourable rate. Upward only rent review clauses were banned by the Dept of Justice last December, but this did not apply retrospectively, thus doing little to relieve pressure on tenants locked into existing agreements negotiated before the recession. REI have taken a proactive lobbying position on seeking a rent reduction, producing three short videos and bombarding local representatives with postcards asking them to pressure the Minister for Justice to enable retrospective rent review clauses. Upward only rent reviews always seemed a dubious arrangement to me, designed to serve the interests of one group only – the landlords – regardless of market conditions. It’ll be interesting to see what the government do here, as they are caught between two strong vested interests (retail and property/investment companies), and by enabling the reduction of rents they’ll potentially be undermining the rental income base of many properties going into NAMA (by one estimate costing the taxpayer €2.1 to €2.8bn). I suspect the pull of protecting jobs and local economies will be stronger, however, although I can envisage legal challenges to such a change – a working group is deliberating on the issue at the minute.

Personally, I think that it will be held that a contract is a contract, so it will not be possible to change the clause retrospectively. In any case, most landlords have exercised common sense and allowed rent reductions in order to maintain a tenant in their properties.
Larger institutional landlords, such as pension schemes etc. are much slower to allow reductions. This is a difficulty for both landlord and tenant and will lead to litigation as some retailers break leases and are subsequently pursued by landlords.
More money for the legal profession!

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Machinery Auction, Fethard, Co Tipperary, June 1st, 2010

A great crowd, in excess of 250, attended an auction held by us at Lakefield, Fethard, Co Tipperary for Mr Nicholas Goodbody, yesterday, June 1st.
Almost 70 lots of used machinery were put up for sale, all of which were used on Nicholas' farm until his retirement from farming recently.


With a backdrop of Slievenamon and under a blazing sun, the bidding was strong and all bar 2 of the lots were sold. This MF 50b was one of the unsold lots!



Star of the sale was a NH TX65 Combine, which went for €56,000.
A 1995 JD 7800 made €20,000 and a 1991 JD 3650 made €14,500.
A 4-furrow plough made €5,100, a ring roller €3,900, Fleming Topper €4,000, while grain trailers made €3,400 for single axle and €4,000 for tandems.

All in all, a great sale, in great weather, leaving all concerned happy with the outcome.

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