DAN O'BRIEN
PROPERTY TAXES and water charges need to be introduced to avoid further increases in income taxes, which would erode competitiveness, the Government has been told. The recommendations come in a six-page note from the National Competitiveness Council (NCC) which has been sent to the Government.
In the document, seen by The Irish Times , the State’s in-house competitiveness think tank has pressed for the implementation of a series of prioritised reforms.
Calling for the introduction of, among other things, a property tax and water charges, it says further income tax increases would have a damaging effect on competitiveness and make Ireland less attractive to highly skilled and highly mobile foreign workers.
Referring to spending by Government departments, the NCC urges an end to the traditional method of assessing needs from the starting point of the previous year’s budget allocation.
This should be replaced by “zero-based budgeting” which requires the continuous assessment of all spending programmes.
The agency also urges the Government to grant wide-ranging powers to a soon-to-be-established independent fiscal council. The council will oversee the management of the public finances and must be established under the terms of the EU-IMF bailout.
The NCC wants its powers to include a “capacity to stress test taxation and spending scenarios”.
While competitiveness gains have been made since the onset of recession, owing to falling costs, the document urges the Government to add to these gains by taking “structural policy decisions that will deliver more long-lasting, durable competitiveness gains”.
The NCC repeats previous calls for the liberalisation of domestic economic sectors to generate greater competition. It highlights legal services, medicine, energy and the public service as being in need of opening to competition.
It welcomes the inclusion of scheduled liberalisation measures for the legal and general medical practice sectors in the terms of the EU-IMF bailout.
Sectorally, the NCC believes the Government should focus on export opportunities in education, agriculture and tourism.
To boost the pharmaceutical and medical devices sectors, which now account for more than half of Ireland’s goods exports, the NCC believes a streamlining of the approval system for new products and processes is needed.
In an implicit criticism of the Central Statistics Office, the NCC says its resources must be focused on those sectors which are most important for the wider economy.
The NCC urges that its two-year-old proposals on education and training be “progressed immediately”, with a particular focus on the quality of teaching in schools.
The document notes Ireland was among the world’s most competitive economies from the late 1990s to 2003. This marks it out from other “troubled” peer countries which never achieved the sort of export success enjoyed by Ireland and proves high levels of competitiveness can be achieved.
The NCC was established in 1997 to measure the Irish economy’s competitive position vis-a-vis comparable economies and to make recommendations on measures to enhance competitiveness.
Wednesday, March 30, 2011
Think tank backs levies on property and water - The Irish Times - Tue, Mar 29, 2011
Tuesday, March 29, 2011
Agency hasn't worked -- so now the gloves are coming off - Independent.ie - Fire-Sales on the horizon?
Saturday March 26 2011
NAMA's decision to move against Paddy Kelly marks a new get-tough policy on its part and almost certainly brings the colourful property developer's 45-year career to an ignominious conclusion.
Originally from Co Laois, 67-year old Kelly was the first major developer to admit that the game was up when he told the Commercial Court in March 2009 that his assets exceeded his liabilities and that he might be bankrupt.
Since that admission, the blows have rained down thick and fast upon Kelly, who had an estimated net worth of €200m at the top of the market.
AIB, NIB and ACC are among the banks which have secured High Court judgments against him for unpaid debts.
He has also had his car seized -- not once but twice -- by the Sheriff and has been forced to move out of his palatial Shrewsbury Road, Dublin 4 home and into rather more modest accommodation.
At his peak, Paddy Kelly was involved in more than 50 projects, including the redevelopment of Smithfield in Dublin and several hotels with a combined value of €5bn.
His preferred method of recruiting partners for each of his projects, which was intended to spread the risk, achieved the opposite result.
As his son Simon explains in his recent book, 'Breakfast With Anglo', when Paddy Kelly sought to sell some of his properties to raise desperately needed cash in 2007 and early 2008, his partners refused to agree because they would have had to take a loss.
NAMA is appointing a statutory receiver to Paddy Kelly's seven hotels. These include three properties trading under the Clarion brand, a Marriot, a Maldron and a Days Inn.
The operation of the hotels is not affected by the appointment of the statutory receiver. NAMA has also appointed estate agents Savill to sell off properties owned by Kelly in Smithfield, Blackrock and Clonskeagh.
A statutory receiver is a sort of "super receiver", whose appointment is designed to prevent individual NAMA-participating banks appointing their own competing receivers to the same property. This is the third time that NAMA has appointed a statutory receiver to the assets of a major Irish property developer.
In February, it appointed a statutory receiver to Liam Carroll's sprawling property empire. It has done the same to some of Bernard McNamara's assets. Statutory receivers have also been appointed to the assets of several smaller property developers.
While there will be considerable personal sympathy for Paddy Kelly -- who, almost uniquely amongst major property developers, seems to have had no enemies -- NAMA's tougher approach is long overdue.
It is now almost two years since the former finance minister Brian Lenihan first announced his plans for the setting up of the National Asset Management Agency in his April 2009 emergency Budget.
Since then, events have moved at a glacial pace, with the state "bad bank" signally failing -- so far at least -- to achieve its stated aims of either stabilising the property market or getting the banks lending again.
Two years on, it is now clear that the property market and the banks' balance sheets are in far worse condition than even the most pessimistic observers could have imagined in April 2009.
With virtually all of Ireland's major property developers now hopelessly insolvent, not alone was NAMA's previous softly-softly policy not working, it couldn't possibly work.
As a result, Brendan McDonagh's outfit is going to have to adopt a much tougher approach in its dealings with property developers.
This is going to see NAMA seizing direct control of the assets of many more developers and selling off their assets for whatever it can get.
- George Garvey
Profits down, rents up | The Post - This has to be the craziest property story!
Profits down, rents up
27 March 2011Over the last three years, shoppers have become less inclined to part with their cash, so it may seem strange to hear about rent increases for retail tenants around the country, with the latest hikes coming for stores in Dundrum Town Centre.Oasis and Coast, run by Ian Galvin’ s Aurora Fashion group, were both hit with rent hikes of more than 50 per cent this month.
The stores will have to pay an additional €100,000plus in rent.
The rent increases in streets and centres around the country are not just being pushed through by landlords, but often follow an independent arbitration process.
Retailers claim the arbitration process is weighted in favour of landlords, while others involved insist that it is fair, and more complicated than it appears.
Arguments put forward by those in the property market to back rent increases include the fact that rents have been unchanged in Dundrum since it opened in 2005. Dundrum rents are also lower than in other premium shopping centres, such as Liffey Valley.
However, Retail Excellence Ireland claims that some shops will close if higher rents are forced through.
The controversial arbitration system chooses arbitrators from a panel nominated by the Society of Chartered Surveyors.
A report from the working group on transparency in commercial rent reviews said last year it was ‘‘clear that there was a perception among some retail tenant interests that the arbitration process was inherently biased in favour of landlords’’. It found no objective evidence of bias, but said ‘‘the perception was real’’ and needed to be addressed.
Suspicion about the process remains.
There are claims that arbitrators are too closely linked to the property market to consider recommending lower rents.
One of the more contentious issues is that of side deals, whereby headline figures set a new market rent, but sweeteners are included in separate documents.
There are differing views as to whether or not these side letters ever make it into the public domain. Blaine Callard, chief executive of Harvey Norman’s Irish stores, said he had no faith in arbitration.
‘‘The arbitration process is an ineffective mechanism," Callard said. ‘‘It is based on this old real estate assumption that rents and property prices only ever go up.
The whole problem is that everybody involved in that process inevitably has some vested interest in the property market.
‘‘There is this huge momentum stacked against any kind of recognition that the rents agreed during the boom are completely unrealistic.
The arbitration process, in its current form, is part of the mechanism designed to maintain this facade that the shopping centres are still worth what it says on the balance sheet."
Harvey Norman has 14 stores in the Republic and two in the North, employing almost 800 people.
‘‘Rents being offered in some stores next door to me are half what we’re paying," Callard said. ‘‘It’s all under the table, and they sign people up on a higher rent and then do a side letter, so you can’t even prove there is a cheaper rent.
There could be a year free of rent or key money, so when you actually add all that together, rents are effectively 30 to 50 per cent lower."
Callard said it was not practice for side letters to be made available to other tenants.
‘‘You have a whole two speed market," he said.
‘‘It’s not a level playing field. We have a well-capitalised, foreign parent that’s profitable, so we have a long-term commitment to Ireland. But unfortunately, for a lot of the small to medium-sized retailers, the money under the mattress has run out. This is the crunch year."
Another retailer, Colm Sorensen of Butlers Chocolates, was also critical of the arbitration system. The luxury chocolates group owns 14 outlets in Ireland, including one in Dundrum Town Centre where it has been issued with a demand for a 100 per cent rent increase. The company has not gone down the arbitration route, however.
‘‘I think the process is very flawed," Sorensen said. ‘‘I think it is open to serious manipulation by the landlord."
Sorensen also said that secret side deals pushed up top line figures to give the impression of higher open market rents and claimed that new rental agreements were often timed to make sure the highest possible comparatives were in place ahead of rent reviews.
He said that, in one instance in Dublin, he believed a landlord struck a high-rent deal with a high-risk tenant to set a new headline rent.
‘‘A landlord wouldn’t normally let a property to a man with no assets, except for the fact that he would pay high rents," he said. ‘‘And then we were all brought up as a result of it."
Sorensen was also critical of Nama’s role in the rental market.
A number of properties, including Dundrum Town Centre, are now in the hands of Nama.
‘‘Nama employs developers to get tenants’ rents up," Sorensen said. ‘‘Nobody mentions Nama, but a government agency is behind a very high rent review request."
Barry Smyth, a member of the Society of Chartered Surveyors, who sat on the review group on commercial rents, insists that the system is fair.
On the issue of rent increases being recommended at a time when revenues are falling, he said that ‘‘generally, the tenant’s turnover and goodwill is not taken into account’’.
‘‘There are rents that are tied to turnover specifically, but for the majority of businesses, the turnover doesn’t come into it," Smyth said.
‘‘Because you could have a situation that you had a lazy tenant. And if turnover is booming, tenants may not want to reveal their turnover and have to pay a higher rent because of it."
Smyth also said that previous rental agreements, with introductory sweeteners, were not taken into account when seemingly large rent increases were reported on.
‘‘It must, to some degree, depend on when the rent was previously fixed and whether or not there were special conditions attached to the original rent," he said. ‘‘So looking at percentages doesn’t give the full picture.
There may well have been some incentives in the early part of the lease, which means an increase is justifiable." Another reason for a rent increase could be improvements to a retail development.
‘‘A location may have changed positively and, even though overall trade may be down, the specific location may not be down," Smyth said.
He also said that both the tenant and landlord presented their cases during the process.
‘‘The arbitrator is an independent person in a quasi-judicial position," Smyth said. ‘‘He must make a decision based only on the evidence that’s put to him. And both the landlord and the tenant have equal opportunity to be represented at the arbitration."
Smyth rejected the suggestion that arbitrators were biased towards property.
‘‘If I were asked to do a rent review on Grafton Street, and I happened to act for the landlord next door, I would decline that appointment, because it wouldn’t be appropriate," he said.
‘‘You can assume that, in any sort of rent review, the tenants are represented by valuers.
There may be some firms that are more readily identified with landlords, and some more with tenants."
He said it would be unlikely that an arbitrator would more closely identify with landlords. Smyth also said that side letters were fully available to retailers and their representatives.
‘‘The tenant’s valuer is quite entitled to get all that information," he said. ‘‘If it was being hidden by a landlord, I think the arbitrator might look somewhat askance at that."
The Sunday Business Post spoke to one retailer who said that side letters were included in his arbitration process, but a sizeable rent increase was still recommended.
Dozens of tenants in Dundrum have sought to go down the arbitration route, while many more retailers around the country are resisting rent increases.
With no sign of a return to spending growth by consumers, relations between tenants and landlords are likely to be strained for quite some time to come.
New AIB Valuer panel causes concern to Auctioneers
From The Sunday Times:
AIB's decision to restrict membership of its mortgage experts panel to
customers has met with accusations that the bank has its priorities wrong.
Property professionals must be customers of Allied Irish Banks to be considered for inclusion on
a new panel of valuers for its mortgage business. The taxpayer-backed bank drafted a shortlist of
more than 100 professionals in January, from which mortgage applicants must select a valuer to
determine that they are not overpaying for their homes.
AIB was one of the last lenders to establish such a panel but it has shocked the profession with its
stipulation that valuers must be bank customers to make the shortlist.
unusual, saying he was concerned that the lender was prioritising valuers’ banking relationships
over their professional competence.
“Our concern is that the best candidates get on the panel — not just AIB customers,” he said. “The
public will want to know that valuations are being conducted by the proper people in the proper
manner.”
Our firm was a long-time member of the panel, but we were arbitrarily dropped in January, without any notice. (We are BOI customers)
The local branch plead ignorance of the matter, citing "Head Office".
I hear reports that the Appointed Valuer is charging up to double normal rates. They now have a monopoly on AIB valuations.
Perhaps one for the Consumer Affairs people or the Competition Authority?
Comments?
ACC Bank secures €33m judgment against developer - Clonmel Property mentioned in case-The Irish Times
MARY CAROLAN
ACC BANK has secured summary judgment for almost €33 million against a Dublin businessman arising from unpaid property loans.
The bank had brought two sets of Commercial Court proceedings against John Walsh, Tinnahinch, Plunkett Avenue, Westminster Road, Foxrock, arising from property loans and a guarantee provided by him and others over loans to a property company, Marydean Properties Ltd.
The bank sought summary judgment for €30.2 million against Mr Walsh in the first set of proceedings arising from a facility under which ACC refinanced existing borrowings with Anglo Irish Bank relating to lands at Termonfeckin, Co Louth, and Ballyboghil, Co Dublin.
Mr Justice Peter Kelly was told yesterday by Damien Keaney, for Mr Walsh, that while no defence was being offered, his client was seeking a stay on judgment because of negotiations related to the sale of the affected property.
Mr Justice Kelly granted the application by Rossa Fanning, for ACC, but agreed to place a three-week stay. Mr Fanning did not object to the stay.
In the second case, ACC sought €2.67 million summary judgment against Mr Walsh on foot of his alleged 2005 guarantee of loans to Marydean to acquire and refurbish commercial investment properties at Gladstone Street, Clonmel, Co Tipperary.
Mr Keaney initially said his client contended he had a defence to that claim in circumstances where a solicitor for Mr Walsh had written to the bank revoking guarantees prior to ACC issuing its demand for repayment. An English court of appeal decision provided authority for that defence, counsel added.
Mr Justice Kelly said such a defence “is news to me” and it appeared to be an interesting proposition that a person could enter a guarantee “and walk away” from it.
He adjourned the issue to yesterday afternoon when Mr Keaney indicated he was no longer pursuing that defence.
In those circumstances, judgment for the €2.67 million was entered.
The €30 million claim arose from a €26.6 million loan facility, plus interest roll-up of €3.19 million, extended to Mr Walsh and two other men in January 2008 relating to property at Termonfeckin, Co Louth, and Ballyboghil, Co Dublin.
The site at Drogheda Road, Termonfeckin, had planning permission for a new village centre and residential units but ACC said it became apparent soon after draw-down of the loan a build-out of the site was not commercially viable because the property market had deteriorated.
The loan was also made for a medium-term development of some 172 acres at Ballboghil made up of two acres zoned residential and 170 acres zoned agricultural.
The borrowers were actively involved in negotiations with a local GAA club to participate in a land swap that was expected to provide an opportunity to begin development of the area zoned residential, the bank said. No progress was made in relation to a formal agreement in that regard, the bank believed.
In separate proceedings yesterday, ACC also secured summary judgment for €2.67 million against Richard Murphy, Oak House, Hainault Road, Foxrock, Dublin, arising from the alleged guarantees provided in 2005 by Mr Murphy, Mr Walsh and others related to the loan to Marydean. Mr Murphy offered no defence to the claim.