capitalflow/ qre seminar, rds 20th september 2019...qre/capital flow commercial real estate...
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Capitalflow/ QRE Seminar, RDS20th September 2019
1
Irelands specialist lender since
2016, over 70 professionals, with
vast lending experience
Irelands newest
specialist lender
since 2016
Funded by
Pollen Group,
€1.2bn
portfolio to
date, Vision
Blue
Finance for local businesses and
property around Ireland
Owners: Invested in a portfolio of
finance companies.
Property bridging & Term Loans,
Pension Mortgages HP, leasing,
Invoice Discounting, Asset Based
Lending
Over €300 m of lending assets across
our product range to over 2,000
customers across Ireland.
Who are we
People what makes you tick? We take the
time to get to know the people behind the business
Delivery Fast Straight up decisions
Principle we lend with integrity. We
combine traditional value of customer service with
modern delivery & systems. We recognise that
customer growth is our growth.
What are we about?
Relationship Partnership Approach,
long term relationships, your success is our success
& local decision making
Why Us
Property Bridging & Term Loans
Specialist Property Team
Local Decision Makers
Nationwide Funding
Multiple funding products
6 months to 7 years term with 30 year amortisation
Up to 100% of financing requirement subject to max LTV 75%
Loans ranging in amounts from €250k to €15m
Interest rates from 5% & up to 5 years interest only
Pre-63 Portfolio - €12m Dublin Portfolio of City Centre PropertiesTerm Loan with flexibility for refurbishment/ rent of properties
New Business ActivityGeorgian Office Property - €2.5mDublin 2Pre-63 Portfolio - € Dublin Pension Loan with flexibility to refurbish and rent property
Hotel - €5m Cork Refinance from Pillar Bank to allow for refurbishment and flexible covenants
Student Accommodation - €1.25m Sligo Bridge Loan3 week turnaround Refurbishment required
Residential Investment - €5m Dublin 26 Apartments Term LoanTurn around 4 weeks
Shopping Centre - €1.2m Kildare Term Loan Significant Asset Management and Vacancies
Retail & Office - €750k CorkTerm Loan with flexibility for refurbishment and rent
Industrial - €4.25mOffaly Term Loan - Replace existing lender cash sweeping 100% of the surplus rental income.
COMMERICAL
PROPERTY
Competition from banks
and other funders but
only we could deliver
FAST decisions &
payments
Standard Investment
loan required for
purchase of NAMA
shopping centre,
Oranmore.
LTV Cover Figures within
banking parameters
Tailored Solutions
Bridging loan within 7
days of approval
Exercised option to
refinance to term loan
over 20 years
after 6 months
Nama Shopping Centre, Oranmore
Funding Structure
Loan: €3.25m
Catalysts for
Underlying
Demand
• Irish economy expected to grow by 4.0% in 2019 & 3.2% in 2020
• Significant planned State investment in infrastructure, and
support for SME lending
• Falling unemployment, rising asset values
Current Market• BREXIT causing uncertainty in the market
• Investors pausing
• Strong Rental Income Demand
Opportunities • BREXIT Dampened Market Demand and Values
• Commercial Property Market long term perspective is healthy
• BREXIT will bring opportunities
6.7% GDP
growth in 2018
MARKET OPPORTUNITY
• Relationship model that DELIVERS
• PEOPLE business
• Swift sensible decisions
• Funding a deal is not plain sailing – We Get IT!
• We are always grateful for the business and partnerships.
KEY TAKEAWAYS
Economic influences on Irish propertyQRE/Capital Flow Commercial Real Estate “Future Focus”
Dermot O’Leary
Chief Economist
20 September 2019
3 ingredients for property investment
Timing
Income
Flows
Economic drivers
Occupier demand
Pricing/yield
Interest rates/alternatives
Covenants
Investment climate
Follow the money!
Dealing with the elephant in the room first
A Brexit deal is reached
PM refuses to request an
extension to Article 50
PM asks for an extension and is
granted
NI – Specific backstop
• Breaks law?• Alternative
letter
• General election
• Referendum
No-deal BrexitNo-deal Brexit
11
1)
EU refuses request
The Road to October 31st
Impact of Brexit on Ireland is varied
0% 5% 10% 15% 20% 25% 30%
Cavan Monaghan
KerryLongfordTipperaryWexfordKilkenny
Mayo Carlow
Donegal Leitrim Offaly Clare
RoscommonLaois
Cork CountySligo
Galway CountyWaterford Limerick
WestmeathMeath Louth
Wicklow Kildare Fingal
GalwayCity Cork City
South Dublin Dublin City
DLR
Employment in Brexit-exposedindustries
Source: IBEC
12
Number of announced company moves Financial and Legal firms dominate the mix
Smaller, more discrete, flows of relocations dominate
Dublin has done well to date
Source: GoodbodySource: Knight Frank
Financials, 57%
Legal, 27%
Insurance, 9%
FinTech, 4%
Business Services, 4%86
5547 47
41
100
90
80
70
60
50
40
30
20
10
0
13
IDA announcements and the “51st State”
US
72%
Rest of Europe
8%
France
3%
UK
3%
Germany
7%
Rest of World
7%
Origin of IDA supported companies byemployment
Source: IDA Annual Report 2017
International
services
41%
Medical & Dental
15%
Pharma
13%
Financial
services
12%
Computers/electr
onics
10%
Misc
9%
IDA supported jobs by sector2017
Source: IDA
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
FDI-related Non-FDI Total
Employment growth - FDI versus non-FDIrelated
%YoY
Source: IDA, CSO
0
2,000
4,000
6,000
8,000
10,000
12,000
Apr MayJan Feb Mar
2012 2013 2014 2015
Jun Jul Aug Sep
2016 2017
Oct Nov Dec
2018 2019
No.
of
Jobs
announced
2019
IDA job announcements byyear
14
Bond market is an excellentforecaster…
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
60 64 68 72 76 80 84 88 92 96 00 04 08 12 16
10-y
r yie
ld m
inus 2
-yryie
ld
Recession Spread
15
Source: New York Fed
US yield spread
…and now puts recession probability at 40%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
Pro
babili
ty
Recession
Jan Jan
60 64 68 72 76 80 84 88 92 96 00 04 08 12 16 20
Probability of recession
16
Source: New York Fed
Probability of recession based on the yield curve
Over 1.6m square feet of Dublin office space let in H1-19 – a new record for the half year period
4.1m square feet is due for completion in 2019-21, of which 44%+ is already pre-let
9
Robust take-up levels as occupier demand remains unbowed by uncertainty
Office supply & demand in Dublin
Source: Green REIT, CBRE, GoodbodySource: Goodbody, CBRE, Knight Frank, Cushman & Wakefield,Lisney
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
H1
19
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
Square
feet(m
illions)
Long-term
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2022+
2021f
2020f
2019f
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
Annual New Completions
Under Construction Pre-let
Planning Granted Pre-let
Under Construction
Planning Granted
Planning Applied
Sqm
Search for yieldcontinuing…
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
All Office - Central Dublin Office - Rest of Dublin
18
Yield difference on property relative to government bonds%
Source: IPD/MSCI, Bloomberg
…and likely to continue for some time yet
-1.0
1.5
1.0
0.5
0.0
-0.5
1M 4M 7M 10M 13M 16M
One year ago
19M 28M 37M 46M 55M 64M 73M
6 months ago Current
19
Interest rate expectations in the euro area
%
Source: Bloomberg
Negative rates in 2025
How does Ireland compare internationally?
Zuri
ch
Munic
h
Geneva
Ham
burg
Pari
s
Berl
in
Fra
nkfu
rt
Am
ste
rdam
Dusseld
orf
Hels
inki
Milan
Madri
d
Oslo
Sto
ckholm
Copenhagen
Vie
nna
London
W.E
nd
Rom
e
Barc
elo
nanil
buD
London
City
Bru
ssels
Lis
bon
Pra
gue
Bir
min
gham
Edin
burg
h
Mancheste
r
Wars
aw
Gla
sgow
Budapest
Bra
tisla
va
Buchare
st
Offic
eYeild
Cyclical High Cyclical Low Current Yield
• Office yields comparisons in theEU• 10
• 9
• 8
• 7
• 6
• 5
• 4
• 3
Source: CBRE
20
Breaks are being pushed further out
Income is increasingly the key return driver
Office leases are lengthening in Dublin
Rent frees are diminishing for new lettings
Preference for reducing risk rather than growing headline rents
Landlords in theascendancy
Source: Goodbody, MSCISource: Knight Frank, Goodbody
Source: Knight Frank, MSCI, Goodbody
5.7
13.114
12
10
8
6
4
2
0
2014 2016 2018Avera
ge N
ew
Lease
Length
(Y
ears
)
2015
London Offices
2017
Dublin Offices
14
12
10
8
6
4
2
0Year
ofBre
ak/E
xpiry
2014 2015 2016
Average Lease Length (Yr)
Source: Knight Frank, Goodbody
2017 2018
Average Break (Yr)
14
12
10
8
6
4
2
02014 2015 2016 2017 2018
Month
s
> 50k sq ft > 30k sq ft
> 10k sq ft > 5k sq ft
0%
21
20%
40%
60%
80%
100%
Sep 2015 May 2016 Jan 2017 Sep 2017 May 2018 Jan 2019
Dublin Office: Income as a % of Total Return
Dublin rents have topped, regions more scope forrecovery
22
Investor interest in Ireland still strong
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2007 2009 2011 2013 2015 2017 2019 H1
Eur
(Billions)
Unknown
Other
Hotel
Industrial
Residential
Mixed-Use
Retail
Office
23
Investment flows into Irish property bysector
Source: CBRE
• Brexit is bad, but creates opportunities for the cities
• The US economic outlook is more important than Brexit to the Irish
economy
• The office cycle is in a more mature phase, with returns likely to be
lower
• However, yields remain attractive in a relative and international
comparison and lease terms suggest landlords still yield the power
• Investor interest has moved to residential assets recently
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Keymessages
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