Every UK real estate owner holding assets in euros must be looking to sell. Seek and ye shall surely find, writes columnist Peter Bill.
On 22 August, European REIT, a UK-listed vehicle run by Schroder, posted a notice worth repeating, almost in full: ‘With exchange rates moving from £1: €1.3625 at 31 December 2015 to £1: €1.2099 at 30 June, there was a significant uplift for shareholders (£3.9 mln) most of which has now been crystalised through the receipts from the Panrico sale (in July). This converted at £1: €1.1618. The sale (three sheds in Spain to its tenant, Panrico) achieved €24.6 mln. At 30 June the Group’s NAV was £35.2 mln, an increase of 12.3%, mainly resulting from the positive impact of foreign exchange gains. The last remaining asset is La Gaude in Nice (old offices). Work continues to explore the best possible future use, in parallel with considering all options to effect an early sale.’
Every UK real estate owner holding assets in euros must be looking to sell. Seek and ye shall surely find.
Foggy number on London town
Take little notice of the H1 data from JLL showing London bumped off the real estate perch by New York. Capital flows into the UK capital were down 44% to $7 bn (€6.2 bn) over the year-earlier period. New York flows were down 9% to $10 bn (€8.9 bn). The ‘who’s top?’ tale has the validity of a chart comparing the flows of the Thames and Hudson rivers.
The only case proven by JLL is the well-anticipated pre-Brexit investment pause in London. The story of how foreign investors view London as a non-EU capital will only start to come to light in six months’ time, when full-year figures are available. Even then, the figures will only give a foggy glimpse of the likely collateral damage sustained by an EU divorce, still several years away.
Prepare for business rate cries
The City of London’s response to Brexit requires only a text containing one emoticon: the little yellow face with gritted teeth. The City of Westminster, by contrast, is putting on a smiley face. July retail sales in Oxford Street are up 7.3% on last year, says the New West End Company, (NWEC) which represents property owners and retailers. But NWEC boss Jace Tyrell issues a non-smiley warning investors should heed. Retailers face ‘an average 80% increase’ in business rates, says Tyrell. Today the tithe is based on the open market value at 1 April 2008. From April 2017 it will be based on the open market value as at 1 April 2015, meaning large hikes for tenants in London, as values have risen more there than elsewhere. Landlords may find tenants crying ‘pauper’ and demanding rent reductions next year –watch out.
Regime change, not much change, yet
Meanwhile Sadiq Khan has enjoyed high approval ratings since his installation as Mayor of London in May. In late August he broke with Labour leader, Jeremy Corbyn. Bit by bit he will come to be seen as a saviour of the party but what will his four-year tenure mean for the price of bricks and mortar?
Funds interested in building mass housing for rent are being signalled to expect planning rules to be eased to allow the sector to expand. The commercial property sector should note the appointment of former Hackney mayor, Jules Pipe as London’s deputy mayor for planning, regeneration and skills. The ex-journalist is now in charge of planning and re-drawing the London plan. What gets built in London and where it gets built will slowly change – monitor his utterances as you would those of a Chinese premier.
Go to jail card played at last
Three bankers have been jailed in Ireland for their role in the €64 bn banking crisis in 2008. Former Irish Life boss, Denis Casey, got 33 months for conspiring with others to set up a €7.2 bn circular loan to falsely bolster Anglo Irish Bank’s balance sheet.
Willie McAteer, ex-finance director at Anglo, and John Bowe, its ex-head of capital markets, were sentenced to 42 months and 24 months respectively. A reminder of what went on at Anglo Irish. The 60-strong loan committee met each Friday at 8 am, approving up to €300 mln of property loans each week. The arrangement fee for loans over €25 mln was €1 mln. Why say no? ‘It was a cross between a Nuremburg rally and a half-time team talk to an American football team,’ said Simon Carswell in his book, Anglo Republic: Inside the bank that broke Ireland. ‘No one was going to dissent in that atmosphere.’
Peter Bill is author of Planet Property and former editor of Estates Gazette
