Capitalflow/ QRE Seminar, RDS 20th September 2019
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Capitalflow/ QRE Seminar, RDS
20th September 2019
1
Who are we
Irelands specialist lender since
2016, over 70 professionals, with
vast lending experience
Finance for local businesses and
property around Ireland
Owners: Invested in a portfolio of
finance companies.
Property bridging & Term Loans,
Pension Mortgages HP, leasing,
Irelands newest Invoice Discounting, Asset Based
specialist lender Funded
Lendingby
since 2016 Pollen Group,
€1.2bn
Over €300
portfolio tom of lending assets across
our product
date, Vision range to over 2,000
customers across Ireland.
Blue
What
Why Us
are we about?
Relationship Partnership Approach,
long term relationships, your success is our success
& local decision making
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.
Property Bridging & Term Loans
Up to 100% of financing requirement
Specialist Property Team subject to max LTV 75%
Loans ranging in amounts from
Local Decision Makers
€250k to €15m
6 months to 7 years term with 30
Nationwide Funding
year amortisation
Multiple funding products Interest rates from 5% & up to 5
years interest only
New Business Activity
Georgian Office Property - €2.5m
Pre-63 Portfolio - €12m
Dublin 2
Dublin
Pre-63 Portfolio - €
Portfolio of City Centre Properties
Dublin
Term Loan with flexibility for
Pension Loan with flexibility to
refurbishment/ rent of properties
refurbish and rent property
Hotel - €5m
Student Accommodation - €1.25m
Cork
Sligo
Refinance from Pillar Bank to allow
Bridge Loan
for refurbishment and flexible
3 week turnaround
covenants
Refurbishment required
Residential Investment - €5m Shopping Centre - €1.2m
Dublin Kildare
26 Apartments Term Loan
Term Loan Significant Asset Management and
Turn around 4 weeks Vacancies
Industrial - €4.25m
Retail & Office - €750k
Offaly
Cork
Term Loan - Replace existing lender
Term Loan with flexibility for
cash sweeping 100% of the surplus
refurbishment and rent
rental income.
COMMERICAL
PROPERTY
Nama Shopping Centre, Oranmore
Funding Structure
Loan: €3.25m
Standard Investment Tailored Solutions
loan required for Competition from banks Bridging loan within 7
purchase of NAMA and other funders but days of approval
shopping centre, only we could deliver
Oranmore. FAST decisions & Exercised option to
payments refinance to term loan
LTV Cover Figures within over 20 years
banking parameters after 6 months
MARKET OPPORTUNITY
• Irish economy expected to grow by 4.0% in 2019 & 3.2% in 2020
Catalysts for 6.7% GDP
• Significant planned State investment in infrastructure, and
Underlying growth in 2018
support for SME lending
Demand
• Falling unemployment, rising asset values
• BREXIT causing uncertainty in the market
Current Market • Investors pausing
• Strong Rental Income Demand
• BREXIT Dampened Market Demand and Values
Opportunities • Commercial Property Market long term perspective is healthy
• BREXIT will bring opportunities
KEY TAKEAWAYS • 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.
Economic influences on Irish property QRE/Capital Flow Commercial Real Estate “Future Focus” Dermot O’Leary Chief Economist 20 September 2019
3 ingredients for property investment
T
Economic drivers
iming Occupier demand
I
Pricing/yield
ncome Interest rates/alternatives
Covenants
F lows
Investment climate
Follow the money!Dealing with the elephant in the room first
The Road to October 31st
1)
PM refuses to PM asks for an
A Brexit deal is EU refuses
request an extension and is
reached request
extension to Article granted
50
• Breaks law?
• Alternative
letter
NI – Specific No-deal Brexit • General No-deal Brexit
backstop election
• Referendum
1
1Impact of Brexit on
Ireland is varied
Employment in Brexit-exposedindustries
Cavan
Monaghan
Kerry
Longford
Tipperary
Wexford
Kilkenny
Mayo
Carlow
Donegal
Leitrim
Offaly
Clare
Roscommon
Laois
Cork County
Sligo
Galway County
Waterford
Limerick
Westmeath
Meath
Louth
Wicklow
Kildare
Fingal
Galway City
Cork City
South Dublin
Dublin City
DLR
0% 5% 10% 15% 20% 25% 30%
Source: IBEC
1
2Dublin has done
well to date
Smaller, more discrete, flows of relocations dominate
Number of announced company moves Financial and Legal firms dominate the mix
100 Business
90 86 Services, 4%
FinTech, 4%
80
70 Insurance,
60 55 9%
50 47 47
41
40
30
20 Legal, 27% Financials,
10 57%
0
Source: Knight Frank Source: Goodbody
1
3IDA announcements and
the “51 State” st
IDA job announcements by year Origin of IDA supported companies byemployment
12,000 Rest of World
7%
Rest of Europe
No. of Jobs announced 10,000
8%
2019
France
8,000
3%
UK
6,000 3%
4,000 Germany
7%
2,000
0 US
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 72%
2012 2013 2014 2015 2016 2017 2018 2019
Source: IDA Annual Report 2017
Employment growth - FDI versus non-FDIrelated IDA supported jobs by sector 2017
Misc
10%
9%
8% Computers/electr
onics
6%
10%
4%
International
% YoY
2% services
0% 41%
Financial
-2% services
-4% 12%
-6%
-8%
-10%
Pharma
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
13% Medical & Dental
FDI-related Non-FDI Total 15%
Source: IDA, CSO Source: IDA
1
4Bond market is an excellent
forecaster…
US yield spread
5.0
4.0
3.0
10-yr yield minus 2-yr yield
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
Source: New York Fed
Recession Spread
1
5…and now puts recession probability at 40%
Probability of recession based on the yield curve
100%
90%
80%
70%
60%
Probability
50%
40%
30%
20%
10%
0%
Jan 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 20
Source: New York Fed
Recession Probability of recession
1
6Office supply &
demand in Dublin
Robust take-up levels as occupier demand remains unbowed by uncertainty
Over 1.6m square feet of Dublin office space let 4.1m square feet is due for completion in 2019-
in H1-19 – a new record for the half year period 21, of which 44%+ is already pre-let
4.5
350,000
4
300,000
3.5
250,000
3 200,000
Square feet (millions)
Sqm
2.5 150,000
Long-term
2 100,000
1.5 50,000
1 0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019f
2020f
2021f
2022+
0.5
Annual New Completions Under Construction
Under Construction Pre-let Planning Granted
0
Planning Granted Pre-let Planning Applied
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
H1 19
Source: Goodbody, CBRE, Knight Frank, Cushman & Wakefield, Lisney Source: Green REIT, CBRE, Goodbody
9Search for yield
continuing…
Yield difference on property relative to government bonds
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
Source: IPD/MSCI, Bloomberg
All Office - Central Dublin Office - Rest of Dublin
18…and likely to continue for
some time yet
Interest rate expectations in the euro area
1.5
1.0
0.5
%
0.0
-0.5
Negative rates in 2025
-1.0
1M 4M 7M 10M 13M 16M 19M 28M 37M 46M 55M 64M 73M
Source: Bloomberg One year ago 6 months ago Current
19Office Yeild
Source: CBRE
Zurich
Munich
Geneva
Hamburg
Paris
Berlin
• 3
• 4
• 6
• 7
• 8
• 9
• 5
• 10
Frankfurt
Amsterdam
Cyclical High
Dusseldorf
Helsinki
Milan
Madrid
Oslo
Stockholm
Copenhagen
Vienna
London W.End
How does Ireland compare internationally?
Cyclical Low
Rome
il
Barcelona
b
u
n
D
• Office yields comparisons in the EU
London City
Brussels
Lisbon
Prague
Birmingham
20
Edinburgh
Manchester
Current Yield
Warsaw
Glasgow
Budapest
Bratislava
BucharestLandlords in the
ascendancy
Preference for reducing risk rather than growing headline rents
Office leases are lengthening in Dublin Breaks are being pushed further out
14 14
Average New Lease Length 13.1
12 12
10 10
Year of Break/Expiry
8 8
(Years)
6 5.7 6
4 4
2 2
0 0
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
London Offices Dublin Offices Average Lease Length (Yr) Average Break (Yr)
Source: Knight Frank, MSCI, Goodbody Source: Knight Frank, Goodbody
Rent frees are diminishing for new lettings Income is increasingly the key return driver
14 > 50k sq ft > 30k sq ft Dublin Office: Income as a % of Total Return
12 > 10k sq ft > 5k sq ft
100%
10
80%
Months
8
60%
6
4 40%
2 20%
0
2014 2015 2016 2017 2018 0%
Sep 2015 May 2016 Jan 2017 Sep 2017 May 2018 Jan 2019
Source: Knight Frank, Goodbody Source: Goodbody, MSCI
21Dublin rents have topped, regions more scope for
recovery
22Investor interest in Ireland
still strong
Investment flows into Irish property by sector
5.0
4.5
Unknown
4.0
Other
3.5
Hotel
Eur (Billions)
3.0
Industrial
2.5
Residential
2.0 Mixed-Use
1.5 Retail
1.0 Office
0.5
0.0
2007 2009 2011 2013 2015 2017 2019 H1
Source: CBRE
23Key
messages
• 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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issuers. (2) No part of their remuneration was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by them in this report.
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Thank You For further information please contact: Shane Flood sflood@capitalflow.ie
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