United Kingdom Autumn 2012 Newsletter a Conversation With
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United Kingdom Autumn 2012 Newsletter ULI HAS A ULI UK PARTICI- UK MEMBER WINS “CONVERSATION” WITH PATES IN ITS FIRST WOMEN’S LEADERSHIP IRELAND’S NAMA AND PARTY CONFERENCE IN INITIATIVE AWARD 5 JOHN MULCAHY 1 BIRMINGHAM 3 ULI JOINS THE CROSSRAIL: A CAT- YOUNG LEADERS PROPERTY INDUSTRY ALYST FOR URBAN TALK DISTRESSED ALLIANCE 5 CHANGE? 2 DEBT 4 A Conversation with Ireland’s National Asset Management Agency Ireland’s National Asset Manage- spread across Europe and the United Furthermore, NAMA must account for ment Agency (NAMA) has been a fix- States. The agency has been focusing the fact that its employees are on fixed- ture of real estate news since its creation first in markets that are liquid and where purpose contracts and will eventually in 2009. Established to address prob- it can add value, like London and the lose their jobs He gave examples of lems in the banking sector caused by US. The total loan portfolio stands at talented employees who have already excessive property lending, the agency €74 billion, for which taxpayers paid been recruited away for more profitable is now shifting gears from loan acquisi- €32 billion. From inception to now, Mr and steady career options elsewhere. tion to asset management. On October Mulcahy reported inward cash of €9 4th, John Mulcahy, Head of Asset Man- billion and this strong position has ena- agement at NAMA, flew to London to bled NAMA to start paying down their have a conversation with ULI. Mr Mul- senior debt and loans while maintaining cahy was formerly Chairman of Jones roughly €4 billion cash on the balance Lang LaSalle in Ireland, and had been sheet. brought in by the Irish government to When it came to questions regarding help establish their loan methodology. how the investment community should Subsequently, he was asked to help run engage with NAMA, Mr Mulcahy the new agency, being ultimately re- stressed that NAMA’s public role re- sponsible for the portfolio. The sold-out quires a very open relationship. The breakfast event was hosted by Lazard & agency is happy to organise conference Co. and sponsored by Eastdil Secured. calls or to find time to meet if investors Other challenges include the 29% of Patrick Long of Lazard and James are in Dublin, but assets must be sold on the portfolio comprise of land and de- McCaffrey of Eastdil served as facilita- an auction basis. While NAMA will velopment—land in rural Ireland is “not tors and interrogators. While the ses- respond if an investor puts in a bid, at hot” at the moment. NAMA has ad- sion was off the record, below are a few best it will only speed up the pace - NA- vanced some unfinished developments, of the topics discussed. MA must be able to show that every such as estates for social housing provi- The discussion kicked off with an transaction passed a market test (unless sion. Luckily, of the Irish property, over overview of the Irish property market by there is some sort of litigation). He said 90% is located in or near counties with Phil Tily, Managing Director for the UK NAMA maintains a database of every- large urban centres, 61% in Dublin and Ireland at IPD. He relayed that the one who contacts them, so potential alone. The long-term prospects for fundamentals in Ireland have been im- investors can remain aware of assets much of this property are positive, par- proving, such as downward trending going to market. They also publish a ticularly if the medium-term outlook for bond yields. From the mid-1990s up to significant amount of information in the Irish economy fulfils current growth the recession, Ireland had experienced a their annual report and appear multiple rate expectations. period of extended growth, withstanding times a year in front of the Irish Com- On personal guarantees, there is a a disconnect between values and under- mittee of Public Accounts. feeling among the public that developers lying indicators in 2005-07. Inflated Mr Mulcahy also discussed challeng- must be punished for plunging the coun- property prices and cheap, easily availa- es NAMA faces, like staffing. NAMA try into a financial crisis with their spec- ble debt resulted in the recession. Ire- has largely finished its recruitment initi- ulative investments. NAMA is working land emerged from the recession in 2011 ative with its 200 strong staff fairly with borrowers to resolve personal guar- and investment returns have been posi- equally split between those with bank- antees over time on a case-by-case basis tive for the last three quarters. There are ing and real estate background. This has and uses litigation when necessary. Mr pockets of recovery around the country, provided confidence in and resources Mulcahy commented on a range of other a high level of income return, and good for making decisions, but attracting the issues, but stressed that NAMA is open signs in the industrial and office sectors. best people to ensure the best deals are for business and happy for any capital NAMA’s loans are backed by assets made requires competitive salaries, coming into Ireland, even if it is not for primarily in Ireland and UK, with 8% which can be unpopular with the public. his agency. Crossrail is the largest engineering ed with the station foundations supporting project in Europe with major construc- the over site developments. The Collabora- tion currently taking place below and tion Agreements provided major landown- above ground in central London. Its ers with the right to buy back the over-site goal is to connect rail networks on both Crossrail: development opportunities after comple- sides of London through the city's cen- tion of the station's development. In ex- tre, bridging Maidenhead and Heathrow 40 Years in the change Crossrail obtained access to the in the west to Shenfield and Abbey Making… design and planning skills, experience and Wood in the east. resources of the top private sector firms. On September 18th, Colin Smith, The Vision Colin Smith has been instrumental in medi- Crossrail’s Head of Over-site Develop- ating between the design teams of Crossrail ment, spoke to ULI UK from the Cross- Becomes Reality and the landlord to ensure that the design rail Visitor Centre at Tottenham Court of the station fits the over-site development Road - Crossrail's most complex and and vice versa. Apparently, constructive advanced worksite in London. He dis- tension between developer and station de- cussed the project's history and construc- signer has led to some good designs. tion progress, including many details of Whilst Crossrail has a Parliamentary developments, especially those above Act which grants some planning powers, ground. He noted that millions of Lon- over-site developments are not covered by doners rely on a rail transport system this and are still subject to the normal plan- which is increasingly under pressure, and ning approval process. This has required that Crossrail is poised to make commut- regular collaboration with local planning ing easier for regular rail passengers by authorities. For example, many stations improving facilities, accessibility, and were in areas with height restrictions. In travel times. When Crossrail is com- obtaining planning permission for the over- plete, London's rail capacity will increase site development above Farringdon station, by 10%, providing connectivity for areas Crossrail and development partner Cardi- of expected population growth. Travel nal Lysander were asked to cut back Cardi- times across the board will fall; for ex- nal House to improve views of the dome of ample, the journey from Heathrow Airport to Liverpool Street St Paul's Cathedral. Cardinal Street is also to become fully will take just 32 minutes, compared to the current travel time of pedestrianized. Improved public spaces will accompany other 55 minutes. stations, such as at Tottenham Court Road station where it is Colin spoke about the challenges of building infrastructure intended that St. Giles will become a new square with im- on this scale in central London. Construction challenges in- proved pedestrian facilities and better connections to Covent clude navigating the city’s existing infrastructure, and minimis- Garden and Soho. Additionally, a new entrance to the Bond ing disruption to communities near to worksites. As Crossrail Street station will open in Hanover Square, which Westminster spans 19 boroughs it comes into contact with numerous land- City Council will be redesigning to make favourable to pedes- owners, residents, contractors, suppliers, and interested parties, trians. resulting in a great number of stakeholders for consultation. At Canary Wharf the station building will be topped by four Various challenges have resulted in each station being de- floors of much needed retail space and is likely to result in a signed and built differently, all involving a huge amount of profitable investment after it opens in 2015. There will also be design integration work. Crossrail stations will be spacious a landscaped park, restaurant, and community facility on the and modern and some, like Canary Wharf, will have a futuristic top floor. feel. Mr Smith said that Crossrail decided not to have a specif- In the future, Colin Smith's role will involve getting sites ic architectural statement so as to better reflect the diversity of ready for sale and selling them back to collaborators. Colin London's architecture, adding that Crossrail will provide a last- noted the variability in values across the Crossrail sites, but ing legacy with a good quality design. informed that Crossrail expects to derive £540 million from the Construction of the new stations required the acquisition of sale of sites. Crossrail’s effect on property values has been re- major central sites, the cost of which has totalled £800 million searched, and based on data from infrastructure projects around through use of compulsory powers.