Anglo Irish Bank and landbanking

Anglo Irish Bank and landbanking

Postby Paul Clerkin » Fri Jan 16, 2009 6:45 pm

The Government should call in all loans from the bank to property developers... failure to pay, take the land / property off them. - Discuss.
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Re: Anglo Irish Bank and landbanking

Postby hutton » Fri Jan 16, 2009 9:35 pm

Paul Clerkin wrote:The Government should call in all loans from the bank to property developers... failure to pay, take the land / property off them. - Discuss.


Can't do that to all developers - they, or at least some of them, got their loans in good faith to build - in some instances - sustainable developments; for them it would be unfair - if not unconstitutional - to force fire sales.

Confiscation of all Vatican-owned lands is something I reckon should be looked at - particularly in view of recent disgraceful events in the dioceses of Cloyne.
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Re: Anglo Irish Bank and landbanking

Postby missarchi » Fri Jan 16, 2009 10:41 pm

It may work however there may be some interrelationships with company's which prevent you from getting the land i.e the loan is to a different company which is holding the land.

I might be dreaming here...
It would also help if a public body let architects/techs build there own houses,offices ect with some help. i.e proper and affordable social housing and cheap cheap land.:p

But will the government fix the price of this land and fix the profit? one might hope so but exchange rates used to fixed too after world war two:rolleyes:

mabye world war three is on the horizon...
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Re: Anglo Irish Bank and landbanking

Postby Frank Taylor » Tue Jan 20, 2009 1:57 am

Paul Clerkin wrote:The Government should call in all loans from the bank to property developers... failure to pay, take the land / property off them. - Discuss.

Land prices move at a far faster rate than house prices and are thus falling at a greater pace than the headline 10-15%pa drop.

Government policy seems to be that forcing the issue on land prices will result in a flood of real estate onto the market, resulting in further property price drops and further foreclosures, leading to a collapse in the Irish banking system. As the government has gone 'all-in' with its guarantee that no bank will fail, we now cannot afford to let the inevitable happen.

The aim of the anglo takeover is to delay foreclosure, not to encourage it. I guess the vain hope is that things will pick up again.

The correct course of action was not to offer a limitless guarantee for the deposits and the loans of a near insolvent bank like Anglo but to let it fail (along with the other bad lender that cannot be named). But this is hindsight.
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Re: Anglo Irish Bank and landbanking

Postby darkman » Tue Jan 20, 2009 2:20 am

hutton wrote:
Confiscation of all Vatican-owned lands is something I reckon should be looked at - particularly in view of recent disgraceful events in the dioceses of Cloyne.


So end the Catholic Church? If you actually examined what you are saying you seem to be living on a different planet. Did the Catholic Church cause this situation? Well? No. Regardless of what some priests got up to, and it was bad - it pales in comparison to the suffering most in this country will have to undergo in the next few years thanks to corrupt government and corrupt developers and corrupt business men. They should all be in jail for the disaster about to occur in this country. We face immediate economic collapse thanks to these bastards. None of you have a clue obviously just how bad this is going to get. This time next year, welcome to the 3rd world. If you have a brain cell in you - you would get the hell out of here ASAP.

Forget architecture sites and all the rest - this country is headed for disaster. I still don't think people realise how bad this is and will be. The money is all gone. It was wasted, blown. Get out of here as fast as you can would be my advice. This country will make Greece look like paradise next year.
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Re: Anglo Irish Bank and landbanking

Postby henno » Tue Jan 20, 2009 8:47 am

for the next time arround.... land prices (for residential developemenht) are going to have to be more regulated....
they should be indexed against CPI, house prices, average industrial wage and transport hubs....
maybe even restricting the sale prices to a percentage of the land price per unit cost...

higher density development must be considered as a better alternative to the two storey lakes of developemnts we have had, thus also reducing the per unit land cost...

true sustainable developments should only be considered, with models of energy usage and environmental impact being a requirement at planning stag...
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Re: Anglo Irish Bank and landbanking

Postby Peter Fitz » Tue Jan 20, 2009 9:52 am

darkman wrote:This time next year, welcome to the 3rd world.


Its always brings a wry smile to the face when spoilt westerners reference their own situation against that of the '3rd world'.

Do so accurately darkman, you might cheer yourself up. Start with say Somalia, you know, compare & contrast.
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Re: Anglo Irish Bank and landbanking

Postby djasmith » Tue Jan 20, 2009 9:25 pm

Paul Clerkin wrote:The Government should call in all loans from the bank to property developers... failure to pay, take the land / property off them. - Discuss.


It's all very well taking the land off them - but isn't it all just a cycle....

1) goverenment take land from developer...
- developer has no land
- still doesn't solve the problem of the bank not getting their money
2) government try to sell land (they need the money)
- nobody wants to buy land due to property slow-down
- bank won't give loans to developers because they don't want to risk it all again
3) government are left with land that they cannot sell or use because they've no money

It really doesn't serve any purpose as far as I can see... I reckon te government should be jumping at the opportunity to give local councils the funds to buy the land and 'half finished' estates from the developers at a break even cost. developers pay back the bank, local councils finish the job of the estates giving people employment, and then provide low rent housing to all the people who can't get a mortgage from the bank....

government are still bailing out the banks and the developers in an indirect way, and we solve our problem of builders not getting work, and also giving people houses to rent with the opportunity to purchase in perhaps 10 years time at a reduced rate to the current market value.
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Re: Anglo Irish Bank and landbanking

Postby missarchi » Wed Jan 21, 2009 1:04 pm

The council gives the developer names of people who are eligible to buy an affordable house. If two affordable house buyers reject the house or apartment, the council is obliged to buy it from the developer at the agreed discounted price. In a rising market, this system worked well.

http://www.irishtimes.com/newspaper/ireland/2009/0121/1232474670302.html
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Re: Anglo Irish Bank and landbanking

Postby SunnyDub » Wed Jan 21, 2009 8:44 pm

I presume what you meant was the government (Anglo Irish) AND/OR the banks should call in the loans and force fire sales of the property.

The other option is put all the bad loans in one place and bring in specialist management to maximise their value over the next few years whether it be in a bad bank or otherwise.

I've no objection to either option. The major problem is when the bad loans are taken off / written down, how should they be valued? The advantage of the second option is that they might be sold at a higher value than in a fire sale.

http://www.davidmcwilliams.ie
http://www.irisheconomy.ie

are good sources of information among others.
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Re: Anglo Irish Bank and landbanking

Postby gunter » Wed Jan 21, 2009 10:11 pm

Frank Taylor wrote:Government policy seems to be that forcing the issue on land prices will result in a flood of real estate onto the market, resulting in further property price drops and further foreclosures, leading to a collapse in the Irish banking system. As the government has gone 'all-in' with its guarantee that no bank will fail, we now cannot afford to let the inevitable happen.

The aim of the anglo takeover is to delay foreclosure, not to encourage it. I guess the vain hope is that things will pick up again.

The correct course of action was not to offer a limitless guarantee for the deposits and the loans of a near insolvent bank like Anglo but to let it fail (along with the other bad lender that cannot be named). But this is hindsight.


Everyone always apologises for hindsight. The problem with hindsight is that we don't use it enough and we don't use it properly. Every bank collapse, every credit crunch, global warming, global freezing, it's all happen dozens of times before and society has found the means to come through. Until actual little green men step off a flying saucer from Mars, there's nothing going to happen here that hasn't happened before [. . and I know a few people who'd go a little bit further on that one too!].

What it comes down to is whether we come shining through this, or we just muddle through.

I agree with other posters that there is a huge opportunity here for Government and, perhaps even more so, for Local Government, to take the reins and lead us, not just out of this recession, but towards a civic society that we would never have reached as long as property developers were in the driving seat.

Again with the benefit of hindsight, it is clear that the quality of the built environment, in any given period, invariably hinges on the ability of the authorities (whoever they may have been at the time) to harness the energy of property developers towards the goal of civic improvement and the common good.

The way the system seems to work best is where the people in authority develop a vision of where they want to get to, then they commission the drawing up of a plan (urban, infrastructural, logistical and financial) to map out a route to achieve the vision and then they carve up the enterprise into managable bits and invite property developers to come and do their thing.

What has been happening here is almost the exact opposite of this. The property developers have been leading the process, picking off sites in an unplanned and opportunistic way and presenting the authorities with little more input into the process of development than a Yes, or No choice.

'No' brings stagnation, boarded-up properties and no financial contribution. 'Yes' brings a happy developer, cashflow and the easily bourne dismay of citizens standing open mouthed with a conservation plan in one hand and the photo-montage of some random act of densification in the other.

Assuming that nothing of any scale is likely to be built any time soon, this is the opportunity to get down and plan. Work up a vision we can all buy into and draw up the plan for getting there. And use hindsight! Look back, not out of nostalgia, but to learn how it was done before, and to learn what works best. Then, when we know where we want to get to and we've got the plan for getting there, phone Bernard and Liam and Joe and offer them a piece of the action.

It doesn't have to be total socialism, we don't have to own all the land, we just have plan, and having planned, use the planning control system with brutal clarity.
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Re: Anglo Irish Bank and landbanking

Postby samuel j » Wed Jan 21, 2009 10:41 pm

good post Gunter, well put
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Re: Anglo Irish Bank and landbanking

Postby johnglas » Thu Jan 22, 2009 12:21 pm

gunter: I'll say Amen to all that and your post has covered all the bases, so I'll not repeat them, except to say that the amount of 'toxic' development land out there with more or less zero (or, in reality, negative value to the developer) does give the state (i.e. the people) a virtually unique opportunity to acquire these assets at a fair value (say that of non-urban agricultural land about five years ago) and use them as a communal landbank.
Anglo-Irish could become the state Development Bank to which these lands could be transferred as assets and they could then be sold on, used to allow proper planning of housing e.g., or transferred to local authorities, etc. In essence the state has to make the developers an offer they can't refuse and become a substantial player in the land ownership market. The 'free market' in land (and much else besides) is dead.
And PS, there's no need to apologise about socialism, just read and reflect on the declarations read out to the first Dail 90 years ago.
PPS Any developer not availing of the state's generous offer should be told that the consequences are entirely in his/her own hands and that they cannot avail of any state-subsidised 'rescue' package.
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Re: Anglo Irish Bank and landbanking

Postby jimg » Thu Jan 22, 2009 9:28 pm

The idea of the government getting into building houses makes no sense given the demand for residential housing is collapsing. The last census revealed that there were somewhere around 250,000 unoccupied dwellings in the country. There are over 70k houses and apartments for sale at the moment on daft alone. At the same time, the population is expected to fall by 50 thousand this year according to the ERSI; I suspect the final figure may be even higher. I myself will be among that number. This will be the first fall in population in over 15 years.

The last thing you want the government doing is using whatever scarce resources are available to build houses in an environment like this. There are thousands of more deserving projects which would actually provide real social benefits. Having said that, the last thing you want the government doing in these times is buying busted commercial banks and picking up their tab but that's what they are doing. From my analysis, nationalising Anglo is going to cost about 15 billion in total. To put that into perspective, it's significantly more than a years worth of income tax.
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Re: Anglo Irish Bank and landbanking

Postby johnglas » Fri Jan 23, 2009 3:57 pm

jimq: I don't think I said anywhere that the Govt should build houses, but that it should manage and benefit from land ownership and lay down the rules for proper planning. Assuming that people are leaving Ireland (why?), where precisely are they going to go that's not in recession?
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Re: Anglo Irish Bank and landbanking

Postby missarchi » Sat Jan 24, 2009 11:54 am

All the unemployed poor architects/techs should be given almost free houses or a small plot of land...

assuming they past some assets test:D
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Re: Anglo Irish Bank and landbanking

Postby PVC King » Sun Jan 25, 2009 4:36 pm

This is easily the most pointless thread ever commenced on this forum and some of the solutions proposed are bizarre to say the least. Unfortunately Anglo has one of the better quality landbanks and I say unfortunately because some of the other banks exposed are a lot more likely to dump land for whatever they can get for it. The only real positive is that the loan books of both BOI and AIB are from I have heard contain less exposure to negative equity thanks to them refusing the type of deals BoS Ireland and some other overseas banks were funding.

In a crisis the last thing we need is panic or score settling the key to the problem is getting the same series of positive demographic trends which created the bubble back to underpin what will no doubt be a far more sustainable market.

Employment growth is the key and much like the challenge the UK faced in the Midlands in the mid 1980's in retraining traditional industry factory workers are being faced in Ireland now i.e. how to retrain an army of surplus construction workers to enagage in technologies and or service sectors.

The residential market will return when large numbers of young professionals want to buy houses / flats and when banks want to lend 75% of the purchase price on an earnings multiple of 3.

The last things you want are either some quazi-totalitarianist solution or pure capital solution of a private equity value fund snapping up thousands of acres.

There is simply a painful reality that there will be a painful period of adjustment to come; I wish you all well through this period.
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Re: Anglo Irish Bank and landbanking

Postby johnglas » Sun Jan 25, 2009 10:09 pm

Amen; but the state acquiring some of the 'toxic' landbacks, even if only to dispose of them again in the upturn is not a bad idea. And it's very far from being 'quasi-totalitarian'. (The 'market' has been allowed to behave in a pretty totalitarian way for the last almost thirty years, with dire consequences.)
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Re: Anglo Irish Bank and landbanking

Postby henno » Mon Jan 26, 2009 12:59 pm

sorry, pvcking.. .but the lazzie faire attitude has gotten us into this mess in the first place.... do you now trust the banks / developers / regulator etc to act in an altruistic fashion?
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Re: Anglo Irish Bank and landbanking

Postby jdivision » Thu Jan 29, 2009 12:57 am

PVC King wrote:This is easily the most pointless thread ever commenced on this forum and some of the solutions proposed are bizarre to say the least. Unfortunately Anglo has one of the better quality landbanks .


Every bank that loaned for land is in the shitter. Tribune a couple of weeks ago and Business Post last weekend had values on the Irish Glass Bottlers site at c E170m. Anglo loaned E293 for the purchase (following roll up of an extra E5m of fees) which means they're essentially E125m down on one site. Anglo made a bad debt provision of E500m FOR THE YEAR for all its assets. That's why Anglo got driven into the ground, it was trying to kid the markets and the market had had enough. They were intentionally not getting formal valuations in order to avoid the loan being classed as impaired and therefore being brought to the audit committee. The reality is that PwC probably didn't even see the worst loans on their books.
BoI and AIB have experienced the same effect. If they don't write down the cost of land heavily then they're gone too. Irish Nationwide too would have had to be nationalised if it was publicly quoted. The negative turnaround in EBS will be eye opening too.
Johnglas, no way should the State take the hit unless each and every one of hte landholders is declared bankrupt. You can't have a boom that you profit from and a downturn that you're immune from.
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Re: Anglo Irish Bank and landbanking

Postby missarchi » Thu Jan 29, 2009 1:46 am

henno wrote:sorry, pvcking.. .but the lazzie faire attitude has gotten us into this mess in the first place.... do you now trust the banks / developers / regulator etc to act in an altruistic fashion?


I started not to trust them when I saw the movie revolver.
Then I started getting calls on my mobile phone 2 years ago to invest from the "bank" or people acting for the "bank" they would call me all the time. I would go into the bank and they would invite me to see someone off the cuff. Then another bank I was with suggested the same thing just before the market crashed. I was not having any of it...

But I'm sure alot of people are making money out of this crash and company tax is not linked to inflation but ticket prices are...

where do I buy tickets for the show:p
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Re: Anglo Irish Bank and landbanking

Postby PVC King » Thu Jan 29, 2009 9:44 pm

jdivision wrote:Every bank that loaned for land is in the shitter. Tribune a couple of weeks ago and Business Post last weekend had values on the Irish Glass Bottlers site at c E170m. Anglo loaned E293 for the purchase (following roll up of an extra E5m of fees) which means they're essentially E125m down on one site. Anglo made a bad debt provision of E500m FOR THE YEAR for all its assets. That's why Anglo got driven into the ground, it was trying to kid the markets and the market had had enough. They were intentionally not getting formal valuations in order to avoid the loan being classed as impaired and therefore being brought to the audit committee.


South Wharf couldn't have timed their exit any better to acheive €412m at that point in the cycle was fortuitious; I'd hadly call €293m of lending on a €412m land deal irresponsible in 2007. Are there doubts on Bernard McNamara or Derek Quinlan or the semi-state Dublin Docklands Agency of imminent default? I haven't heard any.

The markets lost patience with this specialist property lender in the same way they lost patience with RBS/HBoS and Bradford and Bingley in the same way that one bets on falls in oil by buying oil price sensitive shares such as Ryanair hedge funds were able to short Anglo on the basis of it being a pure property sector bet; ironically the complete opposite of that sectorial weighting that saved it from the dotcom fall out.

Valuations for residential development land in the current climate are meaningless as there is effectively no market much as was the case during the first oil crisis in 1973/74. I therefore concur with the JP Morgan report recommending a good bank bad bank split as these assets whilst not reaching the dizzy highs of 2007 any time soon are certainly going to be worth a lot more than their current valuations in 3-5 years time.

I got my delisting notice from my broker on my Anglo Irish Bank shares today; I bet on property and unlike most investments I've made this one didn't work out. We all make mistakes but I wouldn't say lending c71.11% to a semi-state covenant and professional investors such as D Quinlan or B McNamara was any real mistake.
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Re: Anglo Irish Bank and landbanking

Postby KerryBog2 » Tue Mar 03, 2009 3:33 pm

I agree with much of your comment; however, the imminent fall in property values was apparent long before the dizzy heights of 2007. When I returned here from NYC in 2001, apartments in Dublin were more expensive than those on Manhattans Upper East Side. The error was that most people (including me) got the soft landing/hard landing perspective wrong and under-estimated the crunch. Developers/builders had no notion of this and even today have yet to realise that making 100k per new house is no longer an option, which is why more are not selling. Who wants a crappy box apartment or a terraced holiday home thrown up in a bog on the edge of a village in the wilds of Ireland for 350-550k? Even allowing euro1500 per sq.m. for building costs, how can these prices be justified?

There is neither confidence nor trust in bank management (and government) to manage the position. Banks continue to “massage” loan portfolios to avoid classifying many loans as impaired. Deals have been done where only part of the interest is repaid, the balance rolled-up; capital repayment “holidays” are the norm. Once a bank has a screed of evidence that the combined assets of a borrower have a value in excess of total outstandings, the loan can be renegotiated and classified as “performing,” thereby also earning renegotiation fees. IBNRs (incurred but not reported) provisions are accordingly far too low, which is why bank share prices are unlikely to rise.

The bottom of the market will not be reached until a big builder/developer goes under. See my post http://www.archiseek.com/content/showpost.php?p=82557&postcount=43
It is only a question of time; many already are technically insolvent. As soon as we have the failure of a big name, a flurry of others & suppliers will go under also. That will provoke the creation of a “Bad Bank” and large-scale redundancies in the banking sector. Running a bank and managing bad loans require very difficult skills. We need a bad bank to manage our way out of this mess. Consider what happened on the failure of Insurance Corporation – a “bad” company was established to handle the crap, allowing the remainder (minus all senior management who were fired/retired/resigned) to manage the cleaned-up business. After three years that was then sold as a profitable concern. Ironically, Donal O’Connor, now chair of Anglo, was one of the main architects of that deal.
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Re: Anglo Irish Bank and landbanking

Postby PVC King » Tue Mar 03, 2009 8:15 pm

I wish I listened to your post in June last year it was prophetic you got this a good month before the first Lehman rumours hit in July.

Agreed the market lost the run of itself as the boom got boomier; sadly the best perfoming investment between 1994 and 2007 probably would have been a 50 acre tract of land with extensive road frontage on a gradually undulating site outside the devlopment boundary of say Kenmare or Westport disposed of gradually between April 2005 and April 2007 at up to €500k per half acre site; you'd have probably have paid €500k for the land in the first place and netted €20m or so before the market collapse leaving you with 60% of the holding.

I agree with your lack of confidence with the current management structures in the major banks; they need to be replaced with cooler heads who don't chase return but seek safer lending. The Government has been like a rabbit in the headlines they need to start making hard decisions now on how to get the public finances back into order.

I agree with your position on interest holidays but would say that it was right to lend over 100% where developeers could clearly show that value above normal returns could be created in a short period of time. E.G. recladding a particularly horrific looking 1970's office building or renovating a large period house from 7 flats c 1970s to say 4 decent flats where the end value was say 35% or more than the input costs on a 9 month project.

The real pain will be when BoS Ireland calls in Deloitte or BDO on the sillier loans they made on half finished development sites in the outer commuter belt in Dublin, Cork, Limerick and Waterford.

The Anglo approach of O'Connor seems about right hold distressed assets until the distress is releived by demographics creating pent up demand for property at whatever price level is deemed sustainable for prices to rise again and the short term commerical paper funding model of the banks is reformed.

The real downfall of Anglo seems to have been the waste of €300m of very scarce capital in an attempt to manipulate the share price; no doubt the lesson has been learned no one defeats a bear market in full descent. The appointment of a non-executive director with a track record in a major European Commercial property fund or property company would be a really addition to that board. As Bill Nowlen wrote in the IT a few years back making money from property in the long-term is not about momentum investing it is about creating above sector returns by superior approaches. The Anglo loan book will be a real challenge but I've no doubt we haven't seen the last of that institution
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Re: Anglo Irish Bank and landbanking

Postby johnglas » Wed Mar 04, 2009 7:02 pm

Johnglas, no way should the State take the hit unless each and every one of hte landholders is declared bankrupt. You can't have a boom that you profit from and a downturn that you're immune from.


jdivision: sorry for missing your earlier comment - the above is not my position at all; the state should acquire these interests only if (a) they are of advantage to the state (e.g. by creating a strategic landbank) and (b) at a price which privileges the state and not the landowner. If landowners retain land acquired at a high price in the boom and refuse to sell, then they must accept all of the hits and receive no relief. The state would in effect acquire the land at xc. in the euro, not at some imaginary market value that no longer subsists.
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