02 Apr 2019

Cairn Homes: Sales launch and planning success

Cairn Homes has announced that it has commenced a formal sales process for 282 apartments at its Citywest site, while it has also secured planning permission at its Griffith Avenue site in North Dublin.



The Citywest Quarter properties come to the market with a strong guide price of €90m, which reflects an average price of €319k per unit, and we expect good interest from prospective institutional buyers given the demand for such PRS assets in recent times. The units are due to be delivered between Q4 2020 and Q3 2021 and Cairn will also sell 179 units at the Citywest site to the private market. At the group’s Griffith Avenue site, which is located 4km north of Dublin’s city centre, Cairn has received planning permission to build 377 apartments and eight houses. This represents a significant uplift in unit numbers from when Cairn acquired the site with planning for 101 units as part of the Argentum portfolio in 2016.


At the time of its FY18 results Cairn flagged that it was likely to go down the PRS sales route at Citywest so this announcement does not come as a surprise. Similarly, while Cairn has a strong track record of planning success and this approval was the most likely outcome, it is nonetheless welcome given some local opposition to the scheme.


AIB Group: Success on the Beech 

We have a note out on AIBG this morning on foot of yesterday’s Project Beech NPL disposal.

The transaction saw c.€1bn (gross) of non-performing loans sold to Cerberus for c.€0.8bn. The disposal is capital accretive for AIBG (+25bps CET1 given RWA reduction of €0.75bn), with management guiding for P&L neutral after fees (though we suspect a small profit). The transaction is another important step on the 'journey' (not a destination!) to hitting the 5% NPL ratio this year (FY18 9.5%, pro forma now c.8%) and granting full access to the growing excess capital stack on the balance sheet. 


We remain confident in management’s ability to reduce NPEs down at the required pace, and expect AIBG to benefit from a capital distribution re-rating catalyst over the next twelve months. The stock currently trades at €4.00 (0.85x FY18 tNAV, ROE 7.7%, DTA/excess capital adjusted ROTE 12.9%).


Irish Economy: NTMA releases Q219 auction schedule 

Ireland’s NTMA has released its auction schedule for Q219. 

Subject to market conditions, the agency will conduct bond auctions on Thursday 9 May and Thursday 13 June. It will also hold a T-bill auction on Thursday 20 June. Details will be announced on the Monday prior to each auction. 

In the year to date the agency as raised €5.5bn from bond sales, which represents a good start relative to the 2019 funding goal of €14-18bn. Importantly, these sales have been completed at a weighted yield of just over 1%, which compares with the blended average cost of existing debt (2.4%), with the year-to-date fundraisings having been executed at a weighted average maturity of 11.6 years. The recent ECB-inspired tightening of Eurozone yields creates a favourable backdrop for the NTMA as it prepares to refinance more of the expensive crisis-era borrowings. 

Just Say No 

Last night saw the House of Commons hold yet another round of indicative votes on four alternative Brexit options, once again all failed to win a majority. The one option that came closest to securing a majority was Ken Clarke’s customs union proposal, which lost by three votes (276-273).

Nick Bole’s proposal of Common Market 2.0 (customs union + single market) lost by 21 votes (282-261). The remaining indicative votes were for a public vote on any Brexit deal (defeated 292-280) and motion G, which aimed to prevent the UK leaving without a deal (defeated 292-191). Last night also saw Nick Boles quit as a Tory MP following the defeat of his Common Market 2.0 proposal, he will now sit as an ‘independent progressive conservative’. Importantly, this narrows the government’s majority to just 7, a majority which is set to be whittled down further to just 6 following the Newport West by-election this Thursday. Additionally, there are also some question marks over Dominic Grieve’s position, following his loss in a local party confidence vote on Friday and talk of possible de-selection, a prospect which would cut the Tory’s majority again. In short, the differences over Brexit are ever deepening the splits in the Tory party.


Crunch cabinet meeting 

Looking forward there is set to be an extended cabinet meeting today, where there is talk that some ministers will urge the PM to consider an early general election in order to try and break the deadlock. Chancellor of the Exchequer, Philip Hammond, is reported to have said that he will tell cabinet today that a confirmatory referendum may be necessary as neither the Tories or Labour could afford a general election. We would reiterate once more that we fail to see how this would help the current situation. Beyond that, a third round of indicative votes is set to be held this Wednesday, which could be followed by a fourth vote on PM May’s deal in a ‘play-off’ against any option that might win on Wednesday. However a fourth vote is yet to be confirmed.


Thought of the day 

Mixed US data gives Fed food for thought


Yesterday afternoon, the US ISM manufacturing survey came in at 55.3, a bit firmer than the 54.5 expected. That number was almost 1.0 point higher than last month’s print with all the various components including new orders and employment both posting strong gains on last month. On the flip side, US retail sales took an unexpected downturn in February. The headline print came in at -0.2% against a consensus of +0.3% and that’s against a 2.2% rise from February last year, a potential sign that the US economy is starting to cool. It appears that this slow down can be attributed to several factors, some of which include the ongoing trade dispute with China, anaemic global growth and the shadow of Brexit looming large. With mixed messages like this, one can almost sympathise with the Fed as they attempt to tweak their constantly shifting monetary policy.


Economic releases


UK        9.30      Construction PMI

EU        10.00    PPI

US        13.30    Durable goods orders