27 Nov 2019

Commercial REITs: Further evidence of investment and tenant demand

German real estate investment fund, Quodoro, has expanded its holdings in Ireland according to this morning’s Irish Times. 

It has acquired Allianz House, the Irish headquarters of the insurance group, in Elmpark Green in Dublin 4 for €53m. The property was recently brought to the market by vendors Aberdeen Standard with a guide price of €50m. The eight-storey 8,000 sqm office building is let to Allianz on a 31-year FRI lease from 2008 with the next break option not until December 2033. The annual rent roll on the property amounts to €2.9m and the transaction was concluded at a net initial yield of around 5%. Quodoro has assets under management of €9m, and this is its fourth acquisition in Ireland bringing its total investment here to €122m.

Separately, KPMG has agreed to lease 20,000 sq ft (1,858 sqm) at Two Park Place on Hatch St in Dublin city centre, the recently completed office development by Clancourt Group. It is understood by The Irish Times that KPMG has agreed to pay in the region of €60 psf and entered into a 10-year lease. Large professional services firms such as KPMG have benefitted from Ireland’s booming economy in recent years and KPMG are on the look-out for new headquarters to accommodate its 2,500 employees by 2026. The firm is currently located in a couple of locations on both sides of the city. A stone’s throw from Two Park Place is Harcourt Square, Hibernia REIT’s large medium-term development play. The offices at this site are occupied by An Garda Siochana, the State’s police force, with the current lease set to expire in December 2022. Hibernia REIT has been granted planning permission for a 309,000 sq ft office development on the site which should be ready for occupation not long before KPMG is looking to consolidate its offices.

ICG: Trading remains solid in spite of Brexit uncertainties 


ICG’s trading update this morning points to ongoing strength in freight volumes but Brexit uncertainties continue to weigh on tourism traffic. Group revenue was +8.2% to €308.8m in the period to 31 October. Although increases were achieved across all revenue streams, the group notes that a “significant proportion” of the y/y improvement is due to sailing disruptions experienced last year.

As was the case in H1, strong freight volumes are again to the fore. RoRo volumes were +10.5% y/y in the period to 23 November, although this number is flattered by last year’s disruption. Container volumes were +5.7% and port lifts were +4.1% in the same period (and +4.0% and +2.6% in the 30 June – 23 November period respectively). These numbers are “cleaner” without y/y comparison difficulties and the positive performance is attributable to the strong economic backdrop in Ireland, increased group capacity and its strong market position on key routes.

Car volumes were +1.6% y/y in the year to 23 November, and +7.9% y/y between 30 June and 23 November, although the y/y comparisons are impacted both by sailing disruptions last year and scheduling changes this year. The group notes that the Brexit-induced uncertainty, which it has mentioned in previous releases, continues to impact negatively “on consumer sentiment and trade flows as investment decisions are delayed”. Given the current political situation, this overhang can be expected to persist through the New Year at least with (hopefully) better conditions prevailing post-January 31st.

A sixth vessel has been added to the group’s container fleet, the CT Rotterdam, following the addition of the Thetis D in April. Although no financial details have been revealed at this stage, the group has a strong track record of making acquisitions on attractive terms.
We do not expect significant changes to consensus expectations following this morning’s release.

Irish Economy/Dalata: Overall tourist numbers grow despite North American decline

The latest travel statistics from the CSO show a 2.5% y/y increase in the number of overseas visitors to Ireland in October with the YTD increase a similar 2.2%. 

Despite the overall increase, the data for the past few months show a weakness in the North American segment. Visitor numbers from the USA and Canada were 8.8% lower y/y in October, following a 2.7% y/y decline in Q3 this year. Year-to-date, this segment still shows positive growth of 2.4% but the trajectory since the mid-point of the year is concerning given the importance of such visitors (from an expenditure point of view) to the overall tourism industry here. Visitor numbers from Europe (ex. GB) were much healthier in October (+8.3% y/y) and the main driver of overall growth in the month. Year-to-date, this segment has expanded by 2.7% while the British market has grown by 1.0% in the same period following a 4.2% y/y increase in October. Other Areas (mainly Asia-Pacific) continue to post good growth at +5.7% YTD, but this segment accounts for just 6.5% of overall volumes. 

Although the country looks set for another record year in terms of overall visitor numbers, the strong growth that we have become accustomed to has moderated significantly. Also of concern is the sudden turnaround in the North American segment – this is a market that doubled in the five years to 2018 and accounted for 20% of all overseas visitors last year.

Poll dancing

As we approach the UK election date, media coverage is awash with the results varying poll surveys at the moment. According to Bloomberg, the average of the latest 5 polls puts the Tories at 43%, Labour at 30% and the Lib Dems at 14%. Most, if not all of these polls survey a small enough sample of voters, apparently somewhere in the region of 1,000 to 2,000 people. 

Tonight (22:00 GMT), we get the release of the YouGov MRP poll. This takes an infinitely larger sample of voters into account, it is thought to be in/around 250,000 people, and hence a more accurate reading is expected. In the 2017 UK general election, it was this same poll that correctly forecast the Tories losing their majority ultimately ending in a hung parliament. 

Labour leader, Jeremy Corbyn, needs all the help he can get after he spent most of a BBC interview last night trying to bat away accusations of ingrained anti-Semitism within the Labour Party. Mr. Corbyn is due to make a “major statement” in relation to the NHS later this morning.

Fed chatter 

The US Federal Reserve heavy hitters have been out in force over the last few days, giving their opinions on the current US monetary policy stance. Fed Chair, Jerome Powel, was speaking on Monday night at which he stood by earlier remarks that he felt their (the Fed) present policy is “appropriate” and that things would have to shift “materially” for him to think about tweaking policy. Echoing Mr. Powell’s sentiments, Dallas Fed President Robert Kaplan said yesterday that he felt “policy is in the right place now” and that he would have to see a significant growth surprise for him to change his view.

The dollar seems content enough with the current Fed stance too, the benchmark EUR/USD rate has been stuck in a very tight $1.10 - $1.11 level for the past three straight weeks.

Economic Releases

US 13.30 GDP

US 13.30 Durable goods

US 15.00 PCE Price index