23 Jan 2019

IRES REIT: Rockbrook planning application

Today’s Irish Times reports that IRES is preparing a new planning application for 428 apartments at its 2.8 acre Rockbrook development in Sandyford, South Dublin.

The paper says that “it is expected that the application will be finalised around February”. Six months ago the State planning authority, ABP, granted permission for the construction of 460 apartments across five blocks ranging in height from 6 to 14 storeys at the Tivway site, which is adjacent to Rockbrook. This augurs well for the prospects for Rockbrook, where IRES was refused permission in 2017 to build 456 apartments on the site, although since then the climate for development has been improved by a series of government policy measures covering areas such as building height, density and parking provision.


In IRES’ H118 results management said that the company was “progressing a new application seeking approximately 450 apartments at Rockbrook, Sandyford, Dublin”, so this news does not come as a particular surprise.


Next month IRES will release its FY18 results, which provide an opportunity for management to update the market on the group’s portfolio of development assets. Our model assumes that IRES will build 400 units at Rockbrook by end-2020 and while today’s newspaper article hints at a slightly bigger scheme, the timeline for delivery is likely to be a little later than our estimate. We shall await a formal update from management before applying any tweaks, if necessary, to our Rockbrook assumptions.


Robust UK labour data

UK Labour market figures released yesterday morning continued to point to a robust jobs market, with the unemployment rate in the three months to November edging down to 4.0% from 4.1%, beating market and our own expectations of a steady print. Notably the single month unemployment rate edged down to 3.8% in November from 4.1% in October, although it is worth remembering that these numbers can be volatile month to month. At the same time headline average weekly earnings growth was stronger than expected, firming to 3.4% (3m y/y) against a consensus of steady 3.3% (Investec 3.4%), whilst the ex-bonus figures saw growth of 3.3% (3m y/y), the same as last month. Released alongside the labour market figures were December public finance data which showed a larger than expected borrowing (PSNB- ex banking groups) of £3.0bn, against a market consensus of £1.9bn (Investec £1.7bn). Overall the labour market numbers have been taken as a positive and added some support to sterling yesterday morning.

Sterling supported as "sunset clause" is re-tabled

News yesterday that arch Brexiteer and Eurosceptic, Nadine Dorries, said that “we may have to swallow our pride” and accept Theresa May’s deal next Tuesday evening was but one of a few positives for the pound in a day of rolling Brexit comment. There was also news that another Tory Brexiteer, Andrew Murrison, is to re-implement his amendment which would call for a defined expiry date (“sunset clause”) to the highly contentious Irish backstop. If this amendment were to be passed next Tuesday, Mrs. May could be in a position to show Brussels that this concession, if it were to be granted, could be just enough to get her deal across the line. Given the European stance on the Irish border issue to date, it’s highly unlikely Brussels would agree to a concession such as this. This flurry of positive news has pushed sterling higher across the board with the benchmark EUR/GBP now sitting at levels not seen since mid-November.

IMF reduces world growth outlook


The IMF has reduced its world GDP growth outlook from 3.65% to 3.50% This comes after China reported fourth quarter GDP growth at 6.4% - it's slowest pace of growth since 1990 - and has unsettled both equity and oil markets. Brent had set a new high of the year this week at $63.15/barrel, trading just under $62.00/barrel this morning. Our recent Oil Hedging Considerations 2019 report issued last week, discusses the affect that GDP growth has on oil demand.


Economic Releases


10.00  UK BOE Broadbent Speaks

15.00  US MBA Mortgage Applications

15.00  US Richmond FED Manufacturing

15.00  EU Consumer Confidence