19 Aug 2019

IRES REIT: Solid interims

IRES REIT delivered another set of solid interim financials on August 9th and reported strong portfolio metrics.

Much of the results conference call was focussed on the acquisition of the XVI Portfolio from Marathon (the landmark deal which adds 815 units to the IRES portfolio). We were impressed by the pace of integration of the portfolio – within a week of the deal closing, IRES had sent welcome packs to all tenants and on-boarded the units onto its IT systems. Operationally, IRES manages its portfolio on an area-by-area basis, and we see the geographic footprint of the Marathon portfolio as highly complementary to IRES’ existing stock. The Marathon deal showcased the acquisition route to growth for IRES, but the development route (planning consents are in place on a number of sites) and the forward-purchasing route (partnerships with developers are also in place) will come to the fore in forthcoming periods.

Irish property/builders: HTB overhaul may reduce price cap to just €250,000

A major overhaul of the government’s Help-to-Buy scheme is set to reduce the cap on houses that qualify for the scheme, according to the Irish Independent, with a number of scenarios currently being looked at by the Finance Minister Paschal Donohoe. One of these scenarios would see the cap put at just €250,000, according to the newspaper’s report, vs the current €600,000 limit. This lower cap level would effectively rule out almost all new homes being built in or around Dublin, with no area (by postcode) in the capital having an average selling price for FTB transactions last year below €318,000 (according to the CSO). 

US this week

This week, the focus will be firmly on the Kansas City Fed’s annual Jackson Hole Economic Symposium, which will be closely watched for clues on the future direction of US and global monetary policy. The event begins on Thursday but Fed Chair, Jerome Powell won’t deliver his key note speech until 3pm (Irish time) on Friday. Historically, this has been used to signal shifts in the Fed’s thinking but this year may well take on additional importance given that it is likely to be Chair Powell’s first public comments since the latest round of tariffs were announced earlier this month. 

It is otherwise relatively light on the data front. Existing and new home sales figures are released on Wednesday and Friday respectively, while the ‘flash’ PMIs will be published on Thursday. Minutes from the FOMC July meeting minutes will also be released on Wednesday.

UK this week

After some initial dubiousness, Jeremy Corbyn’s proposals for a cross-party ‘time-limited’ government (that would request an Article 50 extension to avoid a no-deal Brexit on 31 October), signs of potential cross-party cooperation has served to increase the probability of success of a vote of no-confidence in Boris Johnson’s government. For the meantime, reports suggest Boris Johnson may embark upon a mini-tour of European capitals to try and build support for reopening the Withdrawal Agreement ahead of the G7 Leaders’ Summit in Biarritz which starts next Saturday (24 August). 

There are very few UK data releases next week, with only the public finances release and the CBI’s surveys worthy of note.

Europe this week

It is set to be more interesting in the Eurozone, with the ‘flash’ PMIs for August and the ECB account of its July meeting making for a bumper Thursday. Both may provide some indication of the size and composition of the policy easing that the Governing Council might deploy at its September meeting.

 However, Finland’s Olli Rehn looks to have provided an early preview, telling the WSJ last Thursday that the ECB should pursue a “substantial and sufficient” stimulus package. Renewed expectations for a restart of the ECB’s QE purchases have pushed 10-year Bund yields to a fresh record low of -0.70%, while equivalent-maturity French OATs are yielding below the -0.40% ECB deposit rate for the first time ever. 

Lastly, focus will also be trained on Rome on Tuesday as Prime Minister Giuseppe Conte has been summoned before the Senate where he may face a vote of no confidence that possibly sets Italy on the path to snap elections.

Economic Releases

Nothing of note.