03 Sep 2019

Irish REITs/builders: Highlights from the CBRE September 2019 Report

The latest CBRE report notes Occupier demand as remaining “robust”. 

The demand for Build-to-Rent, which represented 43% of activity in H1, remains strong. The only area of softness, in-line with other European cities, is in Retail. 


The Investment market remains strong, unsurprising according to CBRE due the significant yield premium of Irish property relative to other assets. With €2.1bn of activity in H1 and H2 to get a boost from the €1.34bn acquisition of Green REIT by Henderson Park. According to the report, yields in CRE have been steady, stronger on PRS, slightly weaker in Retail and development land is opaque due to a lack of activity. 


Dalata Hotel Group – H119 Results

Dalata recorded H1 revenue growth of 12.2% helped by the 1,400 new rooms opened in the past 18 months. The pipeline remains strong with 2,400 new rooms to be added in 2020 to 2022. The company has announced a new site with planning in Shoreditch, London which will be branded as a Maldron Hotel, close to the recently opened Clayton City Hotel.  

 

Performance of the new Dublin Hotels was strong, offsetting a slightly lower Dublin RevPAR with the VAT increase impacting Transient and Corporate, and some supply in the market from student accommodation over the summer months. EBITDAR margins were up 40bps at 40.4%; meanwhile there was continued upward valuation of investment assets of €46.3m.

 

Johnson flip-flops on general election

UK Prime Minister, Boris Johnson, spoke outside 10 Downing Street last night and warned that moves to block a no-deal Brexit would “plainly chop the legs out from under the UK position”. He went on to say “I don’t want an election, you don’t want an election” but briefing to the media overnight suggests that Mr Johnson will call a ‘snap’ general election on 14 October if MPs successfully push through legislation to tie his hands. 


Under the Fixed-term Parliaments Act (2011), Mr Johnson would have to lay down a motion “that there shall be an early parliamentary general election” and would then need 2/3 of MPs to vote in favour of it. It would, therefore, require the support of Labour MPs but given comments by Leader Jeremy Corbyn it is not thought that the party will be an obstacle even though the Conservatives lead around 10 points in recent polls. 


Emergency debate

In the meantime, attention will turn to the House of Commons where opposition parties and rebel MPs plan to apply for an emergency debate under Standing Order 24 in an effort to push through legislation that would prevent the Prime Minister from pursuing a no-deal Brexit without the consent of Parliament. 


The European Union (Withdrawal) (No. 6) Bill would require the Government to either a) reach a deal with the EU, or b) gain Parliament's approval for a no-deal Brexit. If neither of these conditions are met by 19 October, then the government would be obligated to request a three-month Article 50 extension (i.e. until 31 January 2020). If Brussels agrees to this extension, then the Government must immediately accept, but if it proposes a Brexit delay to an alternative date then it must be accepted within two days unless it is rejected by the House of Commons. 


Debate due

UK Parliament is set to reconvene around 3:30pm today and we expect the petition to be made to the House of Commons Speaker John Bercow at around 6:30pm with the vote (if accepted) to be held around 10:00pm. Crucially, the plan would require Mr Bercow to accept the debate but he is expected to do so after having labelled Mr Johnson’s lengthy five-week prorogation of Parliament a “constitutional outrage”. 


With speculation that the Bill has sufficient support, the benchmark GBP/USD rate has slipped below the hugely pivotal/psychological $1.20 level for the first time since 2017 this morning. As investors eye the elevated risk of a general election, which could see a hung parliament given that, the Brexit party would be expected to split the Eurosceptic vote with the Conservatives.


Economic Releases

15.00  US   ISM Manufacturing Index

15.30  UK   Parliament returns from summer recess