15 Apr 2019

Irish REITs: GRN announces sale process

Green REIT (GRN) has today announced that, following a strategic review, “the Board has taken a decision to initiate a process for the sale of the company or its portfolio of assets”.



Notwithstanding “the strong financial and operational performance of the company, the structural discount in the company’s share price relative to its NAV persists and this is at the core of the Board’s decision to focus on the sale of the company or its portfolio of assets. The sale process will commence immediately”.


GRN shares closed at €1.534 on Friday, 16% below the end-December NAV of €1.829. We have repeatedly noted (most recently with HBRN, currently conducting a share buyback at a c. 14% discount to NAV with the proceeds of an asset sold at a premium to book value!) that the ‘big two’ commercial REITs were trading at an anomalous discount to the book value of their assets, despite repeated disposals of buildings at or ahead of what they were in the accounts at, and no lack of buying interest from institutional investors looking to gain exposure to Dublin’s booming commercial property market.

GRN has a €1.48bn property portfolio. The exposures are 83% Dublin offices (52ppt Dublin CBD and 31ppt suburban); 5% Cork office; 4% mixed use; 7% logistics; and there is a residual retail exposure. The REIT owns what we would view as the best located logistics park in Ireland (Horizon), where 263 acres of land are deemed capable of further development; while its top tier Central Park office asset in Sandyford, South Dublin, could accommodate an additional 400,000 sq ft of lettable space.

We have no doubt that there will be ample interest in GRN given both the quality of its assets and the strong fundamentals of the Dublin office and logistics markets.  


UK this week

If the UK and EU can reach a consensus that sees MPs approve the Withdrawal Agreement, then the UK will be ‘treated’ to an earlier Brexit. But these negotiations are still in their infancy and far from certain to succeed, meaning that the current cloud of uncertainty hanging over the UK economy is likely to persist for some time to come. In light of this, we have put our forecast for an August rate hike by the MPC under review. This week is expected to be relatively subdued in terms of Brexit developments given that the House of Commons has now risen for its Easter recess, providing everyone with some well-needed respite. Further distraction will come from a busy data calendar; the ONS is set to release labour market figures on Tuesday, inflation data on Wednesday and retail sales on Thursday. Bank of England Governor Mark Carney is also set to speak at a summit on ‘Greening the Financial System’ on Wednesday.


US this week

Across the Atlantic, the US and China look to have made further progress in trade talks. It was announced this week that Washington and Beijing have agreed to set up “enforcement offices” in their respective countries, suggesting another key hurdle has been cleared. But the US administration gave investors a preview of its next target after releasing a draft list consisting of $11bn of EU exports on which it is threatening to slap tariffs as part of its long-running dispute over aircraft subsidies. Key data releases for the US next week include industrial production on Tuesday, retail sales on Thursday as well as housing starts and permits on Friday. Also deserving of attention is the Federal Reserve’s Beige Book which is out on Wednesday, as are the ‘flash’ PMIs on Thursday.


Europe & ROTW this week

By comparison, it is slim pickings in terms of Euro area releases. Tuesday sees the German ZEW survey published before final CPI figures for the common currency area are released on Wednesday. Rounding off the week is Italian business and consumer confidence on Friday. Hoping to inject some more excitement might be ECB President Mario Draghi who is set to speak at the IMF/World Bank meeting. Last, but certainly not least, is set to be the publication of China’s Q1 GDP on Wednesday. While this is expected to show a further slowing in the 6.4% annual rate registered in Q4, a potential upturn in March’s industrial production and activity data may provide further reassurance that a hard landing will be averted. Elsewhere in Asia, Japan sees the release of trade figures on Wednesday and CPI on Friday.


Brexit talks to continue, but for how long?

While parliament is in recess until 23 April, Theresa May and Jeremy Corbyn continue to search for a Brexit deal which could gain cross party support. Signs of progress are scarce, and David Liddington, May’s de facto deputy suggested over the weekend that while talks would continue this week, they wouldn’t be allowed to go on forever.


A major gap in positions is Corbyn’s insistence on a customs union, while May wants the UK to maintain control over UK trade policy. Policy stance aside, both party heads are under pressure from their own parties to take an even more aggressive stance in talks. The Labour party continue to call for a second “confirmatory referendum” as the price of getting into bed with the Tories, something Corbyn himself apparently opposes, while May is facing continued criticism for giving the Labour party a voice in Brexit policy at all. The most recent criticism came from former Tory leader Iain Duncan Smith, who said May should not only leave the EU immediately (or ahead of EU elections), whether a deal was in place or not, but also that put pressure on May to resign as PM, as she had originally suggested. There were even talks over the weekend that the 1922 committee of the Tory party could change the rules on votes of no confidence to allow a confidence vote in May before December of this year.


The lack of progress has pushed EURGBP to its highest level in just over a month, with the EURGBP 0.8650 level a key resistance point for a move higher this week.


Economic releases

13.30    US        Empire Manufacturing survey

17.00    UK        BoE’s Haskel speaking

17.30    EC        ECB’s Villeroy speaking

18.00    US        Fed’s Evans speaking