NTMA moves

18 Sep 2018

NTMA moves

Ireland's NTMA yesterday released the details of the scheduled T-bill auction on Thursday and announced the buyback of another €500m of IBRC-related debt. Subject to market conditions, the NTMA will offer €500m of T-bills with a 12 month maturity on 20 September.

Barring any shocks, this will be the 13th successive T-bill issuance by the agency at which a negative yield was achieved. On the buyback, the agency cancelled €500m of the FRB that is due to mature on 18 June 2049. This debt was linked to the landmark IBRC transaction in 2013, which was a major milestone on the road to Ireland’s return to creditworthiness. To date the NTMA has repurchased €12.5bn (nominal) of the €25bn of bonds issued as part of the ‘Prom Note’ deal, with €3.0bn of these repurchases taking place since the start of this year. All of the bonds were held by the Central Bank of Ireland, whose holdings previously attracted adverse comment from the ECB relating to monetary financing concerns, although Frankfurt has since acknowledged the progress made in reducing the stock of IBRC-related assets. While the effective servicing cost of the IBRC-related bonds is immaterial (as the Central Bank repatriates most of its profits to the Exchequer), the repurchases serve to improve the optics of Ireland’s headline debt metrics.

GRN: Strong FY results

Green REIT (GRN) has today issued a strong set of FY (year-end June) results. At a headline level, EPRA NAV per share has come in at 178.9c, +8% y/y and +6% since end-December. This is c. 2.8% ahead of Bloomberg consensus. The annual growth in NAV is positive given the one-off hit of c. 8c per share from last October’s stamp duty hike. H2 proved to be a successful period for the group, notably in terms of capital recycling; development and asset management. The group sold Westend Retail Park for €147.7m (representing a 55% profit on cost), cutting its retail exposure to less than 1% of the total portfolio value. On the development front, its new assets delivered €10.4m of new contracted annual rent in the year to end-June, which increased by a further €1.7m post the period end. GRN’s contracted annual rent is now €74.3m, up from €72.7m at end-December despite the sale of Westend. During the year management completed its One Molesworth Street and 5 Harcourt Road office developments. The guidance for the completion of Building I at Central Park (97,000 sq ft of Grade A office space) has been pushed back marginally to Q119 (was Q418), but this is minor in the scheme of things.

On the logistics side, three units were completed at Horizon during the year, with construction of a further two speculative units set to commence shortly, along with a large (115,000 sq ft) purpose built unit for Bunzl (subject to planning). Management has reaffirmed guidance that Central Park could accommodate up to another 400,000 sq ft of commercial property, while the c. 300 acre landbank at Horizon Logistics Park provides “short, medium and longer term optionality”. The group has a strong balance sheet to support its growth ambitions (management notes that its long term development pipeline has an end value projection of €600m and a 7.2% expected yield on cost). Helped by the Westend proceeds and property revaluations, its LTV stood at just 15.5% at end-June (versus 22.1% at end-December and 20.2% at end-FY17). In terms of asset management, the WAULT across the portfolio climbed from 8.2 years at end-December to 8.8 years at end-June, a record high for the group. The period end EPRA vacancy rate was 4.4% (up from 1.5% a year earlier, reflecting developments and disposals), but this has subsequently reduced to 2.8% through new lettings since the start of this financial year. The standing portfolio has a 5% reversionary potential, unchanged from the end-December position.

Trump does the two-step: Last night the US administration ratcheted up trade tensions with China as President Trump announced the implementation of tariffs targeting an additional $200bn worth of Chinese imports. The new tariffs will initially begin at 10%, effective 24 September, but will rise to 25% from the 1 January 2019, slightly more punitive than the market had anticipated. The aim of the ‘two step’ approach is reportedly to allow US firms to adjust and find alternative supply chains. It was also announced that around 300 products would be removed from the original tariff list, following comments during the public consultation, with items such as smart watches and specific chemicals removed. There has been little in the way of a formal response from the Chinese government yet this morning but in a sign that Trump could ramp up tensions further, the President warned that the US would immediately introduce tariffs on an additional $267bn of Chinese imports if the Chinese retaliated with any measures targeting US farmers and industry. Somewhat surprisingly the Shanghai Composite has actually firmed this morning rising 0.9%, whilst the yuan is also relatively stable despite the rising trade tensions.  Meanwhile European and US futures are lower this morning. 

Brexit bits: For a pleasant change most of the recent Brexit news has been on the positive/productive side with several reports yesterday stating that UK & EU talks are going well behind the scenes and that negotiators are edging closer to some type of deal. News out this morning reports that European Council President, Donald Tusk said that EU leaders are hoping to discuss “the final phase of Brexit talks” during the informal leader’s summit in Salzburg later this week. Sterling appears to like the unlikely upbeat Brexit tone too, the pound is hitting multi-week highs across the board this morning with the benchmark EUR/GBP rate reaching levels not seen in almost seven weeks.