The Swoop Of The Vulture

at

90412296
Julien-Mercille-hi-res-233x300

From top: Tyrrlestown, Co Dublin; Dr Julien Mercille

Property vulture funds are circling Europe.

Have we any protection?

Dr Julien Mercille writes:

Up to 200 Tyrrelstown residents now face eviction from their homes.This is because Goldman Sachs bought from Ulster Bank a loan to property developers Michael and Richard Larkin. The loan is secured on their Cruise Park development.

The key aspect of the deal with Goldman Sachs is the sale of 208 houses, which means that families that have rented these homes for up to ten years must now leave.

In short, when vulture funds like Goldman Sachs buy loans tied to properties, business-friendly regulation leaves occupants vulnerable.

An interesting element in this story that has not received much attention is the fact that it is a pan-European issue. In other words, the situation we face in Ireland is similar to that in a number of other countries.

How did we end up there?

When the financial crisis struck in 2008-2009, banks throughout Europe realised that they had made a bunch of bad loans. We’re familiar with the likes of Anglo Irish and a string of bad loans to developers and builders, but the phenomenon was replicated elsewhere, in places like Spain for example, which also saw a massive housing bubble grow to dizzying heights before collapsing abruptly.

In the wake of the crash, European governments set up ‘bad banks’ (NAMA is ours) to buy the bad loans of the banks.

The ‘bad banks’ are now trying to sell those loans to global private investors. Because a lot of the loans are tied to properties, when a global investor buys a package of loans, some control over the properties comes with it.

In Europe as a whole, ‘bad banks’ like NAMA hold about €264 billion of real estate assets that will be sold to private investors within the next decade. It is estimated that 51% of these assets are residential properties, 31% commercial properties, and 18% development and land. The bulk of the assets are located in Spain, the United Kingdom and Ireland.

There is a very good short report here  describing all this.

It surveys ten of the most important bad banks, which are, in order of value of the real estate assets they hold and will sell to investors: SAREB (Spain, €107bn), UKAR (UK, €107bn), NAMA (Ireland, €73.4bn), IBRC (Ireland, €21.9bn), FMS (Germany, €19.7bn), EEA (Germany, €15.9bn), Propertize (Netherlands, €7.4bn), KA Finanz (Austria, €3.6bn), BES bad bank (Portugal, €2.9bn) and DUTB (Slovenia, €1.3bn).

All those are at various stages of selling their assets, a process which is expected to continue strongly in the coming years.

map

The map (above) shows all the sales of such loans for the year 2014. The UK, Spain and Ireland account for 83% of the sales.

The main buyers of the assets are private equity firms, mostly from the United States, but also from Europe.

Examples include Lone Star, Cerberus, CarVal, JP Morgan and Deutsche Bank. The assets are also purchased by Real Estate Investment Trusts (REITs), which are real estate companies in which global investors can take shares and receive dividends from the rental income generated by the properties owned by the REIT.

REITs are attractive because they pay little or no corporate taxes. Spanish and Irish REITs have been particularly active recently to channel investors’ global funds into European property.

But this is not all. In fact, the total value of real estate assets available in Europe for investors to grab is about €531 billion.

This includes the €264 billion above but it also adds the assets held by banks not formally part of bad banks. There’s a very good short report on this here.

When global investors capture properties anywhere in Europe, there is a risk for the occupants. Some countries offer more protection to them than others, however.

For example, the Sunday Business Post mentioned that what is happening in Ireland, with tenants facing eviction in Tyrrelstown and elsewhere, would never happen in Germany, where they are better protected.

Once again, it all boils down to the balance of power between people and corporations: Ireland caters to the needs and interests of global investors; but it should look after the needs of the people instead.

Julien Mercille is a lecturer at University College Dublin. Follow him on Twitter: @JulienMercille

Sponsored Link

42 thoughts on “The Swoop Of The Vulture

  1. han solo's carbonite dream

    I’ve no real issue with the eviction of the tenants – heartless as it sounds – if you rent a property you don’t have the right to stay there forever.
    what stick in my craw is that these sweetheart NAMA deals aren’t offered to the citizens of ireland but to vulture funds and the like …it’s like david icke was right about the illuminati all along.

    Any extra admin cost of selling individual properties would be made up for in benefit to the population of ireland many times over.

    So the only argument i see against this is that it would set a benchmark for similar property probably reducing it. How many TDs are property investors/landlords? well…
    They and Nama would rather see people homeless than risk the value of property

    greed , pure and simple.

    1. dav

      “if you rent a property you don’t have the right to stay there forever.”
      Why? If you pay your rent in a timely manner and adhere to any agreement made with the property owner, why shouldn’t you have a right to stay??
      What is it about the irish mindset that only property OWNERS have rights?

      1. Polaroid Fluid

        because owners might like to take ownership back at any stage for whatever reason, surprised you can’t see that?

          1. Nice Jung Man

            Pig ignorant Paddy as usual is so brow-beaten by being an imperialist’s lapdog and streetcrawler and his advanced case of Stockholm Syndrome has helped him develop such an attitude.

            This streetcrawling poster probably was one of the first line there when Lizzie was over, fannying and poncing about, calling her Ma’am and curtsying

          2. classter

            Is it possible to have a discussion without resorting to some nonsense about ‘pig ignorant Paddy’?

            Clearly there are various competing reasons to allocate rights/responsibilities between renter and landlord in such an arrangement. There are also questions about the level to which the state should intrude to limit the potential options in such contracts.

      2. han solo's carbonite dream

        it’s only correct you have the right to stay for the term of the agreement.
        by all means if it’s within the agreement between the parties I’m on the tenants side for staying but teh landlord shouldn’t be obliged to keep the same tenants after that .
        That’s appropriation of the landlords asset which is theft by another means.

          1. Rob_G

            Grand – I will come and appropriate your house/car/laptop ‘for the common good’; I’m sure you won’t mind.

          2. wellOwen O'F

            Well, you’ve already appropriated the letter ‘e’ for the common good, so I suppose it follows.

    2. Alfonso

      “if you rent a property you don’t have the right to stay there forever”

      So, if the market doesn’t allow you to afford a property, you cannot offer your family or yourself the stability associated with a permanent residency.

      You sir are not just heartless, you are so oblivious to your privilege that it makes me furious.

      1. han solo's carbonite dream

        @alfonso
        you are wide of the mark. Why should a tenant dictate the outcome to the person who owns the house? That’s just bananas.

        I rented since I was 19 and bought my house in my mid 20’s. No privilege just hard work as a bouncer on top of my regular job to get get my deposit together. so get furious elsewhere

        I believe in social affordable housing for all and voted accordingly.
        you sound like a bl0whard

      1. han solo's carbonite dream

        @Rob_G true I meant it in a general sense of how NAMA operates. Sorry if that wasn’t clear.

  2. Clampers Outside!

    If we can follow Germany on everything else, why the fupp hasn’t our govt fixed the protection to match Germany too? …TD landlords driven by personal interest not to give tenants better protection? ….or so it would appear. Can’t think of anything else.

    1. Anne

      When you’ve got investors investing in housing, it seems the protection we afford in this society is for the investor.. not the person who needs a home. They may need to kick you out at any time shur, especially if there’s more money to be made.
      We couldn’t be having 25/30 year leases like they do in Germany.. how would they made vast profits quickly then?

  3. fluffybiscuits

    The legislation reinforces the protection of the landlord classes whom make up a small proportion of the population. When you take into account that a third of TD’s are landlords they will not bring in any laws which run contrary to the interests of the state will they? Vulture funds are just in terms of morals, wrong, its exploiting the misery of others so that a small percentage of society that keep up their luxury life styles. Already in the UK vulture funds are banned as they exploit the poor. The Labour govt in one last act of power before it fell in 2010 put througha private members bill banning the use of such funds. Now if the UK sees fit then why doesnt Ireland? In the US if a property is in a distressed state people can just hand back the keys penalty free, its a win win for everyone involved. And no one is speaking about the suicides from this, the human cost of the measures.

    Society is focusing more on how much banks are set to lose and that people are given time to make deals, it does not work. Ireland needs more stringent protection for those in danger of eviction…..

  4. Owen C

    “In short, when vulture funds like Goldman Sachs buy loans tied to properties, business-friendly regulation leaves occupants vulnerable.”

    The issue here is that the landlord wants to sell the properties. Its as simple as that. Its a security of tenancy issue. There is a related, but separate issue when the properties are owned by an international funds, or are being foreclosed on by a fund owning the underlying loans, but this is actually a fairly standard issue where a landlord wants to sell a property and what protections should be afforded to the sitting tenants. It happens every day of the week in Ireland, albeit not in the lump amounts that are taking place here. These different issues need to be discussed and dealt with differently.

    1. dav

      I’m sure any liabilities will be written off in a nice complex manner, affording themselves of the numerous tax loopholes the state gives the wealthy

      1. Anne

        Here’s the taxes Cerberus-what’s-it paid here

        http://www.irishtimes.com/opinion/time-to-wrestle-mysterious-cerberus-out-into-the-light-1.2564860

        “Tax affairs
        Their figures show that six of those companies generated income of about €350 million in 2014 and repaid €245 million in interest.

        After taking out their costs, they paid a total of €15,500 in tax, less than most working people.”

        What they do is set up other companies, and lend themselves money that they get for nothing i.e. 0%, at very high interest rates.

        To give a comparison it’s like Clery’s setting up a separate property company for the building and charging themselves massive amounts in rent from the operating company business.

  5. AndrewSB49

    “” Ireland caters to the needs and interests of global investors; but it should look after the needs of the people instead. “””

    Fine Gael, Labour & Fianna Failzheimers would argue that Ireland IS “looking after” the people, at least the people who matter! Is [Redacted] making any noises about the current abysmal situation in our hospitals? Is he up in arms about the doubling of the numbers of those forced into poverty? Has he complained about the burgeoning amount of soup kitchens that have sprung up around Ireland? Has he made any statement about the homeless crisis?

    Absolutely not! Why should he? The dire situation of the country matters naught to him and those he has bought.

    Sure he’s been to the Courts to protect his interests but isn’t he entitled to – besides he has enough moola to clandestinely control more than one of the political parties mentioned above. I note also that the politician he bought has said he’s going to ‘give’ his support to the political party that [Redacted] clandestinely funded. Hell of a Republic this is …. for those members of the public that matter, of course.

  6. rotide

    Slightly typically Mercille that he writes an article which is kinda made redundant by the latest news about the tyrrelstown situation.

    Also this “would never happen in Germany, where they are better protected.”. Why would he compare us to germany and not spain, where it clearly would.

    1. MoyestWithExcitement

      “Why would he compare us to germany and not spain, where it clearly would.”

      Ummmm….because that’s the point. Germany protects its citizens. We protect millionaires.

  7. 15 cents

    people in power in ireland have a weird thing for bending over for anyone foreign. from ray burke giving them our seas, to noonan fighting to not accept 19bn in tax from apple, and all between.. i just dont get it. theyll never tell you either, so id love to take some of em hostage and torture some anwers out of them, coz they must have a reason, and its not guna be good if they wont say. i want to know.

    1. Anne

      True.. like Baldy tugging his non existent forelock out at Shannon airport for Trump.
      Cringe inducing stuff.

  8. Truth in the News

    Back in 1881 the Irish Tenants had protection under the three F’s, we need
    the same again, just as we rid rural Ireland of Landlords, We need the same
    uprising to rid ourselfs of Houselords and the lackeys that give the succour
    and support….how come the likes of Noonan is still clinging to Office

Comments are closed.

Sponsored Link
Broadsheet.ie