Record 1 (1 page) BOARD AWAY DAY - 09th MARCH 2016 9.00 9.05 Board meeting to commence NAMA Committee members join from 9.00am to 12.30pm 1. 9.05 9.50 Presentation: Irish Commercial Property Outlook 2016 Marie Hunt, Head o f Research, CBRE Wesley Rothwell, Head o f Development Land, CBRE 2. 9.50 10.50 Presentation: NAMA - The Big Picture, followed by discussion Brendan McDonagli 3. 10.50 11.05 Coffee Break 11.05 11.35 Presentation: Global Money flows- Is Ireland still an investment opportunity? Jim McCaffrey, Senior Managing Director, Eastdil 4. 11.35 12.00 Presentations: Dublin Docklands Update Mary Birmingham 5. 12.00 12.30 Presentation: Residential Development m arket Break (NAMA Committee members leave) 6. 12.35 12.45 Legal Risks Aideen O ’R eilly 7. 12.45 13.00 Downsizing and Cost M anagement Donal Rooney 8. 13.00 14.15 Lunch 14.15 14.45 Presentation: NAMA residual portfolio 2016 and beyond Sean O Faolain 9. 14.45 15.30 Presentation: Residential Development m arket 10. 15.30 16.00 Presentation: Residential Delivery’ update John Collison 11. 16.00 16.30 16.30 Closing discussion Close Record 2 (15 pages) National Asset Management Agency NAMA BOARD STRATEGY AWAY DAY Fifth Board meetine o f2016: 9.00am. to 5.00pm.. 9^ March 2016. Herbert Park Hotel. Dublin 4 Attendance: NAMA Board NAMA Executives (invited) Frank Daly, Chairman Mary Birmingham Brendan McDonagh, CEO, NAMA Michael Broderick Conor O’Kelly, Chief Executive, NTMA John Collison Oliver Ellingham John Coleman Mari Hurley Rory Flannery Brian McEnery Connor Owens Willie Soffe Michael Moriarty Se&n 6 Faolain Aideen O'Reilly Donal Rooney Other Invitees: Alice Charles, External Member, Planning Advisory Committee (Items 1 to 5) Jim Kelly, External Member, Audit Committee (Items 1 to 5) Michael Wall, External Member, Planning Advisory Committee (Items 1 to 5) Marie Hunt, Head o f Research, CBRE (Item 1 only) Wesley Rothwell, Head o f Development Land (Item 1 only) Jim McCaffrey, Senior Managing Director, Eastdil (item 3 only) S37(1) Item 5 only) S37(1) Item 5 only) S37(1) [item 9 only) S37(1) [item 9 only) Jamie Bourke, SenioT Divisional Manager (Strategy) (Items 1 to 11 inclusive) Elaine Hudson, Secretary The Chairman welcomed the Executive and Committee members to the Board’s Strategy Away Day noting that, in the context of NAMA’s three distinct business divisions (Deleveraging, Residential Delivery and Dublin Docklands SDZ) it was an opportunity to focus on strategic issues including, inter alia, key requirements in terms of achieving its objectives, resourcing implications and NAMA’s ultimate wind down. The Board noted the politically uncertain backdrop to the discussions and that the Minister (when appointed) would be expected to wish to engage with NAMA. 1. Irish Commercial Property Outlook 2016 Ms Hunt and Mr Rothwell presented an overview of the outlook for commercial property to Board which noted, inter alia, that while the outlook was still strong, performance for 2016 was expected to be less than the 40% and 25% year on year returns experienced in 2014 and 2015 respectively: notwithstanding the continued benign interest rate environment, strong occupier activity, strong rental growth, etc, the scope for further yield compression was very limited. Furthermore, a number of geopolitical concerns (most notably Brexit) were giving rise to some caution in the market. Ms Hunt proceeded to outline the outlook for commercial real estate (CRE) on a sectoral basis. Due to improved economic activity (Foreign Direct Investment and indigenous activity), vacancy rates for commercial office space in Dublin were projected to be 8.7% in 2016, significantly below the long run average vacancy rate1. As evidenced by the large number of cranes in Dublin’s skyline, significant office development activity was being undertaken, with virtually no speculative funding and a preponderance o f joint ventures and forward funding projects. Ms Hunt reported that one third o f the 26 office schemes under construction in Dublin (318k sq.ft) had been pre-let. Ms Hunt advised that while speed to market and potential oversupply were recurring themes, it was unlikely that all of the supply pipeline currently projected to come on stream in 2018/2019 would in fact be delivered on time. CBRE anticipated continued upward pressure on rents, with prime headline rents projected to reach their 2007 peak o f €65 psf by mid-2016, peak at €70 per sq.ft. in 2017 and revert to €55 per sq.ft by 2020. On the back of strong retail sales growth, there was full occupancy in the major Dublin retail schemes, with lettings occurring on open market terms and the anecdotal re-emergence o f ‘key money’ in some locations. While rents on Grafton Street were expected to increase by 10% they were still below peak (when they were comparable to the Champs Elysees in Paris). There was an acute shortage of industrial and logistics stock: the vacancy rate had more than halved over the past year and prime rents were expected to increase by 25% to c. €9 per sq.ft. 1 Vacancy rates were typically 10% due to the significant amount of Georgian Office stock. In terms o f the outlook for the Investment market, a lower volume o f transactional activity was anticipated in 2016 (€2.5bn to €3bn per annum) reduced from the €4.5bn and €3.5bn experienced in 2014 and 2015 respectively, as deleveraging became a less dominant feature o f the market. Significant secondary trading of assets was anticipated. The Board noted the discernible shift in investor type: Private Equity investors were still a feature o f market, but institutional investors2 were increasingly prevalent (with the entrance of German and French (BNP) investors3). It was anticipated that Hammerson’s entry into the market (purchaser of Project Jewel) would likely to attract other similar investors. Ms Hunt advised that, in the absence o f further yield compression, value in the Irish market would be derived via income generation and asset management and development opportunities. CBRE noted that the yield gap4 was underpinning the relative attractiveness of commercial real estate providing an arbitrage opportunity for investors. The weight o f investment capital was precipitating an increasing demand for alternative sectors including Private Nursing Homes and Student Accommodation (there were c. 24 such schemes in the planning system). Ms Hunt expressed a note of caution in relation to these alternative sectors, particularly given the very management-intensive aspects of these sectors and the need for experienced specialist operators meant that they were a distinct concept from mainstream commercial real estate investment. Mr Rothwell briefed the Board on the Project Clear5 Loan Sale transaction, noting that it comprised 20% of zoned residential land in the Greater Dublin area, 1,700 acres, 22 debtor connections with the potential to deliver 22k residential units. In response to a question from the Board, Mr Rothwell advised that the price achieved for Project Clear represented a premium over the individual asset values within the portfolio. The Board discussed the Student Accommodation sector, noting that a significant proportion o f the proposed development was anticipated to serve overseas students who would be prepared to pay a premium for quality accommodation (noting further than Irish colleges were actively seeking to attract overseas students). The Board noted the unique characteristics of the sector, with standard 36 week letting periods and likely lack of demand from tourists (during summer months) given the suburban location o f many o f the proposed developments and significant rents required (c. €220 per week). 2 Real Estate Investment Trusts (REITS) such as Green RETT and Hibernia REIT and Irish Life and Tt i c K P<* nciAii 1 Twit Tn i o t / TPT l'l'^* 36(1) 4 between 10 year Government bonds (0.85%) and prime yields (office yields 4.65%) - which was expected to persist going forward, notwithstanding a flattening of the yield curve. 5 Ulster Bank Loan sale which was acquired by Cairn pic (75%) and Lone Star (25%) A lengthy discussion took place in relation to the supply and demand imbalance in the residential housing market and the main impediments on the supply side. In the course o f the discussion it was noted that funding was a key challenge in terms o f purchaser’s ability to borrow (under the Central Bank’s macro prudential rules) with demand evident at or below €300k. Given construction costs, it was a significant challenge for developers to deliver product in this price bracket. CBRE noted that the macro prudential rules (and the income multiple restriction of 3.5 times salary in particular) were leading to increasing demand in the traditional commuter belt (as was experienced during the boom) as opposed to the area within the M50. The Board discussed the Central Bank’s review of the macro prudential rules and the scheduled publication of same in November 2016, noting that an early CB decision was preferable to a November announcement on the basis that the delay was causing a drag on the market. In this regard the UK’s recently-announced change in income multiple restrictions from 4 times to 4.5 times salary was cited as a case in point. During discussion, the Board noted that the paucity of residential housing to accommodate the requirements of Foreign Direct Investment firms was becoming a potential issue. The Board noted that Dublin City Council’s (DCC) revised apartment standards would contribute to the alleviation of this issue, by rendering viable some developments which were previously marginally viable or unviable. It was estimated that the revised standards would result in a 20% increase in additional units. It was noted that this did not represent a return to the much maligned ‘shoe box’ apartments of the Celtic tiger era, but would instead result in well-designed living spaces. DCC was compiling a workbook o f preferred designs to assist in this regard. In response to a question from the Board, Ms Hunt advised that policy makers would need to be cognisant that the competitive gains made in recent years were being eroded and action was required in this regard (a specific issue cited was the Irish hotel industry’s uncompetitive room rates which had a negative impact on tourism and presented a negative impression overseas). Noting the (best case) two year timeline to address the supply imbalance (in terms of both office space and residential units) it was noted that on the commercial office front, refurbishment opportunities (from recently vacated premises with tenants upgrading to new builds) would serve (to an extent) to bridge the gap in the interim. The Board discussed the cyclicality of the market, noting that the locus o f control had shifted back to landlords (due to supply issues), having been with tenants during the recession. As more supply came on stream, more favourable tenant incentives would likely feature. It was noted that Ireland was a small open economy which was susceptible to peaks and troughs. Citing Ireland’s global competitiveness ranking, an external committee member raised the issue of external events which could impact on the supply side pipeline. Ms Hunt responded that there were a number of potential ‘storm clouds’ on the horizon, not least of which was Brexit, noting that a number of leading indicators were unfavourable - US manufacturing numbers were down (a bell weather indicator of the US economy) and the recent share performance of global REITs suggested that share prices were below the pricing that would be implied by the value of the underlying assets and was reflective of negative sentiment. Responding to a further question from an external committee member, Mr Rothwell advised that service capacity was a key infrastructural issue to be addressed on zoned land in addition to the necessity to roll out broadband across the country. 2. NAMA The Big Picture - General CEO Presentation NAMA CEO presented a comprehensive presentation to Board which noted, inter alia, NAMA’s evolving focus from the initial establishment of its operating platform and nascent deleveraging activity6, the emergence o f its loan and portfolio sale processes (and concomitant confidence building initiatives7), to more recent development funding in Dublin Docklands SDZ and residential delivery initiatives in addition to the significant challenges involved and outlook for NAMA going forward. The Board discussed the outlook for NAMA’s deleveraging, Dublin’s Docklands SDZ and Residential Delivery initiatives, with the focus of the discussion primarily on the latter two areas. In the context of development funding, the Board noted a structural problem in the market namely that institutional capital was primarily interested in acquiring and leasing completed product and demonstrated little appetite to fund large scale development (in the absence of a pre-sale/pre-let). A lengthy discussion took place in relation to N A M A ’s residential delivery initiative. During discussion, it was noted that the 7,000 completed residential units held by NAMA as security over its loans, were 98% occupied, with 2% unoccupied representing normal market transience (tenants moving in and out). The Board noted that while the younger generation might ab initio have a preference to own property rather than rent, they were more accepting of the rental market proposition. In this regard, it was noted that the Irish residential rental market needed to be overhauled to provide security of rental tenure to tenants (akin to the continental model). The Board noted that the significant increase in rents provided an additional challenge to saving a deposit (as required until the Central Bank mortgage rules) to purchase a home, noting that a €38k deposit was required to buy a €300k home. The rapid increase in rents was anecdotally demonstrated by the increase from €1,100 per month to €1,700 per month for a two bedroom apartment in Sandyford. Responding to a question from the Board, the NAMA CEO advised that Central Bank rules had compressed house prices in Dublin, and resulted in middle income earners renting for longer than would otherwise be the case, thus impacting availability of rental stock with social housing implications. Notwithstanding the review being undertaken by the Central Bank, the Board noted that the mortgage lending rules would not be abandoned, noting Central 6 Commencing with UK assets 7 Such as the Deferred Payment Initiative Bank pronouncements to the effect that a high threshold would apply if it were to be convinced o f the need to change the rules. In the context of the dearth of residential unit supply and the concomitant potential implications for FDI, the Board noted that significant residential units would ultimately become available (on a rental model) in the Dublin Docklands SDZ and commercial development would ultimately drive residential development). Discussing the latter, the Board noted that the designation of an SDZ status on this O site (a political decision) would significantly address the residential capacity issue. It was noted that any investment decisions in this regard would be wholly commercial in line with NAMA’s Section 10 obligations. Turning to social housing, and notwithstanding NAMA’s social housing contribution to date, the Board discussed possible solutions to ameliorate the serious shortage of same. In the course of this discussion it was noted that the Department of the Environment, Community and Local Government (DOECLG) was reluctant to pursue re-purposing of existing industrial sites for social housing purposes which would not be sufficiently serviced with requisite community centres, transport links etc. It was noted that Local Authorities had land available which could be ceded for social housing purposes (noting this would be a political decision). 3. Global Money flows - Is Ireland still an investment opportunity? Mr McCaffrey presented to the Board which noted, inter alia, that notwithstanding the volatile start to the year (across equity, fixed income and energy markets), leading indicators for the US economy remained positive, underpinning the outlook for economic activity in the US and Western Europe. Against this backdrop, and in the context of the fact that 25% of central banks were operating negative interest rate policies, investment in hard assets (real estate) was an attractive proposition and increasingly becoming a safe haven for investment capital. Eastdil stated that the fact that the Pfandbrief auction (€500m) with a yield of -0.367% had been three times over-subscribed emphasised that the yield differential (vis a vis commercial real estate) was driving capital into real estate assets in ‘city states’ (Dublin, London, Paris, Berlin, San Francisco, New York10). This trend was evidenced by the fact that Calsters and Calpers had recently increased their real estate asset allocation from 12% -13% to 15%- 16%. S41(1) 9 Initial Public Offering 10Dublin was being compared to tech hubs/life sciences hubs globally. 11 Californian State Teachers Retirement System $188.6 bn (nov 15). Addressing the risks, it was noted that the recent ‘unloading’ of assets by Green REIT was suggestive o f a perceived peak in the market, noting that the US REITS were trading 30% to 50% below constituent net asset values (NAVs) which was unsustainable. Other key risks included the lack of commercial office and residential product to meet demand and contagion in the event of the cessation of the ECB and Central Banks Quantitative Easing programmes which would cause paralysis across financial markets. Eastdil outlined that while demand was anticipated to remain for real estate assets (as evidenced by the 30 Non-Disclosure Agreements signed to date in respect o f the Blanchardstown Shopping Centre), the depth of the bidding pool would be shallower than in recent years (with fewer bidders in the final stages). Eastdil outlined some recent real estate transactions by European Institutional Funds (Union Investments13, Cap REIT, Deka14) which underscored the strong demand for real estate assets in core cities. In the context o f geopolitical instability (Brexit, the US presidential election), Mr McCaffrey advised that institutional capital perceived the benign legal, commercial and political environment in Ireland allied to the concentration of fortune 500 companies in Dublin as compensating for the marginally lower returns (on a risk adjusted basis) available in the Irish market. In short, Ireland was fairly well positioned to attract investment capital driven into real estate investment for yield enhancement notwithstanding an anticipated modulation in pricing and increasingly thinner bidding fields. Mr McCaffrey posited that residential accommodation was a key concern in respect o f FDI and suggested a policy initiative in which NAMA used its credibility and capital and provided leadership in terms of addressing supply side issues (completed office/residential units) on a participation basis (Joint Ventures) to ‘feed’ the private sector (institutional capital seeking to acquire and lease completed product). Eastdil advised that developer/funding partnerships which existed in other jurisdictions were not a feature of the Irish market to date - this structural deficit in the market (absence o f institutional partnerships providing leadership and sponsoring quality) led to transactional capital being frustrated with the quality of resi operators in the Irish market. In response to a question, Mr McCaffrey advised that despite reduced availability of bank funding, the loan sale market remained resilient with an increasing number of funds being ‘long’ the market and reluctant to migrate up the risk curve (investment in Spanish, Italian, Portuguese real estate). Discussing the anticipated departure of opportunistic capital (private equity funds), the Board welcomed the ostensible broadening o f the investor base with the entry o f a number o f Irish and European 12 Californian Public Employee Retirement System $300.3 bn. 13 €8bn German Fund - purchased PwC building in Boston 14 Germany's DekaBank financed the acquisition of Prisma Tower in La Defense in Paris (lending €79m to Invesco Real Estate which bought the 23,152 sq.m. tower for an Asian state pension fund in an all-equity transaction). institutional investors (permanent capital) into the market. Referencing Lone Star’s participation in the recent Project Clear transaction (with Cairn Pic) and Starwood’s investment in Elm Park (with Chartered Land), it was noted that these represented special transactions. The Board noted that yield-oriented investors (pension funds) represented a lower ‘exit’ risk than opportunistic capital. 4. Dublin Docklands Update Head o f Asset Management (HoAM) provided an overview of the development status (including planning and delivery strategies) of NAMA sites in the Dublin Docklands SDZ15, commercial office supply and demand16 in the Central Business District17 (noting that significant supply was not expected to come on stream until 2018) and the implications o f Dublin City Council’s revised apartment standards (which could enable previously marginal (at best) apartment development to now become viable). In response to a question from the Board, HoAM advised that NAMA was relatively well positioned to achieve first mover advantage in terms of delivery with its investment partnership schemes18 proceeding ahead o f the curve and the vast majority o f its other schemes capable o f commencing construction in 2016 or 2017 noting that (Boland’s Quay) was scheduled for completion in 2018 and that it was inevitable the overall development pipeline would extend beyond that currently projected. In the course o f the discussion, the Board noted there was likely to be more forward funding opportunities with pension ftinds and institutional capital refreshing their portfolios. Furthermore, obtaining planning permissions for the NAMA related sites was a key priority for NAMA in order to meet market demand, and once construction costs remained relatively stable, investment in the Docklands was a commercially viable investment proposition at current rental levels. ---------------o --— -------— partners to co-fund development financing ( Schedule 1 would be a constraint. The Board discussed infrastructural issues in the Docklands noting that NAMA was funding the new road in the Docklands and the pedestrian bridge (which NAMA had offeredtoftm d)w asdue in 2018. The Board discussed the strategic importance of the noting that it would be complementary to the Docklands SDZ and that an SDZ designation would be preferable to a Local Area Plan (LAP). 15 3.8m sq. ft of commercial space and in excess o f2,000 residential units would be delivered 16 3m sq.ft take up in 2015, active demand for 4.1m sq ft ^ flS 3 7 (T ) m ) s 37(T) ^35(1), S36(1) g the HoaM w hich .yitprl. inx>r nllr. thn1 S35(1), S36(1) In response to a question from the Board, the ^ ^ ^ ^ ^ rep resen tativ es advised that with a view to expediting development and enhancing revenue streams in the medium term, ^ ^ ^ v o u l d be open to form partnerships (JVs, etc) in due course. The Board discussed the difference in scale of projected residential unit output over the next number o f years between NAMA and notimMhat NAMA had undertaken to deliver four times the output of H ^ []at peak. The representatives advised that S36(1) intended to increase output g r ^ u ^ lv in line with the development capacity of the company. The Board noted that adopted an outsourcing model, and as was currently the case with their seven ‘live’ sites, deployed four to six key resources on each site to oversee development on the ground. This model would be replicated as they scaled up to potentially 25 active sites. They advised that it was not a matter of number o f resources but ensuring they had the ‘right people’ at the ‘right pace’. S35(1), S36(1) S36(1) The Board and [representatives discussed capacity issues in the sector noting the significance o f sub-contractors in this regard. The Board noted that incorporated an average 4% annual house price inflation assumption into their financial models (noting that this was a broad assumption that varied on a case by case basis acro sy ts sites). In response to a question from an external committee member, the^^B representatives advised that ere mindful o f the cyclicality of the sector and the exogenous factors which could impact demand, were well capitalised to deal with potential shocks and would vary output accordingly in line with demand (scaling output up or down as required). Referencing NAMA, Kj^U] advised that they intended to maintain a good co-existence with other entities in the market provided such competition was not assertive. The Board advised that NAMA was opposed to unsustainable, aggressive competition in the market. Responding to a final question from the Executive, ^ B ^ ^ g id v is e d that the Multi Family and Rental sectors were not, at this stage, an overt part of business model. 6. Legal risks Head of Legal (HoL) presented the paper to Board which noted and discussed the broad range o f emerging legal risks as set out in the paper. The Board noted that following NAMA’s significant deleveraging from the UK, the potential impact of Brexit on NAMA was not envisaged to be too intrusive but would necessitate a significant amount of due diligence in relation to NAMA’s counterparties in the UK. The Board discussed the large number of risks, noting that a number of same were outside NAMA’s control S29(1), S30(1), S36(1) In this regard it was noted that there were no disincentives on the part of aggrieved debtors/third party vested interests to make complaints against NAMA which were hugely resource intensive to deal with and had the potential to cause significant reputational damage. 7. Downsizing and Cost Management The CFO presented the paper to Board which noted, inter alia, that the deleveraging programme was anticipated to be largely completed by end 2016 (on foot of accelerated deleveraging in 2014 and 2015 which facilitated almost half of the original senior bonds being redeemed in a two year period, with a limited number19 of deleveraging connections projected to remain in 2017. Accordingly, in light of the anticipated significant reduction in the scale of NAMA’s loan portfolio while being cognisant o f the future requirements of the RD and SDZ/Docklands businesses, it was apposite to review NAMA’s infrastructure and cost base to ensure optimisation of 19Number was uncertain at this stage - best estimate was c. 40 active connections same in light o f the significant change in focus. It was noted that comprehensive reviews had commenced including a strategic review of NAMA’s Systems and a renegotiation of Capita loan servicer fees. The Board discussed the two ‘downsizing’ options set out in the paper and agreed that Option 2, which advocated a comprehensive root and branch review o f NAMA’s infrastructural and cost base requirements with a view to informing a restructuring programme, was the preferred option. The Board agreed that ‘downsizing’ was a misnomer for the proposed restructuring/repurposing of NAMA. While recognising the need to downsize in pursuit of cost savings, it was imperative that adequate resources were maintained to meet the very onerous objectives in the Docklands SDZ and Residential Delivery businesses. Referring to the latter, it was noted that delivery o f an average o f 4k residential units per annum was a huge task, involving €5.6bn of funding, requiring €7 bn o f house sales to take place by end 2020 and added complexity o f monitoring and managing significant funding outflows in addition to inflows. Furthermore, the resource intensive nature of the business would necessitate ‘on the ground monitoring’ o f relatively disparate residential sites across the country. During discussion, the Board noted that the proposed repurposing/restructuring of NAMA would need to encapsulate/reflect any new policy initiatives required by the incoming Government. In this regard, it was noted that any such initiatives would have to be framed within NAMA’s commercial rationale under Section 10 of the Act. In restructuring NAMA, any proposals would need to consider the process oriented nature o f the environment in which NAMA operated and the resource implications of same (internal audits by NAMA Quality Assurance and PwC and external audits by C&AG, PQs, Oireachtas queries, press queries, conflicts with debtors etc). Furthermore the proposals should also consider any opportunities presented by the restructuring initiative. In response to a question from the Executive as to whether benchmarking o f resource requirements would be considered as part of the process, CFO advised that this could be considered but that NAMA was already well placed to present a robust internal view of resource requirements. Following further detailed discussion, the Board requested that a preliminary scoping paper, setting out the parameters for the restructuring review (addressing the proposed methodology, scope, envisaged time frame etc), be presented to Board in May 2016, with the review findings (incorporating any new Government requirements and State Aid findings) to be presented to Board by September 2016. The Board noted that the scale o f the Voluntary Redundancy Scheme for 2016 would be informed by the restructuring proposals. The Board noted that NAMA would need to engage with its shareholder on a timely basis to facilitate its management (and wind down) of the entity. 9. S37(1) Mr and Mr presented the paper to Board which noted _S36(1 _ S 36(1) current residential and nonresidential (including nursing home, student accommodation, retirement facility) pipeline. Mr advised that the current residential property market was dysfunctional as evidenced by the continued elevated proportion of cash buyers, the requirement to sell units below costs on a number o f sites and the existing gap between the combined income required (in terms o f mortgage affordability) to acquire a relatively modest €300k to €3 50k home (in addition to €58k to €78k deposit) vis a vis average earnings as reported by the Central Statistics Office. epresentatives advised that the profile of First Time Buyers had evolved over their history, from young (mid 20s) professionals acquiring their first home to ‘thirty something couples pushing a buggy’. It was noted that the Central Banks’ income multiple restriction was particularly onerous, while it was feasible in certain quarters to borrow a deposit (from parents), it was not possible to ‘borrow a salary’. Furthermore expensive market rents were makin^itincreasinglv d iffic u lM ^ a v ^ o ^ ^ e n o si^ R e fe re n c in g their ‘niche’ product reported that the development com prised well designed, well located (in terms o f services) product which was attracting first time buyers and ‘trader uppers’ from the area. The Board proceedecHcMiiscuss some of the key challenges to residential delivery. In this regard expressed frustration with the planning system (and one Local Authority in particular) following inordinate delays in updating an existing JO planning permission . It was agreed that there should be statutory timeframes within which planners were required to revert. It was also noted that the planning process increasingly involved requests for additional information and subsequent clarification o f requests thereby unnecessarily elongating the timelines. Furthermore, some planning authorities were purportedly requesting near full applications (at considerable cost to the developer) prior to preliminary engagement to discuss any schemes. Unsustainable levies, VAT, infrastructural deficits were cited as further barriers to residential delivery, ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ w e l c o m e d the revised building regulations. During discussion, Mi ^ ^ o p i n e d that despite each o f the constituent individual ‘players’ in the market (the Central Bank (ensuring prudential lending by the banks), banks, planners/local authorities and developers) focusing on issues germane to their sphere o f influence, there was no ‘joined-up thinking’ and government intervention had been ‘knee jerk’ to date. The Board noted that an overarching role, analogous to the Housing Tsar in the UK (which could conceivably be cast into a cabinet ministry in the new government), with full autonomy and oversight for the sector and with authority over local authorities could ensure an appropriate policy response and connection/ communication between the various players. One suggestion posited to bridge the gap between affordability on the part of the purchasers and viability o f development on the part of the developers was for a 20 NAMA’s Head of Planning had endeavoured to assist to little avail. grant to be put in place for First Time Buyers, noting that S36(1) dismissed as scare-mongering the suggestion tha^dcvclonei^w ould effectively ‘pocket’ the grant. When citing challenges, representatives highlighted the resource overhead and burden of monitoring and oversight imposed by NAMA (financial monitors on site every month etc) and requested whether this could be alleviated. In view of NAMA’s prudential obligations, the NAMA Board was satisfied that significant oversight and monitoring was appropriate given that taxpayer funds were involved. S37(1) In response to a question from the Board, Mr ^ ^ ^ ^ i d v i s e d that in their experience the three pillar banks were very competitive in terms of development funding citing a recent request for Term Sheets from same for what appeared to be commercial (nonresidential) development, noting that rates were further enhanced due to the de risked nature of th ep ^ ticu l^ p ro iect which had the benefit of a pre-let. In the course of the d is c u s s io n .y m ^ ^ ^ ^ ^ ^ a d v is c d that a key consideration for developers was to ensure continuity and pipeline of work, in order to keep labour resources and sub-contractors on site. A key element of attracting former construction workers back to Ireland would be the assurance that there was a pipeline o f work for a number of years. The Board queried whether there were capacity constraints in relation to the quantum of output to which the j^ ^ -ep resen tativ e s advised that the key capacity constraint related to sales velocity. In the context of the Central Bank rules effectivel^concentrating demand in the €300k starter home market, 36(1) inclined to procure and develop lands in the traditional com m uter belt (Naas, Newbridge, Wicklow) where three-bedroom homes could be delivered within this price bracket. rh ^ B o a r^ is c u s se d social housing and possible solutions to address same. S36(1 opined that the proposed modular housing to address the issue was arguably short sighted and could be procured more efficiently - noting that the timeline for delivery of a modular unit (which had PR issues) vs a S36(1) family home was 12 weeks vs 16 weeks respectively. 8. NAMA Residual Portfolio 2016 and Beyond Head o f Strategy & Communications (HoS&C) presented the paper to Board which noted the projected evolution of NAMA’s portfolio across a number of characteristics (scale, asset sectoral/geographic distribution, debtor connection (NDP) size, etc) from end-2015 to end-2017. The Board noted the proposed areas for further analysis by the Strategy Team, noting that any additional specific requests should be directed to HoS&C. The Board discussed NAMA’s key objectives as approved by Board at its 16th April 2015 meeting and following due consideration resolved to approve the proposed amendment to the residential objective as set out in the paper. The Board noted that it was likely that the incoming Government (during negotiations for a Programme for Government) would propose some new policy initiatives relating to NAMA - in this context, the Board noted that NAMA would be mindful of any potential State Aid challenges in this respect, and ensure that such policy initiatives conformed with NAMA’s commercial remit as set out in Section 10 o f the Act. Furthermore, implementation of any Policy initiatives by NAMA was contingent on its ability to retain its experienced staffing capability. It was noted that any suggestions to impose differential Part V obligations on NAMA debtors was likely to result in significant High Court challenges on the part of NAMA debtors. The Board noted that NAMA might have to revert to Government (at relatively short notice) setting out the feasibility of any proposed initiatives. In this respect, it was noted that preparatory work should be carried out which would identify whether any proposed initiatives would require a change to NAMA’s legislation or could trigger a State Aid challenge. Following further discussion, and having regard to the key policy issues which NAMA could assist in potentially ameliorating (social housing, residential housing supply issues), the Board agreed that NAMA should adopt a proactive approach and that it should work in conjunction with ISIF and NDFA to arrive at an agreed NTMA view on possible initiatives to address these issues. It might be necessary to revert to Board (at its April Board meeting) with a paper (setting out recommendations in so far as they applied to NAMA). 10. Residential Delivery Update Head o f Residential Delivery (HoRD) provided an overview of the RD initiative advising that the expanded programme represented a major turning point in NAMA’s evolution and a step change in terms of quantum of output. HoRD advised that a key priority would be to ‘dc-clutter’ RD connections by disposing of non-core assets. The aim o f the programme was to invest in assets to optimise the income-producing potential and disposal value of same in line with NAMA’s Section 10 obligations. It was noted that viability testing was essential in this regard. Referencing the scale of the challenge, HoRD reported that the residential unit delivery target for 2016 represented a 150% increase over 2015 delivery output and would necessitate mobilising sites to 60 concurrently active sites by year end and increasing that to 100 sites by end 2017. The Board noted that NAMA would select the projects to progress on the basis of commerciality and in view of feedback from S36(1) would review its oversight processes to ensure they were as efficient as possible. The Board noted the scale of the challenges ahead adding that a si jS30(1), S36(1) work would be required to identify and propose solutions to same The Board agreed that following NAMA’s orderly withdrawal from the market (envisaged in 2020), a normalisation of the market would be welcomed. 11. Closing Comments The Chairman closed the meeting by expressing his appreciation on behalf of the Board to the presenters and the Executive and Committee members for their active participation throughout the day. The Chairman advised that the session had been useful in terms of crystallising NAMA’s strategic position and the issues and challenges ahead. There being no further business, the meeting concluded. Frank Daly, Chairman 14th April 2016 Record 3 (9 pages) CBRE B I - M O N TH LY RESEA RCH REPORT Ireland Bi-M onthly Research Report, M arch 2016 Good St art To 2016 For Irish Com m ercial Propert y Overview Desp it e t u rm o il on g lo b al f in an cial m arket s sin ce t he b eg in n in g o f 2 0 1 6 an d in creased fo cu s on t he p o t ent ial im p licat io n s o f BREXIT, act ivit y in all sect o rs o f t he Irish CRE m arket h as co n t in u ed u n ab at ed in t h e first t wo m o nt hs o f t he year. Sh o r t ag es of p r im e acco m m o d at i o n co n t in u e to fru st rat e t he o ccu p ier sect o rs o f t he m arket , m ost recen t ly in t he p rim e ret ail an d in d u st rial sect o rs. Th ere is evid en ce o f m o re su p p ly co m in g av ailab le in t he Du b lin o ffice m arket o ver recent m o n t h s, w h ich h as eased p ressu re to so m e d eg ree. As p red ict ed , w e are in creasin g ly seein g m o re sig n s o f d ev el o p m en t - r el at ed act iv it y in all sect o rs o f t he m arket , m o st n o t ab ly in t he Du b lin o ffice an d hot el sect o rs. Th e ap p et it e fo r i n v est m en t in al t er n at i v e sect o r s such as p u rp o se- b u ilt st ud ent h o u sin g is also b eco m in g in creasin g ly evid en t . Act ivit y in t he h o t el sect o r rem ain s st ro ng wit h co n sid erab le d o m est ic an d in t ern at io n al fo cu s on t he p rest ig io u s Gresh am Ho t el in D u b lin city cen t re, w h ich h as recen t ly b een o ffered f o r sale g u id in g €8 0 m illio n . M ean w h ile, in t he i n v est m en t sect o r , t h ere h ave b een a n u m b er o f n o t ab le sales co n clu d ed in t he first t wo m o nt hs o f t he year. THE OFFICE M ARKET To date, the appetite for office accom m odation in D ublin does n o t appear to have been adversely affected by the u n certainty th a t has dom inated in global investm ent m arkets since the beginning of the year. Indeed, there has been continued m o m en tu m in the D ublin office m ark et in the first few m onths of 2016 w ith several new requirem ents em erging since C hristm as and a n u m b er of sizeable transactions currently in active negotiations. W ith the developm ent of several new office schem es now well underw ay and a n u m b er of refurbishm ent o p portunities becom ing available, there is finally som e light at the end of the tu n n el for occupiers seeking office prem ises in the capital. Having increased significantly over the course of the last 12 m onths, prim e rental values are steady at approxim ately €592 per square m etre (€55 per sq. ft.) at present. However, we expect to see this headline rate increasing to €700 per square m etre (€65 p er sq. ft.) during 2016 as transactions close and new m arket evidence m aterialises. A n u m b er of options are also now becom ing available for occupiers w ho are unable (or unwilling!) to pay headline rental rates, w ith availability in buildings th a t are secondary in term s of location or fit-out im proving a little in recent m onths. Q uite ap art from rents, the biggest frustration for m any occupiers at p resen t is the inflexibility of lease term s being offered by landlords in the cu rren t m arket. Th e EU r ef er en d u m result an d t h e im p licat io n s if t he U K w ere to leave t he EU is creat in g u n cert ain t y f o r in vest o rs, o ccu p iers, d evelo p ers Prime Headline Office Rents an d o t h ers in vo lved in U K real est at e. H o w ever, to d at e, d em an d fo r Irish CRE d o esn 't ap p ear to City Centre €5 6 5 .0 0 per m2 South Suburbs €2 6 9 .0 0 per m2 North Suburbs €1 6 1 .0 0 per m2 West Suburbs €1 5 1 .0 0 per m2 h ave b een affect ed by t h is p art icu lar issu e. Sim ilarly, w h ile it w ill lead to so m e u n cert ain t y o ver t he co m in g w eek s, t he o ut co m e o f t he Irish G e n e r a l Elect i o n is u n likely to h ave a sig n ifican t im p act on t h e co m m ercial real est at e m arket lo cally. Source: CBRE Research THE IN DUSTRIA L & LOGISTICS M ARKET Having achieved the hig h est ever recorded volume of an n u al take-up during 2015 (425,000m2), activity has contin u ed a t pace in the D ublin industrial m arket durin g the first two m o n th s of 2016, w ith several notable transactions having com pleted or been negotiated in this sector since C hristm as. Recent notable transactions in this sector include; Pioneer Bu ild in g , Elm Park, Dublin 4 However, as m ore stock becom es available, this is expected to alleviate som ew hat. Transactions agreed recently include; • The letting of 11,250m2 at The Gateway Building at East Wall Road, Dublin 3 to ESB; • The letting of 6,317m2 at George's Quay House to Fidelity Insurance; • The letting of 3,264m2 at Bloom House, James Joyce Street, Dublin 1 to the OPW: • The assignm ent of 3,000m2of accommodation formerly occupied by Dropbox at Park Place, Dublin 2 to Slack; • The letting of an additional 2,787m2 at Block G2 at Cherrywood to Applied Process Consulting A n u m b e r of new office schem es have entered the p lan n in g process in recent weeks while co n struction has com m enced on m ore th an 120,000m 2 of new office accom m odation in Dublin city centre since the begin n in g of the year. IPUT has recently agreed to forw ard fund 10,219m 2 at The Exchange b u ild in g in the IFSC w hile C hartered Land will p a rtn e r Starw ood on the developm ent of the 8 storey 16,171m 2 Pioneer b u ilding at Elm Park in D ublin 4. We are seeing an increasing n u m b er of su b u rb an schem es being considered, w hile outside of D ublin, perm ission has recently been granted for 22,670m 2 of office accom m odation a t Trinity Quarter, South Terrace in Cork City and 5,576m2 at M illennium Park in Naas, Co. Kildare. • The sale of the 9,749m2 former Vitra Tiles facility on a 5 acre site in Arklow, Co. Wicklow; • The sale of 3,713m2 at Unit 8, North Park, Finglas, Dublin 11 The strong volum e of transactional activity in this sector over the last 12 m onths has seriously im pacted the supply of m odern industrial accom m odation in the capital. In fact, the availability of prim e industrial buildings of more th an 1,858m 2 (20,000 sq. ft.) to either purchase or ren t in the capital is less th a n half of w h at was available at the sam e tim e last year. The shortage of m odern accom odation will p u t considerable upw ard pressure on prim e rental values in this sector over the course of 2016 considering the volum e of d em an d an d the n u m b er of unfulfilled requirem ents in the m arket at present. In light of anticipated ren tal grow th (which will render speculative industrial developm ent viable in m any instances), there has b een a noticeable increase in requirem ents for prim e industrial land over recent m onths. Land sales recently agreed include the sale of 160 acres at the M1 Business Park in N orth County Dublin and the sale of 41 acres at Profile Park in W est Dublin. D em and for prim e industrial investm ent o p p o rtu n ities has also strengthened recently in light of rental grow th expectations with good in terest in industrial o p p o rtu n ities recently offered for sale, including a d istrib u tio n centre at R osem ount Business Park, D ublin 15, w hich is Prime Headline Industrial Rents Prime Dublin €7 8 per m2 Secondary Dublin €4 8 per m2 Secondary Provincial €4 3 per m2 Source: CBRE Research Prime Headline Zone A Rents Grafton St €5 ,7 0 0 per m2 The Square €1 ,5 0 0 per m2 Dundrum €4 ,0 0 0 per m2 Secondary City Centre €1 ,0 0 0 per m2 Henry St €4 ,0 0 0 per m2 Prime Retail W/ house (Dublin) €2 9 6 per m2 Blanchardstown €2 ,5 0 0 per m2 Secondary Retail W/ house (Dublin) €1 3 5 per m2 Liffey Valley €2 ,2 5 0 per m2 Prime Retail W/ house (Provincial) €1 0 0 per m2 Source: CBRE Research Vitra Tiles, Arklo w , Co. W icklow guiding €18 m illion an d a m od ern w arehouse and d istrib u tio n facility at Fonthill Industrial Park, w hich is guiding €3.4 m illion. We expect to see con tin u ed activity in this sector of the m arket over the com ing m o n th s w ith a shortage of m odern accom m odation co n tin u in g to be the biggest challenge for occupiers seeking m o d ern prem ises aro u n d the M50. a lease on a new store on G rafton Street w here both Lacoste and & O ther Stories are currently undergoing fit-outs. Encouragingly, there are increasing signs of activity outside of Dublin. In recent weeks, it has been announced that; • TK Maxx are currently fitting out new stores in Douglas Village in Cork and in the former Homebase store in Castlebar, Co. Mayo; • Harvey Norman are reportedly looking to develop a new store at Airton Road, Tallaght, Dublin 24; • Homestore &More have leased a new store in Portlaoise and are in negotiations on a num ber of other provincial stores; THE RETAIL M ARKET Following w h at was the b u siest C hristm as trading p eriod in several years in the Irish m arket and w ith retail sales volum es having increased by m ore th an 6% year-on-year d uring 2015, activity has rem ained consistently stro n g in the retail property m arket durin g the first two m o n th s of the year. D em and for prim e pitches th ro u g h o u t the country is strong alth o u g h a lack of prem ises is proving to be a challenge being th a t m any of the b etter high streets, sh o p p in g centres an d retail schem es are now at, or close to, full occupancy. The stren g th of d em an d from existing retailers and new en tran ts (which was clearly evident at last w eeks’ C om pletely Retail event in Dublin) is in turn fuelling ren tal grow th an d leading to the exchange of key m oney in certain locations. In addition, Iceland have recently an n o unced plans to open 10 new stores; C entra annou n ced plans to open 16 new stores this year while The Range an n o unced a req u irem en t for several new stores having recently agreed to o pen stores in Limerick, Cork and Dublin. M eanw hile, D anish retailer Sostrene Grene (who recently opened a new store in A n u m b e r of retail schem es are currently u ndergoing or plan n in g refu rb ish m ent program m es, w hich is encouraging. M eanwhile, news th a t p lan n in g perm issio n has recently been lodged for a 22,000 square m etre extension a t Liffey Valley Shopping Centre in w est Dublin to include an Olympic size ice-skating area an d 1,800 additional car spaces has been broadly w elcom ed. In Dublin city centre, Magee are due to open a new store on South Anne Street w hile Dune have recently signed Sostrene Grene, Dun Laoghaire D un Laoghaire) are in advanced negotiations to o pen five new stores in 2016. The stren g th of retailer appetite an d poten tial for rental grow th in this sector will no d o u b t be encouraging to the m any investors w ho will be b id d in g on B lanchardstow n Town Centre in w est D ublin, which has recently been offered for sale. THE IRISH IN VESTM EN T M ARKET Global investm ent m arkets have been hugely volatile durin g the first two m o n th s of the year. W hile it is clearly too soon to guage w h at im pact, if any, this has h ad on the d em an d for E uropean real estate, increasing credit spreads have started to have an im pact on d eb t pricing. In fact, pricing has already started to stabilise in the Irish com m ercial pro p erty m arket, w ith the pace of yield contraction slowing. The latest retu rn s from MSCI show th a t Ireland once again boasted one of the b est perform ing com m ercial p roperty m arkets in 2015, having achieved a total re tu rn of m ore th a n 25% year-onyear. A lthough 2016 is also expected to be a record year for the Irish com m ercial real estate sector, return s are unlikely to be quite as strong as in 2015. Deleveraging activity is now clearly w inding down in the Irish m arket an d as a result, sourcing stock is proving m ore challenging, w ith increased focus on asset m an ag em en t an d developm ent activity. We are also seeing an increasing p ro p ortion of tran sactio n al activity occuring off-m arket as investors are m ore confident w ith the pricing of assets. The prim e asset B lanchardstow n Town Centre is currently on the m ark et and will prove a good test of prim e sh o p p in g centre yields in the Irish m arket. We expect to see a high volum e of Prime Yields Trending Retail (High Street) 3.2 5 % Stronger Office 4 .6 5 % Stable Retail (Super Prime Shopping Centre) 4.0 0 % Stable Retail (Prim e Shopping Centre) 4.7 5 % Stable Retail Warehouse 5.00% Stronger Industrial 5.75 % Stronger Source: CBRE Research 3 Harbourm aster Place, IFSC, Dublin 1 single borrow er loan sales and a sm all n u m b er of larger granular books com ing to the m arket over the next few m onths. Properties that are currently being formally marketed include: • The GLAS porfolio of retail and office properties, including the Arena Centre in Tallaght, Dublin 24; Parkway Retail Park in Limerick and Globe Retail Park in Naas, which is guiding €168.7 million; • The Hume House office redevelopment opportunity in Ballsbridge, Dublin 4, which is guiding excess €40 million; • 3 Harbourm aster Place in the IFSC, Dublin, which is guiding €37.5 million; • Ennis Road Retail Park Limerick, which is guiding €15 million; • CLIC Portfolio of mainly retail assets in Cork and Limerick, which is guiding €9.5 million Investment sales announced in recent weeks have included: • Whitewater Shopping Centre in Kildare to German investor DEKA for €180 million; • Central Quay, Sir John Rogerson's Quay, Dublin Docklands to Hibernia REIT plc for €51.3 million; • The new AirBnB headquarters building in Dublin Docklands to French investor BNP Paribas Investment for €32 million; • City Square on Marlborough Street, Dublin 1 for €21 million; • 2 Custom House Plaza, IFSC for €15 million A nother tran sactio n th a t has been com pleted off-m arket in recent weeks is the sale of an office investm ent at 23 Shelbourne Road, Ballsbridge, D ublin 4 and retail units at Royal H ibernia Way in D ublin city centre, w hich were sold to an in stitu tio n al buyer for in the region of €50 m illion. W hile som e investors are delaying decision-m aking aro u n d p roperty investm ent in the UK m arket until such tim e as there is greater clarity on the outcom e o f the BREXIT referendum this Sum m er, to date, d em an d for Irish com m ercial real estate d o esn't appear to have been affected by this particular issue. Similarly, the outcom e of the local General Election is unlikely to have a significant im pact on the investm ent m ark et locally. THE DEVELOPM EN T LAN D M ARKET C onfirm ation th a t only 12,666 hou sing units were developed in Ireland in 2015 (despite there being a need to develop at least twice th a t am ount) is d isap p o in tin g to say the least, particularly w hen you consider th a t approxim ately half of these housing u nits com prised one-off dwellings. Less th a n 3,000 h ou sin g units were developed in D ublin in the 12 m o n th period. Against a backdrop of severe undersupply in the residential sector and continued strong dem and in the com mercial sector, it is perhaps not surprising th at the dem and for developm ent land has continued unabated in 2016. In fact, there has been noticeable increase in the volume of land being offered for sale since the beginning of the year w ith many of these sites em anating from various loan portfolios traded over the last num ber ofyears. Transaction volumes in Q1 2016 are therefore expected to be considerably stronger than in the same period last year. Dem and for sites in the com m uter belt of Dublin is particularly strong at present. Sites that have sold or gone sale agreed since the beginning o f the year include: • 18.4 acres at Knockrabo, Dublin 14 for €25 million; • Two sites within Cherrywood SDZ in South Dublin for a combined €21.5 million; • 1.06 acre site at 6 Hanover Quay, Dublin Docklands, for €18 million; • 0.53 acre office site at Charlemont Place, Dublin 2 for €16 million; Sites that are currently being marketed include; • A 6 acre mixed-use waterfront site at Spencer Dock in Dublin 1, which is guiding €50 million; • A portfolio of 6 sites totalling 128 acres in various locations in Dublin and Kildare, which are guiding €44.75 million; • The Hume House office site in Ballsbridge, Dublin 4, which is guiding in excess of €40 million; • 2.17 acre Leisureplex site in Stillorgan, Co. Dublin which is guiding €10 milion; • 4.265 acre site at Sandyford Industrial Estate, which is guiding €9.5 million; • 0.36 acre hotel site at New Street South and Kevin Street, with planning for a 137 bed 3 star hotel, which is guiding €6.5 million; • 4.6 acre residential site at Rathcoole, Co. Wicklow, which is guiding €5.25 million; • 1.41 acre site with planning permission for a petrol station at Millennium Park, Naas, which is guiding €2 million; W ith a steady supply of land co n tinuing to be offered for sale and increasing evidence of a pool of capital to su p p o rt p u rchasing activity, we expect to see contin u ed activity in this sector over the com ing m onths. Proposed Office developm ent at Hum e House, Ballsb rid g e, Dublin 4. However, w ith developm ent plans at various stages of adoption in the four D ublin local authority areas at p resent, it is likely to be som e tim e before these site sales translate into the delievery of new supply in the capital. As the year progresses, we expect to see a notable increase in p lan n in g activity w ith an increase in the n u m b er of applications for alternative accom m odation such as purpose b u ilt stu d e n t accom m odation and m ultifam ily residences particularly anticipated. THE H OTELS & LICEN SED M ARKET Hotel Performance - 2015 vs. 2014 Following a particularly active year in 2015 in w hich 63 trad in g hotels changed h an d s and m ore th an 40 o th er hotel properties were sold as p a rt of loan portfolios in Ireland, 2016 has seen an equally busy sta rt to the year. Trading perform ance in the hotel sector - especially in D ublin an d the o ther m ain cities - continues to stren g th en , as is evidenced by the m o st recen t hotel data w hich shows significant year-on-year im provem ent in occupancy, average room rates an d RevPar. Activity in the hotel p roperty m ark et in the first two m o n th s of 2016 has included concluding transactions th a t carried over from 2015 and the p rep aratio n of o th er hotel assets for sale. Transactions com pleted since the start o f the year include: • Clarion Hotel, Sligo on 5.5 acres for €13.1 million; • Clarion Hotel, Limerick for €7.5 million; • Diamond Coast Hotel, Enniscrone, Co. Sligo for €4.5 million; • Cashel Palace Hotel, Cashel, Co. Tipperary on 25 acres for €2.25 million; • Derrynane Hotel, Kerry for over €1.8 million; • W atermarque Hotel, Cahirciveen, Co. Kerry Dalata plc continue to grow th eir b ran d s w ith the recen t acquisition of the leasehold interests in the G ibson Dublin; the Clarion Cork and the Clarion Limerick. The big news in the m arket ju s t now is the OCC% 2015 Y-o-Y % Change APR 2015 Y-o-Y % Change RevPAR 2015 Y-o-Y % Change Cork 7 7 .5 % 1 .44 % € 78.20 8 .03 % € 60.61 9 .66 % Limerick 6 8 .3 % 9 .72 % € 60.00 12 .42 % € 40.98 23 .36 % Galway 7 5 .74 % 4 .27 % € 88.04 8 .69 % € 66.68 13 .32 % Dublin* 8 2 .2 % 4 .98 % € 112.29 17 .58 % € 92.25 23 .38 % Source: Trending .ie, *STR proposed sale of the G resham Hotel D ublin, which has ju s t been b ro u g h t to the m arket w ith a guide price in excess of €80 m illion. The sale of this 323 b edroom D ublin city centre asset (which has p lan n in g perm ission for a fu rth er 145 bedroom s) is understandably generating huge in terest from both Irish and in tern atio n al hoteliers alike, especially as it offers an exciting in tern atio n al branding o p p o rtunity to the ultim ate purchaser. Other hotel assets that are currently being offered for sale include; • The Pillo Hotel in Ashbourne, Co. Meath, which is guiding €8 million; • Tulfarris Hotel & Golf Resort in Wicklow, which is guiding €5 million; • Sweeney's Hotel on Dublin's Dame Street, which is guiding €3.5 million; • Cahernane House Hotel in Killarney, Co. Kerry, which is guiding excess €3 million; • Imperial Hotel in Dundalk, Co. Louth, which is guiding €1.2 million Several loan portfolios are expected to be formally launched for sale over the com ing m o n th s and we u n d e rsta n d these will contain a large n u m b er of hotel properties in different locations across the country. In D ublin, a n u m b er of hotel developm ent projects have been an n o u n ced recently, w hich is Prime Hotel Yields ii&tr m Gresham Hotel, O'Connell Street, Dublin 1 Trending 5 Star Dublin - Vacant Possession 6 .2 5 % Stronger 4 Star Dublin - Vacant Possession 6 .7 5 % Stronger 3 Star Dublin - Vacant Possession 7 .0 0 % Stronger Source: CBRE Research very encouraging considering the cu rren t scarcity of hotel accom m odation in the city centre. The recent an n o u n c e m e n t th a t D alata plc have confirm ed th eir in ten tio n to build a 4 star 181 b edroom hotel at C harlem o n t Street in D ublin 2 (having p urchased the site w ith the benefit of p lan n in g perm issio n for €11.9 m illion) has been well received. The delivery of m any o ther proposed hotel projects in the capital will, however, be d ep e n d e n t on the availability of funding. As the sector gears up for w hat prom ises to be a busy trad in g period in the run-up to the 1916 com m em orations, the prospects for the Irish hotel sector look particularly encouraging. D em and for prim e D ublin pub properties has been particularly stro n g in the first two m o n th s of 2016 w ith very stro n g in terest in properties offered for sale including Kennedy’s in D rum condra, D ublin 9, w hich was guiding €900,000 and w hich has now gone to b e st bids. M eanw hile, the sale of the Castle Inn in R athfarnham has com pleted in recent weeks for a price in the order of €660,000. In other news in this sector, it was recently an n o u n ced th a t the M ercantile an d C apital Bars groups in D ublin are to m erge to form one group - The M ercantile Group, w hich will now control 12 venues in the capital. understandably been a huge blow for the N orthern Ireland m arket in recent weeks. It is therefore encouraging th a t there has been co ntinued activity in the property sector in the Province in the first two m onths of 2016 w ith strong occupier dem and co ntinuing to prevail for office and industrial accom m odation in particular. Since C hristm as, the Boston technology firm Cayan have announced plans to expand their presence at the City Quays 1 b u ild in g in Belfast. M eanwhile, Liberty IT have recently leased an additional 21,000 sq. ft. at Adelaide Exchange in the city where G enpact have also recently agreed to lease accom m odation. Puppetlabs have agreed to lease 8,000 sq. ft. at 40 Linenhall Street in Belfast, having announced 100 new jobs in Septem ber 2014. C onstruction has now com m enced on the developm ent of the new Allstate headquarters building, extending to 165,000 sq. ft. at Mays M eadow in Belfast. Prime Rents Belfast Zone A Retail £115 per sq. ft. £ 1 ,2 3 7 .4 0 per m2 Secondary Retail £4 5 .0 0 per sq. ft. £ 4 8 4 .0 0 per m2 Prime Office £1 6 .0 0 per sq. ft. £ 1 7 2 .0 0 per m2 Secondary Office £8 .5 0 per sq. ft. £9 1 .4 6 per m2 Prime Industrial £3 .7 5 per sq. ft. £4 0 .3 5 per m2 Source: CBRE Research Prim e office rents in Belfast will continue to increase over the course of the year as new rental evidence m aterialises, w ith som e transactions reportedly underw ay at levels in excess of £17 per sq. ft. at present. Following a busy Christm as trading period, the latest Springboard figures suggest th a t January footfall num bers in Belfast were up year-on-year. Vacancy levels in the city centre have seen a significant im provem ent over the last 12 m o n th s having declined from 14.9% to 6.0% year-on-year. Kenned y's Drum condra, Dublin 9 THE BELFAST M ARKET News th a t the C anadian firm B om bardier Aerospace are to reduce their Belfast workforce by 580 this year an d potentially by a fu rth er 500 next year has Recent transactions co n trib u tin g to this im provem ent in occupancy include lettings to Nationwide Building Society and Stradivarius on Donegall Place as well as lettings to Ed’s Easy Diner and Tiger on Castle Place. It is anticipated th at the vacancy rate will continue to decrease over the course of 2016 with increasing dem and leading to a shortage of prim e units and fuelling rental growth in the retail sector. Improved m arket conditions are also beginning to ripple out to key provincial centres. D espite strong dem an d in the industrial sector, the supply of m o d ern accom m odation rem ains elusive an d is likely to do so u n til rental values rise further. In this respect, the fact th a t the developm ent of 180,000 sq. ft. of new stock a t Greenwood Business Park in L isburn is n earing com pletion is particularly welcome. Some com m en tato rs are anticip ating a delay in investor decision-m aking durin g the first half of 2016 as the debate aro u n d BREXIT loom s large in advance of the June 23rd referendum . M uch of the focus in the investm ent m arket in N orthern Ireland in the first two m o n th s of the year has been on com pleting transactions w ith few new o p p o rtu n ities launched for sale so far in 2016. Prime Yieldsj Belfast Gatew ay Office Bu ild in g , Titanic Q uarter, Belfast • Tesco Extra, Craigavon, guiding £24.68 million; • Lisnagelvin Shopping Centre, Derry, guiding £17.2 million; • Part of Riverside Retail Park, Coleraine, guiding £14.3 million; • Oxford & Gloucester House, Belfast, guiding £5.75 million • Lesley Retail Park in Stabane, guiding £5 million; • Carlton House, Belfast, guiding £1.25 million; • Tesco Express, Belmont Road, Belfast, guiding £775,000; • Forestgrove Office Park, Belfast, guiding £750,000 Trending Prime Retail 5 .7 5 % Stable Prime Office 6 .0 0 % Stable Prime Industrial 7 .0 0 % Stronger Secondary Retail 9 .0 0 % Stronger Source: CBRE Research The sale of the Bloomfield Shopping Centre in Bangor to Ellandi has now been confirmed for a price of £54.15 million, reflecting a yield of 7.66%, while Capital London has emerged as the purchaser of The Soloist office building on Lanyon Place in Belfast for a reported £14.5 million. It has also been reported that Capital House in Belfast has been sold for approximately £11 million, while an office building at 8-10 Donegall Square N orth has reportedly been sold to a local investor for £5.9 million. One of the m o st notew orthy investm ent properties to com e onto the m ark et since C hristm as and w hich is g enerating considerable in terest is The Gateway office b u ild in g in Belfast, w hich is guiding £29 m illion. Properties that are currently on the market or in negotiations include: • The Outlet, Banbridge &Junction One, Antrim, guiding £58 million; We continued to see new hotel projects and stu d en t accom m odation schem es m oving th ro u g h the p lan n in g process durin g the first two m o n th s of the year. Planning was recently approved for a 179 bed hotel at Hope Street, a new 63 bed hotel in the old War M em orial building at W aring Street and an extension at Ten Square in Belfast. M eanwhile, the 31 bed Bishops Gate Hotel opened for business in Derry in recent weeks. We expect to see a n u m b e r of hotels being offered for sale in Belfast over the com ing m o n th s including The Balmoral Hotel in W est Belfast, which is expected to be released for sale shortly. Planning was recently granted for an o th er purpose b u ilt stu d en t accom m odation block of 476 units at the form er M etropolitan College building in Belfast. This brings to 1,500 the n u m b er of stu d en t accom m odation u n it's granted plan n in g in the city in the first two m o n th s of 2016. M eanwhile, McAleer and Rushe have em erged as the purchasers of the Belfast Telegraph office developm ent in Belfast for close to £6 m illion in recent weeks. CONTACTS - RESEARCH M ar i e H unt CONTACTS - CAPITAL MARKETS Joh n n y H organ CONTACTS - RETAIL AGEN CY Flor en ce St an ley Executive Director, Ireland Research Executive Director, Capital Markets Deputy Managing Director, + 353 1 618 5543 + 353 1 618 5597 + 353 1 618 5732 marie.hunt@cbre.com johnny.horagn@cbre.com florence.stanely@cbre.com Sean O’Br i en Ber n ad i n e H ogan Associate Director, Ireland Research Executive Director, Capital Markets Senior Director, Retail Agency + 353 1 618 5738 Su zan n e Bar r et t + 353 1 618 5724 + 353 1 618 5744 suzanne.barrett@cbre.com sean.obrien@cbre.com bernadine.hogan@cbre.com Col m Luddy Si m on Cooper CONTACTS - OFFICE AGEN CY & TENANT ADVISORY Paddy Con lon Senior Director, Capital Markets Senior Director, Retail Agency + 353 1 618 5729 + 353 1 618 5747 colm.luddy@cbre.com simon.cooper@cbre.com Director, Tenant Rep + 353 1 618 5520 paddy.conlon@cbre.com Sar ah W ard W il lie N orse Caren Leon Senior Director, Capital Markets Senior Director, Retail Agency + 353 1 618 5529 + 44(20) 7182 2627 willie.norse@cbre.com caren.leon@cbre.com Associate Director, Tenant Rep + 353 1 618 5760 sarah.ward@cbre.com W il lie D ow lin g N at ali e Br en n an Sh an e Cah i r Director, Capital Markets Director, Retail Agency + 353 1 618 5555 + 353 1 618 5704 natalie.brennan@cbre.com shane.cahir@cbre.com Executive Director, Office Agency + 353 1 618 5590 willie.dowling@cbre.com M ark Sm yt h Kyle Rot hwell Si m on Plun k et t Director, Capital Markets Associate Director, Retail Agency + 353 1 618 5502 + 353 1 618 5512 kyle.rothwell@cbre.com simon.plunkett@cbre.com CONTACTS - INDUSTRIAL & LOGISTICS Gar r et t M cClean CONTACTS - HOTEL & LICENSED Paul Col l i n s Senior Director, Office Agency + 353 1 618 5567 mark.smyth@cbre.com A lan M oran Director, Office Agency Executive Director, Ind. & Logistics + 353 1 618 5568 + 353 1 618 5557 alan.moran@cbre.com garrett.mcclean@cbre.com Executive Director, CBRE Hotels + 353 1 618 5592 paul.collins@cbrehotels.com Jo h n H ugh es CONTACTS - DEVELOPMENT LAND W esley Rot h well Executive Director, Development Land Jar l at h Lynn Director, CBRE Hotels Associate Director, Ind. & Logistics + 353 1 618 5538 + 353 1 618 5728 john.hughes@cbrehotels.com jarlath.lynn@cbre.com + 353 1 618 5548 Jo h n Ryan wesley.rothwell@cbre.com Rober t Col l er an Director, CBRE Hotels CONTACTS - BELFAST Br i an Laver y + 353 1 618 5721 john.ryan@cbrehotels.com Director, Development Land Managing Director, CBRE Belfast + 353 1 618 5701 + 44 (0)28 9043 6741 D er m ot Cur t in brian.lavery@cbre.com Director, CBRE Hotels robert.colleran@cbre.com + 353 1 618 5539 dermot.curtin@cbrehotels.com T i m M acM ah on Director, Development Land + 353 1 618 5782 tim.macmahon@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. + FOLLOW US GO O GLE + FA CEBO O K TW ITTER p lu s.g o o g le.co m /+ cb re faceb o o k.co m /cb re @CBRE Ire la n d Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, w arranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. Record 4 (45 pages) National Asset Management Agency 8355 I RE LAN Marie Hunt Wesley Rothwell, CBRE Ireland Presentation to NAMA Board March 9th 2016 ?#CBREOu?rlook201 6 31 YEAR PERFORMANCE TOTAL RETURNS GREW BY 25% IN 2015 35.0 25.0 15.0 NO c = a) o' (0 .o 5.0 -5.0 -15.0 -25.0 -35.0 D l'-~ CO CD ■ sr co5 C co co CO CO CO CD CD CD CD CD CD 0 CD CD CD CD 2 CD CD 3 ■ST CD CD CD CD 5 CD CD CD CD CD l'-~ CD CD CO CD CD CD CD CD 0 0 0 2 m. 2 0 0 0 0 2 2 3 ■ST 0 0 0 0 2 2 5 0 0 2 CD 0 0 2 I-0 0 2 0 1 O O o o o o o o CN C N CN CN CN CN CN CD OUTLOOK 2016 IRELAN D CRE PERFORM A N CE 1984-2015 Total Return 50.0 Capital Growth 25.0 18.7 % (50.0) ■ s l - m C O I ' - ' C O C D O T - C N C O ' S i - m C O I ' - ' C O C D O T - C N C O ' s r m C O I ' - ' C O C D O T - C N C O ' c r i X ) c o c o c o c o c o c o o ) a > a > o ) a > a > o ) 0 ) a > a > o o o o o o o o o o - < - T - T - T - T - T - CT ) CT) 0 ) CT ) CT) 0 ) 0 ) CT ) CT ) 0 ) CT ) CT ) 0 ) 0 ) CT ) CT ) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 t - Source: MSCI t - t - t - t - t - t - t - t - t - t - t - t - t - t - t - C N C N C N C N C N C N C N C N C N C N C N C N C N C N C N C N 2015 ANOTHER EXCEPTIONALLY BUSY YEAR interest compression rates growth economic occupational chasing real estate backdrop activity opportunities OUTLOOK 2016 LO A N S A L E S PERFORMANCE s lb f d i GENERAL ELECTION RESULT RECOVERY occupier activity Income Growt h commercial rates Transaction Volumes ARBITRATION RENTAL GROWTH ' I OverSup p ly “ 1 BREXIT / » design & build New Sectors GEOPOLITICAL RISKS_________________ VALUES Job Creation healthcare f u n d in g levelopment forward funding CON SUM ER SPEN DIN G Speculative Development Core vs Opportunistic ] ] ^ i[ I ] data centres US President GOVERN M EN T BON DS Undersupply i] [» compet it iveness E-Commerce WORKPLACE STRATEGY Rent Reviews FED TIGHTENING p lan n in g Irish General Elect ion Joint Ventures SUSTAIN ABILITY m ar k et cy cl e tl??m 7-Ill" OUTLOOK OFFICE TAKE-UP vs. VACANCY 2006-2016(f) Take-up 300,000 250,000 eU a 25% 20% 200,000 15% 150,000 10% 100,000 50,000 0 Source: CBRE Research 5% 0% Vacancy Rate ^ c W Vacancy OUTLOOK 2016 OFFICE M ARKET Continued strong volumes of leasing activity Escalation of office development activity in the capitaL.m ainly in the city centre for now Increasing number of joint-ventures and forward funding projects Speed to market & potential for oversupply a recurring theme Continued upward pressure on rents until 2018 - prime headline quoting rents to reach €700 per sq. m. (€65 per sq. ft.) by year-end 2016 OUTLOOK CURRENT DEMAND BY LOCATION Q4 2015 Suburbs - All Areas 9% West Suburbs 2% All Dublin Locations 5% City Centre - All Areas 18% South Suburbs 13% North Suburbs 2% Dublin 1/3/7 7% Dublin 2/4 44% Source: CBRE Research DUBLIN CBD OFFICE SUPPLY PIPELINE rw ffM iv w im / \ mmih i OLAM MtVIM ASHTOWM g DM n MUWO CUM ;" ST A GE O F CO N ST RU CT I O N T ot al m 2 Sp ecu l at i ve Pr e Lei • Under Construction 318,994 230,610 88,384 9 Planning Granted 344,968 9 o Planning Applied 77,891 Pre-Planning 80,670 p i \ -- -—i---------- CUM TTiur m2 M m2 ....... KASTWAliy m STPAM M AW AY AK K D isdoim er: Inform ation con tained herein, including projections, h as been obtained from sources believed t o be reliable. W hile w e do not doubt its accuracy, vie h ave not verified it an d m oke n o guaran t ee, w arran t y or representation ab ou t it. It is your responsibility t o confirm indepen den tly its accuracy an d com pleteness. This inform ation is presented exclusively f o m set i y CBRE clien ts an d professionals an d all ligh ts t o t he m at erio) ore reserved an d cannot b e reproduced without prior M itt en perm ission of r PPF ' . OUTLOOK DUBLIN POTENTIAL OFFICE SUPPLY 350,000 A Complete Planning Application 300,000 Planning Granted u1 Pre Planning 250,000 ex C/D Under Construction meaningiful 1 nprovemlent i supply iuntil I 293,967 2017w Under Construction - Pre Let 200,000 Ifl bs 150,000 92,308 100,000 50,000 11,754 0 Source: CBRE Research 2015 2016 2017 2018 2020 PRIME OFFICE RENT FORECAST €726 800 €700 700 600 :=» cr W (D 500 400 Back to peak values but levelling as new supply emerges 300 200 100 0 -----1------ 1------ 1------ 1------ 1------ 1------ 1------ 1------ 1------ 1------ 1------ 1------ 1----O0 T - 0C N0 O O0 ^ L0 O 0C O 0r ^ 0- C 0O O 0O T1 - C 1N O1 O 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Source: CBRE Research -----1------ 1------ 1------ 1----io 0 0 0 0 CO c* 0 0 CO 2 2 0 0 0 0 2 2 2 2 0 20 2 NE: Retail Sector . OUTLOOK RETAIL SALES VOLUM E GROWTH 2006-2016 15.00% 10.00% 5.00% £ oS(D 0.00% -5.00% § re 3 C c < -10.00% -15.00% -20.00% -25.00% Source: CSO 7 0 1 4 7 0 0 1 0 0 0 1 T-T-T-T-T-T-T-T-T-O O O l-T- O O O O O O O O O C N C N C N O O CNCNCN CN CN CN CN CN CN CNCN 2016 RETAIL M ARKET Recovery becoming more firmly established Increase in transactional activity - particularly strong demand for prime high streets and shopping centres Reversion to open market terms - Return of key money in some locations Prime Zone A rents on Grafton Street to rise by another 10% with even higher rental growth anticipated in secondary locations 2020 PRIME GRAFTON ST ZONE A RENT FORECAST 12000 10000 8000 cr ^ 6000 a) a + 10% 4000 growth in 2016 0 O O o CN Source: CBRE Research 0 0 2 2 0 0 2 CO 00 2 00 2 LO 00 2 CD 0 0 2 00 2 CO 00 2 9 00 2 0 2 0 2 CN 0 2 CO 0 2 O CN LO 0 2 )(f (O 10 2 )(f 10 2 )(f 03 01 2 2019(f) 2000 OUTLOOK DUBLIN INDUSTRIAL TAKE-UP 2006-2016(f) 450.000 400.000 in J= 350,000 425,000m2 of take-up achieved - highest ever OUTLOOK 2016 INDUSTRIAL & LOGISTICS M ARKET Shortages of modern accommodation becoming more acute Prime rents expected to increase by as much as 25% to €94 per sq. m (€8.75 per sq. ft.) in 2016 As rents rise, feasibility of new development will improve but few speculative schemes expected to commence this year Increase in ‘design & build’ projects in 2016 - several data centre projects underway and commencing Further strengthening in lease terms as the year progresses Appetite for good industrial investment opportunities 2020 PRIME INDUSTRIAL RENT FORECAST 140 120 € per Sq. M 100 gm 80 'r 25% increcise in 1 2016 & reaching i €1210 psmi by I 2020 60 40 20 0 L o CN i0 0 0 0 CN Source: CBRE Research 20 0 2 CO 0 0 2 40 0 2 LO 0 0 2 60 0 2 I-0 0 2 8 0 0 2 CD 0 0 2 CN 0 2 0 2 LO CO 0 2 CN 0 0 2 0 2 g CO 10 2 L 2 0 2 g ocT 0 2 g aT 0 2 OUTLOOK IRISH INVESTMENT VOLUM E 2006-2015 i > €3.5 bn 176 individual transactions 5.000 4.500 4.000 3.500 o 3,000 W 2,500 2,000 1,500 1,000 500 0 2003 Source: CBRE Research 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 OUTLOOK IRISH INVESTMENT SPEND MAP 2015 Irish REIT 6.6% ?w . . mm ?5.222; .FJ Europe 11.2% of the bn . W83 rom Midd'eOEZacit USA 28.2% ?974'? ?397.15m Undisclosed ?197.79m 5.6% ?#CBREOu?rlook2016 OUTLOOK IRISH INVESTMENT BY SECTOR 2015 48% > 4% > 29% 2% iifv Mixed Use Source: CBRE Research 2% 2016 INVESTMENT Moving to a new phase - somewhat lower volume of transactional activity anticipated as deleveraging starts to wind down More secondary trading of assets anticipated Prime yields now at, or close to, a trough Focus shifting towards income generation, development opportunities and rental growth PRIME RENTS COMPARED FURTHER RENTAL GROWTH ANTICIPATED I Rent as of Long Term Average 30% I Rent as of Most Recent Peak 20% 1 0% 0% Industrial Office Retail y#CBREOutlook2016 2016 CAPITAL M ARKETS SECTOR Expect to see more forward-funding transactions Continued appetite from overseas buyers and new entrants More demand for ‘alternative’ sectors Significant yield gap will continue in the short to medium term regardless of interest rate hikes ARBITRAGE BETWEEN PRIME YIELDS & 10 YR GOV BONDS Significant arbitrage 10.0 10 Year Gov Bond Yields 9.0 Prime Office Yields will continue even when interest rate start to ris 8.0 7.0 6.0 £ 5.0 4.0 t i i i i 3.0 2.0 T 1.0 0.0 O O CN Source: CBRE Research lO O O CN C D O O CN O O CN 0 0 O O CN O O O CN O CN O CN CN O CN o CN O CN O CN 0 OUTLOOK IRISH HOTEL SALES 2007 2015 63 Hotel sales totalling ?710m 700 600 500 400 Millions 300 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 y#CBREOullook2016 OUTLOOK IRISH HOTEL SPEND MAP 2015 're'and ?442.58m 62% Hotel sales a totallmg ?710m USA ?226.7m #CBREOu?rlook201 6 OUTLOOK 2016 HOTEL SECTOR ^ ■ Another very active year anticipated, although transaction volumes will be down compared to 2015 ■ Further loan sale activity anticipated this year ■ Several re-trades out of loan portfolios also expected ■ Indigenous Irish hotel groups will expand their portfolios ■ Values in Dublin, Cork and Galway could rise by 10 - 15% this year ■ Shortages will remain in the short-term ■ Wave of new development activity expected in Dublin with more than 7,300 new hotel rooms in the planning pipeline OUTLOOK DUBLIN HOTEL SUPPLY - PLANNING STATUS Pre-Planning H135 (18 schemes) I naoe 5* ARBOUR HILL B804 moa & Dubl i llac Shopping Centre & ? Artx>ur Hill Prison ARRAN QUAY Old Jameson Distillery I H1481 s aj NORTH.WALL Jervjs shoppjng Cen re a " M $ • THE LIBERTIES H8io ^ - W r ,____ , u b , (§ 2,328 rooms B101 rumi -P 0 m v lL L A 0 £ # Tnmly C o l l e g d H ^ ^ Dublm fwrarl r^ S f] Castle £ • Guinness Storehouse THE COOMBE ' St Patrick's Cathedral .n< ,____ _ [em],a j« M ERCHANTS quay s m " a # •S * A [sIH] ^ ^ B e v 's G ardei hins Barn l«'n[ \ \ be* Source: CBRE Research RDS Main Arena A m Clayton Hotel Ball? 4 1% rooms TRANSACTION VOLUM E 2008 - 2015 2014 Transactions 116 Capital Value €674m 700 600 500 400 300 200 100 ooo CN O CN O CN CN O CN O CN O CN O CN 2016(f) C o €15 - €20m 2015 75% of transactions by number €5m or less 2014 70% of transactions by number €5m or less €20m + 7% • High volume of land sales anticipated again in 2016, mostly as individual sites but possibly some small portfolios • Most land sales emanating from secondary trading out of loan portfolios • Increase in land values expected, particularly in the commercial sector • Appetite for ready-to-go residential sites to remain strong - shortage of housing most pressing issue for new Government • New buyer groups expected to emerge in this sector in 2016 - increase in forward- funding transactions • Demand for sites to accommodate purpose-built multifamily and student accommodation development WHAT WAS PROJECT CLEA R? • Approx. 20% of the Zoned Residential Land in GDA • Approx. 1,695 acres (686 hectares) • Approx. 2,500 Extant Planning Permission • 22 Borrower Connections • Approx. 22,000 units - Capacity to develop approx. 22,000 units PROJECT CLEAR WEBSITE 1- 1. r ^ 1. Met hodology l * a 3. Su b Po r t f o l i o s & Tr a n c h e s 2. Ra n k i n g ^----------------------------- * KEY DRIVERS Alin im ise [ Mixecutior 1 1 , L i [ L la x im is Net 3roceeds e ] M V r A iPo sit iv t , A FlannincV. F’erm issice C apacity of Development + ASSUMED ABSORPTION/ B B SS y e a r s s u ppl y 1 KISTING Lik ely Delivery Tim eline € RANKING OF ASSET PORTFOLIO APPROACH ' _j i_ '_ j i _ ■ Development Opportunity y Land i 5 T Bank f Ready to CD 69% Zoned ‘Residential’ Capacity for Housing Sites m 8 Exceptional SUMMARY Another busy year in prospect as the market shifts gear Increase in secondary trading as de-leveraging activity winds down Investor profile continuing to evolve Increased signs of development activity emerging Healthy volumes of occupier activity expected Rental growth becoming increasingly evident in all sectors Strong returns expected but lower than achieved in the last few years Maintaining competitiveness is critical Biggest threats are external at this juncture V5 National Asset Management Agency 8355 I RE LAN Marie Hunt Wesley Rothwell, CBRE Ireland Presentation to NAMA Board March 9th 2016 ?#CBREOu?rlook201 6