Even Anglo’s good assets are going up the flue…

Without doubt, over a period of time, and in aggregate, market economies tend to be a lot smarter than planned ones. However, in the short term, market panics can cause a lot of unnecessary damage.

Take the Anglo Irish Bank for instance, currently a byword for rash investment in property development. But in their haste to clear their books, they are also burning some of the good investors. Here’s Paul McMorrow in the Boston Globe:

Last week, Anglo initiated a foreclosure against the owners of One Kendall Square, the massive Cambridge lab, office, and retail complex owned by the Beal Companies and Rockwood Capital. What’s unusual about the foreclosure is that the Cambridge complex isn’t struggling at all. It’s nearly 90 percent full and producing plenty of cash. Beal and Rockwood have never missed a payment on their $180 million mortgage.

Anglo’s wind-down means the rules that usually govern lender-borrower interactions have been thrown in the trash. There’s little regard for preserving relationships. Strong borrowers with good loans are now the biggest targets for aggressive action, because they represent the bank’s best chances of sending piles of cash back to Dublin.

One Kendall Square is actually one of the most attractive assets in Anglo’s US portfolio. And that, local real estate players believe, is why Anglo came after it.

Anglo Irish Bank, which was nationalized after sustaining spectacular losses on its Irish portfolio, is now less a bank than a collection agency. It is now going out of business, and is liquidating most of the real estate loans on its books. There’s roughly $15 billion in American loans to churn through — $4 billion in New England.

And in a more recent Editorial the Globe argued:

The sins of the bankers should not be confused with the things Ireland got right in its economic policies, including its creation of a business-friendly environment. Once Ireland recovers from its staggering debt burden, its EU partners will be entitled to ask that its low corporate tax be raised to create a level playing field within the union. But for now, the last thing Ireland’s creditors should do is to expunge a crucial provision of the country’s economic-development pitch.

In Dublin as in Boston, where Anglo Irish still holds some $4 billion in real estate loans, creditors have to be careful not to liquidate any goose that is still laying golden eggs. [emphasis added]

  • Cynic

    Absolutely true but when you are bust you are bust> Anyone recall a winding up that ever produced more that a few % for the investors? It all gets sold off cheap and for big fees!

  • Drumlins Rock

    do you think there will be a “fire sale” of assets up here Mick? know of a few places I suspect they control, but are good viable concerns so far as I know.