Sunday 18 March 2018

Security solutions needed for insolvencies

Paul McNeive

The aggressive disruption of the Allsop Space auction last week was short-sighted and pointless with tones of racism. Protesters thinking they were preventing famine-era type evictions entirely missed the point that Allsop Space do not sell forcibly repossessed family homes. Indeed with well over 50,000 buy-to-let apartment mortgages in arrears, auctions like Allsop Space are part of the solution to the debt problem. The economy and the property market can never recover until debt solutions are worked out and properties sold.

Protesters ignored the fact that whilst Allsop Space are 50pc UK owned, many of the major estate-agency firms are 100pc foreign owned. Some of the banks that put investment properties into the sale are owned by Irish taxpayers.

Almost a third of the lots were being sold by people who were selling investment properties as part of debt forgiveness deals with banks. Not alone could the disruption delay their plans to get back on their feet but it may also add to their costs.

It was galling to see TDs Michael Healy Rae and Mattie McGrath involved and I don't recall them protesting at political policies which caused the mess in the first place.

Allsop Space's switch to a sale-by-tender is clever and hopefully it will succeed. But future auctions may require attendees to have a bank draft for a minimum amount. Whatever the mechanism, the market needs a transparent way of selling large amounts of properties.

The incident highlights the importance of security, particularly in insolvency situations where emotions run high. Receivers have a duty of care to creditors and must take every step to secure assets. Staff are increasingly occupying employers' premises in order to strengthen their negotiating position.

Suppliers who are owed money often feel entitled to take stock and equipment. Once a receivership is announced company cars and trucks can start disappearing and in one case an aircraft was removed. For these reasons, receivers hire security contractors who secure premises at short notice.

A newly appointed receiver must also quickly establish what must be done to protect buildings and equipment and facility management expertise is critical. As Vincent Hickey, chairman of the Irish Property and Facility Management Association told me, when premises are vacant the water supply may need to be cut-off or maintained to the sprinklers. Specialist equipment may need to be de-commissioned or lifts and plant maintained to protect warranties and insurance cover.

The biggest cost faced by property owners, whether the property is vacant or occupied is security, and security costs typically account for half of service charges. With criminal activity increasing in recessions and Garda stations closing, many business owners and homeowners feel more vulnerable than ever.

An Garda Siochana advise architects on how design can reduce the incidence of crime.

The good news is that advances in technology have suddenly put the property owner several moves ahead of the criminals, via a monitored CCTV system of the type pioneered by Irish company Netwatch. When someone approaches a property, the camera triggers an alert. The monitoring station assesses the person at the property and, if necessary issues verbal warnings to intruders via loudspeakers and alerts gardai.

The system works over broadband, day and night, and is simple and cost effective. Criminals run away when told they are being watched and thus the system prevents crime. For commercial occupiers with the system, it is very cost effective and gates can also be controlled remotely.

Netwatch employs 136 people and the headquarters in Carlow monitors over 30,000 cameras on four continents. They have bases in the US and England and David Walsh, a founder of the company, told me they have just opened in Kampala from where they will expand in Africa.

The system has been a godsend to receivers and this year 75 more receiver properties have been monitored. With traditional 24-hour manned security costing €150,000 per man per year, Network's savings can be significant for creditors.

With insolvency sales needed to stabilise the property market, receivers, Netwatch and hopefully Allsop Space will be busy after the summer break.

'Buy-to-let' loans exceed €31bn

The scale of the 'buy-to-let' apartment issue is staggering and debt is mounting. OSG, the service outsourcing group, say that there are 149,395 'by-to-let' mortgages in Ireland with a total outstanding balance of €31.3bn.

26pc of these loans are in arrears and most arrears are over three months. 70pc of the 'performing loans' are on interest-only deals, but I fear that many of those loans would default if required to repay capital as well.

Managing these mortgages is a big issue for banks, and Maurice Chadwick of OSG told me they provide a technology and service-based solution. This web-based system provides data analytics alongside the management of receivers and agents. It helps banks effectively manage their buy-to-let portfolios while reducing costs and increasing returns.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business