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Which Institutions Are Buying Up Ireland?

Many of Europe's peripheral economies were hit especially hard by the recession, but not all investors are running from economic turbulence. Some of the best bargains can be found in downturns and major investors and institutions are looking at these countries for value picks.

In this three part series, I will discuss which prominent investors and institutions are going after a piece of Ireland, Spain, and Greece.

Irish meltdown
As the financial markets fell apart, Ireland experienced the collapse of a real-estate bubble inflated by poor quality mortgages. Ireland's biggest native banks lost billions of euros leading collapses, liquidations, and bailouts, while many international banks reduced their operations or left Ireland altogether.

After the recapitalizations and reorganizations were complete, Bank of Ireland (NASDAQOTH: IREBY  ) emerged as the only major Irish bank under majority private ownership, and even it required billions in additional capital and became 15% government owned, which has since been reduced to 14%.

Picking up the pieces
Reorganizing the Irish financial system has led to a situation where plenty of Irish assets are for sale. A group led by such investors as Prem Watsa of Fairfax Financial, Fidelity, and Kennedy Wilson provided the recapitalization funds that kept Bank of Ireland in majority private hands. Entire businesses have also been for sale with Great West Lifeco (TSX: GWO  ) taking over Irish Life after its was split from Irish Life and Permanent to raise capital.

The investment in Bank of Ireland has turned out to be a multibagger for its investors, while the purchase of Irish Life gave Great West Lifeco the opportunity to expand in the Irish market.

Irish garage sale
But there are plenty of assets left for sale and even more investors are eying them. In the wake of the collapse, The National Asset Management Agency, or NAMA, was set up to take about 71 billion euros of high-risk assets off bank balance sheets. Today, NAMA is looking to sell these assets to recoup some of the costs of the bailout.

Among those interested include Kennedy Wilson, which helped recapitalize Bank of Ireland, a Cargill unit, and Deutsche Bank (NYSE: DB  ) . Bloomberg notes that the portfolio, called Project Spring, has a face value of more than 400 million euros but is likely to be sold at a discount.

After years of asset sales, Anglo Irish Bank, which turned into Irish Bank Resolution Corp, is finally near the end of its liquidation. Among the least healthy of Ireland's financial institutions, IBRC was wound down by the Irish government as it was too unhealthy even for a bailout. Although two of the bank's former officers have since been convicted of illegally providing loans in an attempt to prop up the share price, Irish taxpayers still have to live with the fact that their nation is out billions of euros for providing a safer landing for IBRC.

Property sales
Not only are loans for sale but properties are as well. In late May, it was reported that Deutsche Bank is buying 680 Irish homes from Danske Bank as the Danish bank retreats from the Irish market.

NAMA is also selling real estate acquired during the bust with its latest portfolio, including 761 apartments. According to the British newspaper The Journal, the portfolio comes from four separate developers that saw their loans taken over by NAMA during the collapse (one of these developers was later forced to pay Ireland's largest ever payment of back taxes and penalties). This portfolio is expected to price around 160 million euros with Canadian investor CapReit in the lead although other buyers may enter the bidding.

Finding the buyers
All sorts of investors have bought pieces of Irish real estate and assets after the nation's economic troubles. Big name investors saved Bank of Ireland from majority state control, Great West Lifeco found a way to expand across the Atlantic, and Deutsche Bank is looking to buy both assets and physical real estate.

As Ireland exits a major recession, contrarian investors have made substantial profits and if the nation's economy continues to improve, investors like those described above are among the best positioned to benefit.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 31, 2015, at 2:58 PM, pete163 wrote:

    There is a bright side to IRE being delisted from NYSE. Anyone that has shares from the IRE ADR'S there stocks shares will be converted to preferred shares or they can trade them for 40 shares of IRLBB on the pinks. I'm taken the preferred shares witch holds a lot more value and a better dividend. In fact I'm picking up as much as I can before it closes out.

  • Report this Comment On February 05, 2015, at 8:55 AM, pete163 wrote:

    The shorts waited to long to get out and now they are starting to cover for there losses. Look for a big spike up any time now.

  • Report this Comment On February 05, 2015, at 9:17 AM, frtedcrilly wrote:

    Good move Pete, IRE was the cleanest bank all along..I went of BofA and santander, did well on both, but also managed to get 80 acres of land from NAMA too. ;-)

    RBS also issues notes for preferred shares and they are doing well too.The hard fact in all this is the "new" banks are going to have a powerful mono-or du-opoly.Expect charges to rise..anuually.!


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Alexander MacLennan

Alexander MacLennan is a Fool contributor covering Industrials, Airlines, and Financial companies. He is always ready for a good growth or turnaround story and tries to find them before the market does.

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