St George to Sell & Leaseback 25 Bank Branches

Australian Financial Review - August 14

St George Bank is to auction another group of bank branches as it seeks to capitalise on strong demand at the smaller end of the commercial investment market. Fifteen bank branches in NSW will go under the hammer on September 17, and 10 South Australian branches will be auctioned on September 18.

The bank is likely to realise more than it originally expected because some of the high-value branches in NSW - Darlinghurst, Crows Nest, Bondi Junction and Avalon - are to be sold. The other branches being offered in NSW are Bathurst, Chatswood, Coffs Harbour, Eastwood, Grafton and Ingleburn. At earlier St George Bank sales, NSW buyers have pursued properties in South Australia to secure slightly higher-yielding investments.

CB Richard Ellis is handling the sales after it conducted the sale and leaseback of 10 bank branches for St George in June. The earlier sales generated about $24 million, yields ranging from 9.23 per cent in Wagga Wagga to 4.17 per cent in Oatley.

CB Richard Ellis's associate director, metropolitan investment sales, Flint Davidson, will co-ordinate the project. The agent has handled three sale and leaseback programs for the bank in the past three years and has sold several branches in the 4 per cent yield bracket. The properties sold in St George Bank's initial $27 million sale and leaseback campaign in 2001 have also had strong capital growth. Private investors have been buying bank branches because of their relatively long leaseback deals and because statutory charges are paid by the tenant.

All the branches being offered have five-year leasebacks, with two rights of renewal of five years, and the bank has committed to 3.5 per cent in annual rent increases. In Western Australia, BankWest sold three branches in June for more than $11 million. Yields ranged between 8.1 per cent and 5.1 per cent.

Colliers International director Ian Mekle, who handled the sales, said the market was still strong for well-leased strip assets. "The yields reflect the demand for this type of product and the shortage of this type of stock," he said. "Banks are doing it because they can earn a better return on the capital than leaving it sitting in property." Sphere: Related Content