Bank of Ireland and AIB to Leaseback More Branches

The Sunday Post - January 28, 2007

Bank of Ireland is set to announce a further sell-off of branches later this year, according to informed investment sources, who also said that AIB was examining a possible sale of more branches. In October, Bank of Ireland agreed sale and leaseback deals on 36 premises for just under €240 million. Half of the 36 branches were bought by Bernard McNamara, Quinlan Private and Friends First.

The selling prices of the branches reflected yields of between 2.6 per cent and 3.7 per cent, less than many investors could have achieved by lodging the money in bank accounts. However, sale and leasebacks on branches are popular because many are in prime locations, rents are increasing and investors are confident that yields will improve after the first round of rent reviews in five years.

AIB sold 12 branches last year for €100 million - well over the guide price of €87million - to developer Gerry Gannon, reflecting a yield of 2.8 per cent. AIB then announced it would sell off another 25 branches in a deal that was expected to raise €100million for the bank.

Sale and leasebacks of branches are becoming increasingly popular internationally, as the banks decide that disposing of property assets will free up capital for other purposes and realise value for shareholders.

Bank of Ireland and AIB have already sold off their headquarters buildings, while in London HSBC is now planning a €1.2 billion sale and leaseback of its headquarters in Canary Wharf in Britain, making it the largest investment deal in British history for a single building.

The bank will sign a 15-year lease on the property as part of the deal. The 45-storey building houses around 8,000 staff and was completed in 2002. Sphere: Related Content