Friday, November 30, 2007

AIB Agrees to EUR 30 Million Sale Leaseback of Bank Branch Portfolio in Ireland

Irish Independent - November 28, 2007

A private investor has agreed to acquire a portfolio of AIB properties in Munster in a major sale and leaseback transaction.

AIB had brought the 12 properties to the market last month, seeking offers of around €35m through Savills Hamilton Osborne King. But the ultimate agreement is believed to be significantly below this level.

Nevertheless the sale will provide a boost for the investment market, where deals have slowed since the credit crunch. However, the slowdown is believed to have taken its toll and the deal eventually may have been closer to €30m.

The original guide price indicated a net initial yield of approximately 4.25pc. But experts believe the yield was pushed out towards 4.5pc and maybe even beyond as bidders struck a harder bargain than similar transactions before.

AIB's Munster portfolio includes branches in strategic locations in towns such as Ennis and Limerick. Each property will be let to AIB with guarantees on a 20-year FRI lease with upward-only rent reviews every five years. The tenant has a break option in year 15.

Total initial income for the portfolio is €1,664,000, with individual properties generating rents of between €77,500 and €415,000.

The major banks have capitalised on their property portfolios, through lucrative sale and leaseback deals. However the credit crunch and higher interest rates have slowed investment activity across the board.

The strong AIB covenant nevertheless makes the Munster portfolio a cut above most regional properties, even though some might be considered less 'prime' than those snapped up in previous bank disposals over the past year.

The identity of the buyer is a closely guarded secret. But only investors with proven credentials are able to raise funds on the scale required to secure such a large deal in the current, more exacting financial environment.

The Munster portfolio has a total net internal lettable area of around 7,148sqm. Sphere: Related Content

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