Wednesday, February 03, 2010

AIB Seeking €40m Sale Leaseback of 23 Bank Branches in Ireland

The Irish Times - February 3, 2010

With the serious scarcity of funds still hampering the banking system, AIB looks set to raise more than €40 million from the sale of 23 bank branches in Dublin and the provinces.

Sale and leaseback terms have been agreed on 11 of the buildings and contracts are due to be exchanged in the next three weeks on the remaining 12 branches.

Yields generally for the new owners will be between 7 per cent and 7.5 per cent.

Ever since AIB first started offloading branches in the autumn of 2006 it has used three different estate agents to sell them through high profile campaigns.

However, on this occasion it commissioned Davy, the stockbrokers, to market the 23 branches among its wealthy investor clients.

The decision to go for a low key campaign is thought to have been prompted by a desire to keep the sale out of the public realm at such a difficult time for the banking sector.

On Monday the bank refused to acknowledge that it was in the process of selling another tranche of its 182 branches.

“We have no comment to make,” a spokesman said.

The 11 branches about to be sold range in value from €580,000 for a building in Kenmare, Co Kerry, to one in Capel Street, Dublin 1, at €4.2 million. The yield in this case will be 7.25 per cent, marginally better than for the Kerry property.

Other branch sales being handled by Davy include buildings in Dalkey and Sutton in Dublin as well as Castlebar, Leixlip, Celbridge, Portlaoise, Cavan, Tullamore, Carlow and Enniscorthy.

A banking source said all the branches are to be bought by cash customers – “when the music stopped they happened to be on the right side of the trade”.

Funds on deposit with banks in Ireland currently exceed €280 billion, according to the latest quarterly report from the Central Bank.

AIB does not help finance the purchase of any part of its network of branches as a matter of policy. Most of the 50 branches sold over the past three-and-a-half years were bought by local investors, some of whom cherish the kudos of owning their local branch.

The most valuable of the bank buildings sold in 2006 showed an initial yield of 2.8 per cent. The returns to investors have rapidly increased with each subsequent sale in line with the stronger yields available in the investment market generally.

Like the previous branches sold, the 23 buildings being handled by Davy will be secured by long term leases for a period of 20 years with a break option in year 15.

The leases will also be subject to five yearly rent reviews. Sphere: Related Content

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