The second tranche of AIB branches available on a sale and leaseback basis is likely to produce higher returns for investors, writes Jack Fagan.
AIB is to proceed with the sale and leaseback of another 25 bank branches in Leinster and Munster after getting a top price for 12 of its leading branches.
The second tranche of buildings includes six in the Dublin area and others in provincial cities (Cork, Kilkenny and Waterford), as well as towns in counties Cork, Wexford, Wicklow and Tipperary.
The bank sold the first 12 branches to Dublin property developer Gerry Gannon for over €100 million in a deal which will show an initial yield of only 2.8 per cent.
These include major branches in O'Connell Street and Dame Street in Dublin city.
The next tranche is likely to produce higher returns for investors - possibly as much as 3.25 per cent, depending on the location.
Sean O'Neill of DTZ Sherry FitzGerald expects to secure over €100 million for the 25 retail investments, some of them with redevelopment potential on adjoining sites.
While it was always on the cards that the first 12 branches brought to the market would be sold in one lot, the likelihood of that happening again is quite remote given that there is such a variation in values and locations - from the highest guide of €11.5 million for a branch on Lower Baggot Street, Dublin 2, to €1.35 million for a building in Carrick-on-Suir.
As in the first block of branches to be sold, AIB is to sign 20-year leases with break options in year 15. Both the AIB and Bank of Ireland plan to offload further branches, probably in the new year, to release dormant capital for their core banking businesses. UK banks have been using the same strategy for years.
AIB is to pay an initial rent of €380,000 for the Lower Baggot Street branch which has a retail space of 320sq m (3,451sq ft) and an overall floor area of 697sq m (7,503sq ft).
Other high value branches now going for sale by private treaty are in Kilkenny for region €8 million (rent €270,000); Wexford at region €7 million (rent €220,000); Clonmel at region €6.2 million (rent €200,000); and Douglas Road in Cork at region €6.5 million (rent €214,000).
Also for sale are branches in Cork city at Western Road for region €3.542 million (rent €127,500) and 33 North Main Street for region €2.547 million (rent €91,700).
In Co Cork, branches are on the market at Main Street in Midleton for region €3.959 million (rent €142,500); Main Street in Carrigaline for region €3.128 million (rent €112,600); 6 Pearse Street in Kinsale for region €2.77 million (rent €99,700); Youghal for region €1.7 million (rent €66,600); and New Square in Mitchelstown for region €1.5 million (rent €56,300).
In Co Tipperary, the branches on the market include those at Main Street in Tipperary town for region €2 million (rent €78,800); Cahir for region €1.6 million (rent €64,600); and Carrick-on-Suir for region €1.35 million (rent €52,600).
The other branches on the market are at Rathgar, Crumlin Cross and Sandymount in Dublin; Skerries in Co Dublin; Bray and Greystones in Wicklow; The Quay in Waterford city; Dungarvan, Co Waterford; and New Ross and Enniscorthy, Co Wexford.
