Price drop of over 50% at bank branches

UK insurer Royal London, which previously traded as the Royal Liver Group, is about to take a serious hit on two AIB branch buildings in Kilkenny and Wexford bought in a sale and leaseback deal in 2007.

Agent CBRE has put a valuation of €3 million on the Kilkenny branch, which was acquired six years ago for €7 million – a fall of 57 per cent. The Wexford building has an asking price of €2.5 million, a long way from the €5.5 million paid for it during the peak of the property bubble. The fall in value in this case will be 55 per cent.

Though Royal Liver had been happy to settle for income returns of between 3.48 per cent and 3.65 per cent on the two investments in the halcyon days, the company now accepts that it will have to offer yields of 8.57 per cent to shift the Kilkenny branch and 8.67 per cent in the case of the Wexford building. The two branches will either be sold individually or as a single lot.

The much-reduced asking prices should help CBRE to find buyers for what are two fairly prestigious bank buildings. The latest valuations will also be of particular interest to a considerable number of private investors who acquired AIB and Bank of Ireland branches before the property market collapsed and who are now under pressure to offload them to reduce their overall bank borrowings.

Prominent position
Last June, receivers for developer Bernard McDonagh managed to sell a high-profile Bank of Ireland branch virtually opposite the Shelbourne Hotel in Dublin. It made €6.25 million, a full 48 per cent less than the €12 million paid for it in 2006.

The Kilkenny and Wexford branches are let to AIB for terms of 20 years from May 2007 with five-yearly upwards- only rent reviews and tenant break options after 15 years.

The bank is currently paying a rent of €271,800 for the Kilkenny branch, which occupies a prominent location on the north side of High Street at the intersection with Rose Inn Street and Patrick Street.

The impressive four-storey over-basement building extends to more than 796sq m (8,567sq ft) and has a fine banking hall on the ground floor as well as ancillary offices and interview rooms. The upper floors have a mixture of open plan and cellular offices as well as a kitchen and toilets.

The Wexford branch on North Main Street also stands four-storey over basement with an overall area of 688sq m (7,405sq ft). There are ancillary offices as well as a banking hall on the ground floor while most of the upper floors are also given over to offices. The bank has its own car park at the rear.

Not only was Royal Liver unfortunate to have acquired the two bank buildings, it also missed out on an opportunity to sell off a range of high-profile properties in Dublin city centre just as the market ran into trouble.

The properties offered for sale at the time included McDonald's and Foot Locker on Grafton Street and three substantial Dawson Street properties – Café en Seine, Waterstones and Hodges Figgis.

Like other investment properties, they are now worth considerably less than was offered for them at the time.