Blue-chip investments with strong yields

With bank interest rates still on the floor, private investors are increasingly looking at property investments for a better return on their capital.

Two blue chip investments going on the market today and likely to attract considerable attention are the modern Bank of Ireland branches at Balbriggan, Co Dublin, and Ballincollig, Co Cork, which are to be sold separately by different estate agents with a guaranteed income growth in both instances for the remainder of the leases. .

Kevin Donohue of DTZ Sherry FitzGerald is quoting €5.76 million for the Balbriggan building which will show a net initial yield of 6.25 per cent after costs. The current rent of €376,049 per annum will be increased by 15 per cent at each five yearly review during the remainder of two 25 year leases which began in 2008 and 2009. The weighted average period remaining on the leases of 18.63 years, as well as the strength of the covenant and the guaranteed income growth, will greatly strengthen the appeal of the investment, according to Donohue.

The Balbriggan branch is located along the Dublin Road and extends to 696.77sq m (7,500sq ft). It has 31 car parking spaces to the rear.

Kevin McMahon of Savills Investments is seeking in excess of €4.9 million for the Ballincollig bank investment where the rent is guaranteed for another 16 years.

Under the terms of the lease, the bank has also agreed to fixed rental increases of 15 per cent every five years.

This means that the current rent of €322,000 will rise to €370,300 in July, 2016; €425,845 in July, 2021, and €489,721 in July, 2026.

Even based on the guide price of €4.9 million and the standard purchasers costs of 4.46 per cent, the successful investor will be able to rely initially on an income yield of 6.3 per cent, rising to 7.23 per cent in 2016, 8.3 per cent in 2021 and 9.57 per cent in 2026.

McMahon said that besides the suitability of the tenant, the new owner would be able to avail of an attractive longterm return relative to deposit rates.

The bank building forms part of the modern Ballincollig Town Centre which was completed in 2008. It is around 8.5km from Cork city.