AIB is to follow Bank of Ireland by embarking on a sale and leaseback next month of part of its branch network to release capital for its banking operations. Jack Fagan reports.
AIB is planning to upstage its main competitor by putting about 15 of its best-located branches in Dublin city and suburbs on the market in August, a week or two before B of I is due to begin a sales campaign for 36 of its branches.
Significant investments are seldom offered for sale in August, when many of the main players are on holidays.
AIB apparently has not finalised the list of buildings to be offered for sale in the first round but, according to a bank source, the portfolio will include many of their best branches in the Dublin area.
If, as expected, the first branches sell particularly well, the bank will then offer other buildings throughout the country, including those in provincial cities and large towns where they generally occupy prime trading positions.
AIB's most valuable Dublin branch at Grafton Street also has frontage on to Wicklow Street and would be expected to sell for a yield of 2-2.25 per cent. Depending on the rent the bank is prepared to pay, this branch alone could be worth at least €35 million.
Branches in Dame Street, Lower Baggot Street, Upper O'Connell Street, Blackrock, Morehampton Road, as well as Ranelagh and Dun Laoghaire, are likely to be among those going for sale.
Suburban branches will have a valuation of €5-€8 million and should show returns of around 3 per cent for investors, depending on whether the leases provide for break options. About half the Bank of Ireland branches going for sale allow the bank to opt out after 15 years.
A spokesman for AIB said yesterday that their property portfolio "remains under review." In fact the bank has favoured a sale and leaseback strategy for a considerable time and always planned to move ahead with the sale of the branch network once it had completed the disposal of the AIB Bank Centre for over €377 million.
The initial intention is to sell buildings as stand-alone investments, but it will be no surprise if some of the provincial buildings are offered for sale in packages. The bank has 280 branches on both sides of the border as well as in the UK. Freehold properties on its books have a net value of €421 million.
Two months ago, AIB group chief executive Eugene Sheehy expressed disappointment at suggestions that the bank's decision to sell its headquarters was a vote of "no confidence " or that it was selling out at the peak. On the contrary, he said it was "a vote of confidence" in the Irish property market.
