The bank's 24 freehold premises and two investment properties may generate €13.5m but it'll be hard to assign the leases of its 23 remaining properties, writes JACK FAGAN
THE ENTIRE branch network of mortgage specialist First Active has come on the market following a decision by Ulster Bank to transfer the business into a single entity encompassing both banks.
The portfolio of 49 properties is probably the largest to have been offered for sale in the past 20 years and is competitively priced in the present difficult market to ensure that all the buildings are disposed of.
Agent DTZ Sherry FitzGerald is handling the sale of 24 freehold properties and two investment opportunities. There are also 23 leasehold buildings, most of them in strong business locations. The majority of the properties are in the Leinster region.
DTZ expects to secure around €13.5 million for the 24 freehold buildings, a modest enough figure which reflects the sharp fall in retail property values over the past two years. The Irish property index prepared by Jones Lang LaSalle has reported that capital values in the commercial sector have dropped by 53 per cent from their peak in the third quarter of 2007.
Ulster Bank’s decision to close First Active and to seek up to 750 job cuts across the banking group is in line with banks and financial institutions around the world which have been laying off staff as their losses on toxic assets, and the falling value of properties and other assets, has weakened their trading position.
It was no surprise that Ulster Bank opted to shut down the First Active operation given the fall in investment and property lending due to the housing slump and the financial crisis. First Active was one of the most aggressive lenders during the property boom, being the first bank to introduce 100 per cent mortgages in the mainstream lending market.
Most of the branches going for sale are likely to be bought by private investors with the intention of letting them to alternative businesses. A great many of them are priced between €200,000 and €500,000 – the equivalent price of a two-bed apartment before the housing market collapsed. These buildings could be expected to rent from €13,000 to €25,000, depending on size and location.
Karl Stewart, retail director of DTZ, said that as well as private investors, he expected interest from retailers and owner-occupiers in both the freehold and the leasehold properties because of their high profile retail pitches.
One such property is at Upper George’s Street in Dún Laoghaire, a three-storey over basement corner building with a floor area of 390sq m (4,198sq ft). The two upper floors are already let and, according to the selling agent, there should be no difficulty in finding a tenant for the ground floor which extends to 163sq m (1,763sq ft). There is also a basement of 50sq m (538sq ft). The guide price is over €995,000.
Equally well located is the Dundrum branch at Main Street which is priced at €350,000-plus and should have a particular appeal to owner-occupiers. The two-storey building is near the Luas service and has a combined floor area of 112sq m (1,212sq ft).
There is also likely to be a high level of interest in the Wexford branch which is close to Boots and Superdrug on North Main Street and has a guide price of over €455,000. The two-storey building has a floor area of 180sq m (1,944sq ft).
The branches in Drogheda and Ennis are in equally busy streets and are likely to be among the first to sell given that the guide prices are on the low side. The building on West Street in Drogheda stands three-storeys over basement and has a floor area of 362sq m (3,896sq ft). It is expected to sell for over €750,000 and should rent easily now that West Street has been pedestrianised and reclaimed its retail business from the two new shopping centres.
DTZ is suggesting a price of over €650,000 for the modern First Active building on O’Connell Square in Ennis which measures 320sq m (3,445sq ft).
The lowest priced freehold property being offered for sale is at Oliver Plunkett Street in Mullingar where the three-storey building of 82sq m (880sq ft) has a guide of €200,000. DTZ is also quoting €200,000 to €300,000 for another three-storey block of 126sq m (1,362sq ft) at Market Cross in Carlow.
The agent is seeking over €650,000 for the well located former branch at Upper Baggot Street in Dublin 2. The ground floor has been relet at a rent of €40,000 per annum while three upper floors extending to 130sq m (1,408sq ft) are vacant.
Also going for sale as an investment is the former branch at Upper Drumcondra Road in Dublin 9. The two-storey building has been rented at €36,000 per annum and is expected to fetch over €400,000, giving a purchaser a return of 8.5 per cent.
It will be a different matter altogether when DTZ sets out to offload the 24 leasehold properties, given the downturn in the retail market over the past year and the rent reductions now being sought by tenants, particularly in provincial areas. In some cases First Active will have to pay reverse premiums to assign the leases to other traders. The bank has been paying rents of between €13,000 and €110,000 on these premises.
Karl Stewart says that, given the difficult market conditions, he accepts they will need “a level of flexibility” when it comes to disposing of the leases.
This is likely to prove particularly true in the case of shops at The Crescent shopping centre in Limerick and Mahon Point in Cork. The 97sq m (1,045sq ft) of retail space in The Crescent is already over rented at €110,000 per annum even before a scheduled review is completed. DTZ will inevitably pitch the lease at one of the betting chains or a financial institution or credit union which can replace First Active under the existing planning regulations. If that fails it can pass the unit back to the landlord at little expense in the knowledge that it can be relet fairly promptly even in the present downturn.
The same goes for the shop in Mahon Point – a unit of 136sq m (1,464sq ft) – which is rented at €90,000 per annum. A rent reduction could also be sought in this case.
Other former First Active branches where there is likely to be a good interest in the leases include Ely Place, D2 which is rented at €121,500; Upper O’Connell Street, D1 (€95,000); The Mall in Tralee (€69,000); and Edward Street in Newbridge (€64,000).
