DESPITE the ongoing credit scarcity, investors have completed the purchase of 18 AIB bank branches in Dublin and the provinces. The average yield was between 7 per cent and 7.4 per cent – a long way from the initial returns of 2.25 to over 3 per cent ageed when the first tranche of bank branches was sold in 2006.
Davy stockbrokers advised all the purchasers, including Quintas, the accountancy and financial services firm, which bought the AIB branch at Patrick Street in Cork for a group of investors.
Michael Clarke of Savills also advised Quintas on the €9.36 million purchase of the Cork branch, which will continue to be occupied by AIB under a 20-year lease at a rent of €796,000 per annum. The yield will be 6.87 per cent. The property was purchased using investor equity and bank finance.
Kenny Kane of Quintas said the transaction offered a quality location on one of the best retailing streets in Ireland, a robust tenant with a long lease and excellent cashflow.
The effect of the high yield on the property combined with low fixed interest rates meant that 50 per cent of the rent covers the interest on the loan with the other 50 per cent going to reduce the principal amount of the loan. Based on reasonable assumptions, the 70 per cent loan would be repaid from the rent roll within 15 years, he said.
Some of the other AIB branches sold to investors included the one at Castle Street, Dalkey, Co Dublin, which made €1.7 million. The rent of €150,000 will give a return of 6.9 per cent.
The branch at West Square in Macroom, Co Cork, was sold for €1.4 million. The rent will be €126,000 and the return will be 7.4 per cent.
Another investor paid €4.2 million for the AIB branch at Capel Street, Dublin 2, where the rent will be €360,000 per annum. The net yield will be 7.28 per cent.
In Castlebar, Co Mayo, another investor will get a return of 7.27 per cent from the purchase of the AIB branch for €2 million. The initial rent will be €173,000. Just over a year ago Davys bought six Bank of Ireland branches from Friends First for €36 million. The yield in this case was 7.5 per cent compared to the 3 per cent agreed by Friends First when it bought the portfolio in 2006.
