Falling euro puts investors in position for AIB portfolio

The recent strengthening of both the dollar and sterling against the euro

has greatly enhanced the appeal of an AIB bank portfolio to international buyers in the run-up to the investment sale next month.

Selling agents Knight Frank, which has announced a bid date of May 13th, originally sought offers in excess of €48 million for the portfolio at its official launch last November.

At that point, the guide equated to $59.7 million, but that figure has now slipped to about $51.7 million.

Similarly, the original sterling price of £38 million has dropped to £34.6 million.

James Meagher of Knight Frank is guiding more than €48 million for 12 of AIB's best located Dublin branches, which will show a net initial yield of 6.56 per cent on the current rent roll of €3.29 million.

The bank portfolio was purchased by businessman Gerry Gannon in 2006, just before the property crash, for a figure believed to be in the region of €100 million.

The branches are now priced from €2.5 million to more than €8 million. They are expected to appeal to individual investors as well as funds interested in solid investments while values are well below their peak.

All the branches are let on 25 year leases from 2006, with five yearly upwards-only rent reviews.

There are tenant break options on the expiry of the 15th year of the leases, so investors are provided with more than six years of secure income. The buildings all occupy high-profile prime position and could easily be switched to alternative use in the unlikely event of the bank opting to close some of the branches.

This is particularly true in the case of the bank buildings at Dame Street, O'Connell Street, Ranelagh and Sandymount. Two other former bank buildings near the Dame Street branch have been successfully converted into fashion stores for Abercrombie & Fitch and H&M.

The eight other branches going for sale are at Donnybrook, Artane, Crumlin, Dundrum, Dún Laoghaire, Drumcondra, Tallaght and Stillorgan.

Knight Frank said the portfolio has undoubted appeal because of the strength of the covenant, the high-profile retail locations, single tenanted and fully let, full insuring and repairing terms, upwards-only rent reviews and minimal management.