Branches sale and lease back could see AIB raise €500m

AIB could raise an extra €500 million from the sale and lease back of a large portion of its 325-branch network on the island of Ireland.

Yesterday, the bank disclosed details of a deal to sell a large chunk of its existing bankcentre property in Ballsbridge for €377.7m cash, in a sale and leaseback deal.

Once the deal is completed in the coming months the bank is expected to examine selling off portions of its branch network.

AIB’s branch network has a book value of €421million.

The Dublin 4 property has been sold in two lots to property developer Sean Dunne and Hibernian Life and Pensions and will be leased back to AIB over 20 years.

Mr Dunne has arranged an option with AIB whereby either party can terminate the deal after five years.

This latest asset sell-off transaction is expected to generate a capital benefit of €230m to the company.

“AIB will reinvest the capital from the transactions in its core banking business and the transactions are expected to complete during the second quarter of 2006,” the company said.

AIB disclosed that the initial annual rent payable on both lots by the tenant will be €11.6 million per annum and will be subject to adjustment in subsequent five year rent reviews.

“It is anticipated that the cost will be more than offset by savings and by the benefits derived from the use of the capital,” the bank said.

This latest deal compares to the €367.8m received for the initial Bankcentre land sale, which released €160m in capital and has an initial annual rent of €16.1m.

The portion of AIB Bankcentre being disposed of comprises eight adjoining office blocks.

The front four blocks and adjoining land are to be bought by Sean Dunne and will be leased back to the AIB Group on a 20-year lease, with a break clause exercisable by either party after four years and eleven months.

The remaining property to be bought by Hibernian Life and Pensions Limited, will be leased to the AIB Group for a period of 20 years.

And at yesterday’s annual general meeting of AIB in the Rochestown Park Hotel, Douglas, Cork, chairman Dermot Gleeson disclosed that AIB has moved some of its data processing centres away from low ground which could become the subject of flooding as a result of global warming.