Bank of Ireland Branches for sale

b4bmm

I was just going through the commercial property section on daft and noticed that there has been alot of Bank of Ireland branches gone up for sale very recently.
There seems to be well over a dozen of them on the market now across the country.

Anybody know why the big push to offload these properties are?
They seem to all be on long term lease 25 years starting from 2007.

Are they trying to offload them now before the inevitable crash over the next few years, reducing property exposure?

LunAtlFringe

Probably cost cutting no?

https://www.independent.ie/business/irish/the-rise-of-the-banking-machines-will-dispense-with-cash-branches-and-humans-36762525.html

neris

theyve sold a load of branches before. some are vacant at sale others sale and they continue as tenant on a lease. know of two near me they sold one as vacant and the other they kept the branch in. the vacant one while sold was put back on the rental market by the bank as the new landlord wouldnt let them terminate the lease which they still had to pay and are still paying as the building is still vacant

ct5amr2ig1nfhp

Do they still have about 250 branches? They've had a similar number for the last few years.

neris

i think they still have around the same number, they have shut a few down but not massive amounts but they seem to have cut back on services within branches. otc cash lodgements for a few hours a certain amount of days, advisers moving around branches day to day

minikin

b4bmm wrote: »

Are they trying to offload them now before the inevitable crash over the next few years, reducing property exposure?

Prudent 'pre-bust' strategy from those who know property values the best: the banks.
Rinse and repeat...
https://www.irishtimes.com/business/sale-and-leaseback-deal-set-to-net-aib-80m-1.1042622

garrettod

Hi,

I wouldn't be concerned about seeing this, if I were a BoI shareholder:

• divesting of non-core assets to release capital that can be re-invested elsewhere in the business is usually a good thing (particularly when property prices appear high and there's appetite for commercial property investments)
  
• long term the business is moving away from retail branches, so it makes sense to be selling off the branches (albeit, many will remain occupied for a number of years to come, while BoI progress with their IT project).
  

b4bmm

garrettod wrote: »

Hi,

I wouldn't be concerned about seeing this, if I were a BoI shareholder:

• divesting of non-core assets to release capital that can be re-invested elsewhere in the business is usually a good thing (particularly when property prices appear high and there's appetite for commercial property investments)
  
• long term the business is moving away from retail branches, so it makes sense to be selling off the branches (albeit, many will remain occupied for a number of years to come, while BoI progress with their IT project).
  

Judging by the link posted just before your post, there is plenty to be concerned of. That article is dated 2006, which basically states that they were offloading property so that they can leverage that extra cash on the balance sheet to lend more to punters, look how that turned out.

Im not sure are the people of Ireland so caught up in this boom right now that they have forgotten all about the last one already or do they think "this time will be different" or is it that its young buyers who didnt really experience the horror of 2007-2015? It blows my mind.

ct5amr2ig1nfhp

I still believe that one of BOI biggest issue is their IT systems. Project Omega was projected to take four years but is already behind schedule. I would imagine you can double that time frame (and more). The cost of the upgrade is expected to cost close to 1bln euro.

garrettod

b4bmm wrote: »

Judging by the link posted just before your post, there is plenty to be concerned of. That article is dated 2006, which basically states that they were offloading property so that they can leverage that extra cash on the balance sheet to lend more to punters, look how that turned out.

Im not sure are the people of Ireland so caught up in this boom right now that they have forgotten all about the last one already or do they think "this time will be different" or is it that its young buyers who didnt really experience the horror of 2007-2015? It blows my mind.

As you will see if you look at my post above, I posted my comment from the perspective of a BoI shareholder.

It's not in any way uncommon for a business to sell non-core assets and reinvest the funds released in their core business ... in this instance, retail branches are non-core property holdings for BoI, reinvesting the money generated from the sale of those properties in the banking business makes a lot of sense to help them grow their business.

Property values rise and fall, banks are in the business of taking risk for profit and sometimes, those risks result in losses, but you need to take a very long term view if you are a shareholder looking for long term returns from investing in BoI (for example).

pjmn

b4bmm wrote: »

I was just going through the commercial property section on daft and noticed that there has been alot of Bank of Ireland branches gone up for sale very recently.
There seems to be well over a dozen of them on the market now across the country.

Anybody know why the big push to offload these properties are?
They seem to all be on long term lease 25 years starting from 2007.

Are they trying to offload them now before the inevitable crash over the next few years, reducing property exposure?

Haven't seen the ads you refer to, but if there leases in place then it would suggest that the bank doesn't own the properties (they are the tenant) - therefore its not the bank that's selling the properties, but the landlord....

b4bmm

pjmn wrote: »

b4bmm wrote: »

I was just going through the commercial property section on daft and noticed that there has been alot of Bank of Ireland branches gone up for sale very recently.
There seems to be well over a dozen of them on the market now across the country.

Anybody know why the big push to offload these properties are?
They seem to all be on long term lease 25 years starting from 2007.

Are they trying to offload them now before the inevitable crash over the next few years, reducing property exposure?

Haven't seen the ads you refer to, but if there leases in place then it would suggest that the bank doesn't own the properties (they are the tenant) - therefore its not the bank that's selling the properties, but the landlord....

“Let to the governor and company of bank of Ireland on a 25 year full repairing and insuring lease 1/7/07”

Thats what they all say.
I guess it doesn’t have to be the bank I just presumed it was. If it’s not the bank then it’s a large investor/fund. Would be well over €20M worth of property they have for sale right now.

There is still just under 15 years left on the leases and the total value of the rent would mean that the property would pay for itself.

Example of one for sale;

€3.15 asking price.
€270.7k p/a rent.

Excluding interest and other costs just over 11.5 years. Including other costs and interest should be better than break even after the full lease maybe, haven’t crunched the numbers properly.

With a return of 8%+ if it’s not the bank itself then why would they be offloading these properties, that’s a fairly solid looking return. What’s the biggest risks buying one of these?

Retail banking going extinct over the next ten years, all online and over phone and self service?

Property crash might affect values as they did during GFC, now bounced back but rental return is locked in, can they default on the contract?

pjmn

b4bmm wrote: »

“Let to the governor and company of bank of Ireland on a 25 year full repairing and insuring lease 1/7/07”

Thats what they all say.
I guess it doesn’t have to be the bank I just presumed it was. If it’s not the bank then it’s a large investor/fund. Would be well over €20M worth of property they have for sale right now.

There is still just under 15 years left on the leases and the total value of the rent would mean that the property would pay for itself.

Example of one for sale;

€3.15 asking price.
€270.7k p/a rent.

Excluding interest and other costs just over 11.5 years. Including other costs and interest should be better than break even after the full lease maybe, haven’t crunched the numbers properly.

With a return of 8%+ if it’s not the bank itself then why would they be offloading these properties, that’s a fairly solid looking return. What’s the biggest risks buying one of these?

Retail banking going extinct over the next ten years, all online and over phone and self service?

Property crash might affect values as they did during GFC, now bounced back but rental return is locked in, can they default on the contract?

You might want to factor in the old taxman's take - think you'll find the after tax return much lower than the 8% you quote....

b4bmm

I often see this advertised with properties.

“Total current rent reserved €155,000 p.a.
Current rent received €69,750 p.a. (a 45% share of the total rent).”

So all I’m guessing is that the rent got reduced during the big R. Are these mutual agreements between landlord and tenant due to the fact business dropped and tenants would not be able to keep up with repayments if the rent didn’t drop?

How secure are long term leases?

Would the tenant have to go bankrupt to get out of the lease usually or what clauses can Be built in?

Do bigger companies set up subsidiaries specifically for this purpose that they will allow to go bust to get out of these types of leases if they wanted?

ct5amr2ig1nfhp

News today that BOI will invest an additional 250m in its IT systems. That brings the total IT investment to between 1.1-1.2 billion.

The latest announcement outlines plans to cut costs by 200m.

Raul Yellow Android wrote: »

I still believe that one of BOI biggest issue is their IT systems. Project Omega was projected to take four years but is already behind schedule. I would imagine you can double that time frame (and more). The cost of the upgrade is expected to cost close to 1bln euro.

garrettod

Don't be surprised to see BoI selling off more branches, or regional offices (most likely, on a sale and leaseback basis) to help raise funds....

Property prices are reasonably high again, yields are dropping on commercial investment properties, BoI are considered a good low risk tenant again and long term, it helps the Bank exit branches....

Their New Ireland building looks like it's getting them close to €40m gross as an example and I don't even think they are planning on remaining in occupancy there tbh.

(Sorry, appreciate that this should really be in the BoI share thread btw )