Wednesday 20 November 2019

Discount for foreign buyers as euro plunges

The €48m guide price for The Banks Portfolio has fallen by millions when converted to sterling and dollars
The €48m guide price for The Banks Portfolio has fallen by millions when converted to sterling and dollars

Peter Flanagan

The weakening euro has helped cut Irish property prices for international investors, creating de facto discounts for buyers using other currencies.

Knight Frank this week relaunched "The Banks Portfolio" of 12 bank branches owned by developer Gerry Gannon.

When the portfolio was originally put on the market last year, the €48m guide price was the equivalent of $59.7m and £38m.

Since then though, the European Central Bank has started its long anticipated round of quantitative easing, dramatically reducing the value of the single currency.

In mid-December, the euro was worth some $1.25. In the four months since however, the euro has weakened to near parity with the dollar, dropping to $1.05 at one point. By the end of this week a euro was worth $1.08.

It has been a similar situation in the sterling market. In November last year the euro was trading against the pound at a shade over 80 pence. By the close of trading on Friday this week the euro had dropped to only 72 pence.

Those moves are likely to make assets such as The Banks even more attractive to US and British buyers, say Knight Frank.

"[The changes in the currencies] equates to price reductions of approximately $8.95m and £3.4m respectively, offering potential for significant capital gains for those international buyers," said the agents.

The collection consists of twelve AIB bank branches that are all in Dublin.

The twelve properties are guaranteed by AIB. Individual lots start from €2.5m and reaching up to in excess of €8m with net initial yields ranging from 5pc to 7.5pc.

The overall portfolio generates an annual rent of €3.29m equating to a yield of 6.56pc across the entire portfolio.

Knight Frank claim to have seen "a large and wide selection of interest across the portfolio that are available collectively or in individual lots, meeting the requirements of a broad range of private and international investors" ahead of the deadline for best bids on May 13.

The slumping euro is likely to intensify numerous other portfolio sales being prepared, especially by Nama.

The state bad bank is expected to sell loans tied to Galway developer Gerry Barrett imminently, while the agency is also widely expected to put the loans tied to the Dundrum Town Centre on the market with a estimated value of around €1bn.

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