GlobeSt.com UPDATE: AFR Pays Wachovia $84M for 97 Branch Locations

JENKINTOWN, PA-For a net price of approximately $84.1 million, American Financial Realty Trust completed its acquisition of 66 vacated Wachovia/Sun Trust bank branches and 29 unimproved bank branch parcels from Wachovia. The properties were acquired under the locally based financial REIT’s recently renewed formulated price contract with Wachovia. Under this program, AFR agrees to buy branches the financial institution vacates, as in this case, primarily through acquisitions and consolidations. For previous coverage, click here.

“We have already leased 40% of the assets,” Nicholas Schorsch, president and CEO of AFR, tells GlobeSt.com. He declined to identify the new tenants or disclose the average rental rates, but says the tenants “are national banks, and the lion’s share of the assets will be leased to national, regional and community banks.” Asked if, through the leasing, AFR had recovered its investment, Schorsch says, “I can’t yet disclose what we have recovered. This is one of our highest-margin businesses.”

This marks the sixth year in which AFR and Wachovia have had a formulated price contract, and, this March, the contract was renewed for two years. At that time, Wachovia announced plans to close 174 Wachovia and Sun Trust branches. Schorsch says, under the current agreement, American Financial will acquire more of them in 2006, “bringing the total to between 150 and maybe 200 locations.”

The current acquisition includes approximately 242,000 sf of retail space and nearly 1.8 million sf of developable land. The acquired properties are concentrated in Florida, North Carolina and Virginia. “They are very well situated, premium locations,” Schorsch says. Regarding the unimproved parcels, he says they, too, “will be predominantly leased.” If any are not, we’d look at selling, probably rolled into a 1031 exchange.”

In AFR’s just-released 2006 guidance, the company expects to realize between $149.2 million and $163.7 million of adjusted funds from operations next year. Among the sources of funds is “capital recycling” through the sale of non-core assets. Schorsch tells GlobeSt.com that following $110 million in assets sold this fourth quarter, the company will sell another $100 million in assets in 2006 and re-deploy the capital. AFR expects acquisition volume of between $100 million and $200 million in 2006, “before any significant capital recycling program.”