(For more retail coverage, click GlobeSt.com/RETAIL.)
JENKINTOWN, PA-The newly formed joint venture between locally based American Financial Realty Trust and Dillon Read Capital Management LLC has completed the acquisition of 236 bank branches from two subsidiaries of Citizens Financial Group for approximately $317 million. The properties have an aggregate of about 969,000 sf and are located in 11 Northeastern and Midwestern states.
The close of an additional five branches in the Citizens' portfolio was delayed pending the receipt of third-party consents. The acquisition of some or all of those locations is anticipated within 90 days, according to an AFR statement, and will take the overall price tag to an expected $323 million.
This, the first JV between the two entities, is a sale-leaseback deal. Citizens Bank and Charter One Bank will continue to occupy the properties under triple-net leases with initial terms of five or 15 years. "All the assets…are fully leased and deposit levels exhibit a well-established customer base," says Dave Nettina, AFR's CFO, in a statement.
An AFR spokesman tells GlobeSt.com, "the 15-year leases include rent escalators, and the deposits at branches with five-year leases indicate strong likelihood for renewals." He also says the average rent rate of the portfolio is $22.50 per sf. AFR anticipates an average cap rate of about 7% before transaction expenses, based on the projected cash flows.
AFR contributed approximately $18.5 million to the acquisition and will receive about 25.4% of the venture's net cash flow. This is an off-balance-sheet transaction for AFR, according to the spokesman, and Dillon Read's share of the JV is 75%, while AFR's share is 25%.
AFR's property management affiliate, First States Management Corp. LP, will manage the portfolio, and the JV will pay it an annual management fee along with potential incentives based on the portfolio's performance. Providence, RI-based Citizens Financial is the US banking arm of the Royal Bank of Scotland Group plc, and Standard & Poor's gives Citizens Bank an AA- rating.
This is AFR's first JV with Dillon Read. In a statement, Nicholas Schorsch, AFR's president and CEO, says the affiliation "provides AFR with an alternative source of funding and combines our competitive advantage in bank real estate with the broad financing capabilities of Dillon Read." He says he anticipates future joint ventures with Stamford, CT-based Dillon Read.
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