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JENKINTOWN, PA-American Financial Realty Trust has completed its sale of a five-property portfolio to the New York City-based Resnick Development Corp. for nearly $260 per sf. The buildings have an aggregate of nearly 1.2 million sf, all of which is 100% leased.

The gross sale price is $301 million, before transaction and closing costs and net of approximately $11 million in loan defeasance and prepayment costs that were paid by Resnick. The implied cap rate on the sale is approximately 6.7%, according to AFRT, and the locally based financial specialty REIT anticipates net proceeds of approximately $65.8 million after closing and debt prepayment costs.

The properties include a 373,000-sf office building at 215 Freemont St. in San Francisco that is leased to Charles Schwab & Co. and a 256,000-sf commercial condo unit at 123 S. Broad St. in Philadelphia that is leased to Wachovia Bank. Also include are operations centers in Meridian, ID, Louisville, KY and McLeansville, NC, which aggregate approximately 530,000 sf and are leased to Citicorp.

An AFRT spokesman tells GlobeSt.com that, under the agreement, American Financial will continue to manage the Philadelphia asset and retain management fees from that property. Also, under the sale agreement, "AFRT has rights of first offer to reacquire the properties in the event Resnick decides to sell them in the future. This is no different from first-right-of-refusal provisions we often structure into acquisition deals with banks."

The properties are not from a single previous AFRT acquisition. "What they have in common," the spokesman says, "is that they are 100% net leased, which illustrates that as a portfolio blooms into 100% occupancy, it becomes fully valued." He asserts that this "full value" is what prompted Resnick "to reach beyond New York City for the first time." A call to Resnick, which is a subsidiary of Jack Resnick & Sons Inc., was not returned by deadline.

The sale "is a key transaction in our ongoing capital recycling program," says Dave Nettina, AFRT's CFO and chief real estate officer, in a statement. It gives the company "the ability to capture shareholder value from fully valued assets while also creating opportunities for redeployment into higher yielding assets." Nettina says the impact of the Resnick transaction on AFRT's 2006 earnings guidance will be discussed during an earnings conference call scheduled for May 2.

Instant Insights /

UPDATE: AFRT Completes $301M Portfolio Sale to Resnick

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