When the locally based financial REIT announced the deal last May without naming the seller, the deal was to encompass 150 properties aggregating 8.2 million sf at about $66.71 per sf. In late August, when Wachovia was named, the then-$547-million acquisition included some 24 properties aggregating 2.2 million sf that AFR deemed non-core and would seek to sell. Some of those properties contained vacant space and space leased to third parties, which Wachovia acquired through mergers and acquisitions and which are excluded from the final AFR transaction.
Under the final agreement, Wachovia will lease approximately 4.7 million sf for a 20-year term and about one million sf on a short-term basis. The 20-year leaseback has an annual triple-net rental rate equal to approximately 8.5% of AFR's purchased price on the leased space. Wachovia Corp., the seller's parent, guarantees Wachovia's lease obligations.
As of Sept. 20, AFR's portfolio represented an aggregate investment of more than $1.3 billion. Its portfolios were 88.3% occupied and had an annualized return on equity of 13.5%, based on annualizing the historical financial data for the quarter ended June 30. The return "falls within our expectations and delivers measurable value to our shareholders," says Nicholas S. Schorsch, president and CEO. He also noted that Wachovia was the company's first banking tenant when the specialty financial REIT was formed in September 2002.
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