AFR Renews Agreement to Buy Vacated Wachovia Branches

JENKINTOWN, PA-American Financial Realty Trust renewed a formulated price contract with Wachovia Bank NA for two years. It is essentially the same as a former contract between the two parties, which expired in September 2004, and it follows an announcement that Wachovia plans to close 174 Wachovia and SouthTrust branches across the Southeast.

Under the renewal, as with all of its formulated price contracts, the locally based financial specialty REIT agreed to buy, at a price based on an appraisal formula, branches that a financial institution vacates. Under the renewed agreement, Wachovia agreed to sell, and AFR agreed to buy most bank branches that Wachovia will vacate through its consolidation activities across its nationwide footprint. The only exceptions are locations that have environmental or structural defects. Typically, under these agreements, AFR leases the vacated locations to other banks. When that is not possible, it leases or sells them for alternative retail purposes.

"A formulated price contract gives the financial institution a ready buyer--us," Muriel Lange, an AFR principal, tells GlobeSt.com. "By law, banks must give their customers 90-day notification of any branch closings. That gives us an opportunity to market a branch even before it changes hands. The price appraisal is done in advance of the sale, so we can look at the properties and establish a value.

"These contracts also help us build and strengthen relationships with our clients," she says. "We have agreements with large national financial institutions that are consolidating and with smaller banks that are expanding. While formulated price contracts give large banks with redundancies a ready buyer, the contracts also give us an opportunity to meet the needs of our smaller, expanding bank customers."

A week ago, AFR inked similar contracts with three community and regional banks based in Florida. Nicholas Schorsch, AFR's president and CEO, calls such contracts "a core and expanding part of our business." Of the Wachovia contract renewal, he notes that Wachovia "was our first, and remains one of our most important customer relationships."