AFR Builds $250M-Plus Purse, Anticipates Acquiring 152 Properties

Trading on the NYSE, AFR shares opened at $14.88 a share on May 4. At that price per share, the company would raise more than $249 million from the offering, and another nearly $37.4 million if the over-allotment option is exercised, potentially raising the tally to about $286.6 million.

Announcement of the stock offering follows a list of six proposed acquisitions that AFR announced in its first-quarter earnings report on May 3. The estimated aggregate cost is approximately $278 million, and all are expected to close by the end of this quarter. The stages of the acquisition process ranges from signed contracts to letters of intent to "substantive negotiations," according to an AFR statement, and "contractual restrictions and the status of negotiations" prohibits the company from revealing specific sellers/tenants and locations. However, the anticipated purchase includes four office buildings and two multiproperty portfolios that include both office buildings and bank branches covering six US regions.

Negotiations are under way on a contract to acquire a 113-property portfolio, aggregating about 3.2 million sf, primarily in the Southeast, from the subsidiary of a major commercial bank for about $114 million. The portfolio is approximately 43% occupied, and AFR intends to dispose of 37 non-core, substantially vacant properties, and lease the remainder to the seller for 15 years.

A 53-property portfolio, aggregating 598,000 sf, is located primarily in the Northern US and selling for about $41 million. The seller, identified as the subsidiary of a major international bank, is expected to lease about 37% of the portfolio for seven years, and AFR anticipates selling 14 non-core, substantially vacant properties.

The four buildings, identified only by region, include a 532,000-sf building in the Southeast for $38.5 million, a 234,000-sf one in the Southwest for $20.5 million, a 158,000-sf building in the Central US for $24.5 million, and a 70% interest in a 535,000-sf building in the Midwest, which is valued at $55.7 million. Occupancy and/or anticipated leases in the four properties ranges from 87% to 100%.

AFR intends to use proceeds from the stock offering to acquire properties, including any or all of the announced proposes properties and vacant branches that it may acquire under existing and future formulated price contracts and for general corporate purposes. During first quarter, AFR signed seven new formulated price contracts, bringing its total to 11, and it expects to acquire between 80 and 100 vacant bank branches via formulated price contracts by the end of this year for an aggregate investment of between $60 million and $80 million.

Meanwhile, during the first quarter, AFR's revenues increased 100% to $124.8 million, compared with first-quarter 2004. It acquired 15 bank branches and five office buildings, aggregating about 834,000 sf for $135 million, and it disposed of 43 non-core properties and three leasehold interests aggregating 736,000 sf for net proceeds of approximately 33.4 million.