AFR Plans Och-Ziff JV to Acquire $1B in AFR's Non-Core Assets

Under the agreement, Och-Ziff would contribute 85% of the venture's equity and AFR would contribute the balance. The JV would allow AFR to retain a stake in these properties, which might otherwise simply be sold and AFR will form an affiliate to manage them. "It represents an additional revenue stream," an AFR spokesman tells GlobeSt.com.

During a third-quarter conference call, Nicholas Schorsch, CEO, said Och-Ziff would contribute approximately $400 million to the venture. "Closing on an initial acquisition of assets by the venture is anticipated to occur in the fourth quarter of 2005." He declined to identify specific properties, but said both parties are currently evaluating such assets, and "the partnership will look at them on a fair market value basis." He said there's been a number of "really fine assets that we have, that have been sold to developers over the last three years, that we'll now be able to work with together with Och-Ziff and redevelop them and share that value with AFR shareholders."

Glenn Blumenthal, COO, further described the type of assets. One example "would be operation centers that we believe can be repositioned in the marketplace; either backfilled with another financial institution or just backfilled from a different office type," he said. Blumenthal also pointed to a Key Bank asset in Cincinnati that had excess ground a shopping center wanted to develop. "Because we didn't have an opportunity [like this JV], we were left out in the cold."

Asked if Och-Ziff would flip the assets, Schorsch said no. "This is typically a five- to seven-year hold. We have the ability to extend that." As for its third-quarter performance, AFR reported revenues of $146.6 million, a 10% increase over the previous quarter and an 80.7% increase over third-quarter 2004.