GlobeSt.com UPDATE: Fireman's Fund Insurance Co. HQ Sells for $283M

NOVATO, CA-Publicly held American Financial Realty Trust has acquired the 64-acre 700,000-sf headquarters of Fireman’s Fund Insurance Co. here for $283.5 million. The insurance company is committed to lease the three-building property through 2018.AFR, which announced the deal as pending last week, has not revealed the name of the seller. However, a source at AFR tells GlobeSt.com that the insurance company exercised an option to acquire its headquarters and then flipped it to AFR, and a source with the insurance company tells GlobeSt.com that the previous owner was Menlo Park-based Spieker Partners. The insurance company source says its 13.5-year lease commitment matches the remaining term of its 25-year lease with Spieker Partners. Spieker Properties founder Dennis Singleton was not available Monday for comment.AFR also did not reveal the value of the leaseback in dollars, but did say it anticipates an annual capitalization rate (average revenues over the remaining term of the Fireman’s Fund lease less operating expenses divided by the gross purchase price) of 7.82%. In dollars, that percentage is $22.17 million.AFR financed the acquisition with funds generated from its recent equity offering, advances under the company’s secured credit facility and approximately $191 million in secured indebtedness at an effective fixed interest rate of approximately 5.27% net of hedging activities. Fireman’s Fund Insurance Co. is rated “A” by Standard & Poor’s. The properties were acquired under AFR’s “landlord-of-choice” program, wherein its bank clients pre-select AFR to own existing and new facilities. AFR chief executive Nicholas Schorsch told GlobeSt.com in January that the program is a natural extension of its other offerings, which have grown the company from $250 million in assets in 2002 to more than $4 billion in 120 markets.The program’s offerings include arrangements whereby AFR will purchase every vacant branch in a bank’s portfolio, execute multiple sale-leaseback transactions, and acquire larger bank portfolios that include offices, operations centers and bank branches. Approximately 90% of the company’s revenue is derived from financial institutions through net leases or bond leases. “We allow the banks relocation rights within our portfolio or substitution rights, giving them flexibility not usually allowed by other buyers,” said Schorsch. “All of the programs are about being an efficient option for the disposition and re-utilization of bank properties, a clearinghouse that offers a fixed cap rate, no mark up and no middle man.” Schorsch said the company’s goal is to at least double the company’s portfolio to $8 billion, including a minimum of $500 million of assets in 2005. Indeed, a source at the company tells GlobeSt.com that the company has acquired year-to-date about $724 million of assets (including transactional-related expenses). Last year, the company made $2 billion in acquisitions.AFR went public in mid-2003 via an $800-million IPO that was exponentially oversubscribed. The IPO price was $10 per share. Shares closed the first day of trading at $14.25 and rose steadily to a peak of $18.44 in January 2004. Shares hit a low of $13.30 in August 2004–due to profit taking when the REIT market took a hit last year, says Schorsch–and on Monday morning were trading at $13.78, down from $15.40 on July 20.