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JENKINTOWN, PA-An hour after his appointment as CEO and president of American Financial Realty Trust, Harold Pote dominated a conference call with Wall Street analysts to spell out key initiatives that he said will bring discipline to the company and “take it back to its roots.” Pote replaces Nicholas Schorsch, an AFR founder and former president, vice chairman and CEO.

Discipline indeed. Over the next 18 to 24 months, Pote said AFR will dispose of non-core and selected high-profile assets that represent good market opportunities for expected net proceeds of up to $2 billion. Some of the proceeds will be used to help reduce debt toward a goal of achieving an overall debt to asset leverage ratio of between 60% and 65%. An analyst noted that the dollar value of property sales represents about half of the company’s current assets.

Going forward with acquisitions, Pote said AFR will scrutinize each asset within a portfolio and quickly dispose of non-core real estate within it. “We are a net lease company, not a high-rise office company,” stressed Lewis Ranieri, chairman, during the call. “We’ve acquired small buildings and concluded that it’s very difficult for us to drive value in a portfolio like that.”

AFR will cut its third-quarter dividend to 19 cents a share, down from 27 cents in order, Pote said, “to ultimately align dividend payout with quarterly earnings.” He anticipates that by mid-2007, dividends will be covered by operating cash flow. Management will move ahead with a previously approved $100-million stock repurchase plan, possibly followed by additional stock buybacks on the belief that stock is undervalued. Both Pote and Ranieri declined to put a figure on current NAV, but said they are working on determining that.

Among cost-cutting efforts to reduce second-half expenses by up to $8 million is the closuring of a New York office. Pote said, “going into 2007, we believe we can knock off 15% to 20% of MG&A without damaging our core business. Jenkintown is our headquarters, and I will be based here, not in New York.”

Among the future anticipated savings is a reduction in CEO compensation. According to the company’s 2006 proxy statement, Schorsch received $1.7 million in salary and bonus in 2005, plus stock grants of about $2 million, and about $595,000 in expenses as part of his agreement. Pote said he will receive a salary of $500,000 with a potential $500,000 bonus based on performance, plus some stock options.The cost of restructuring is between $23 million and $27 million, “largely the result of separating the company from its founder under a contractual agreement,” Ranieri said. Later, management said, “between $13 million and $15 million cash will walk out the door.” Schorsch’s actual severance will be posted later today, but an AFR spokesman tells GlobeSt.com the total settlement package is in the neighborhood of $20 million, including cash and stock.

Regarding a potential sale of the company, Pote said, “this management team will not close the door on any opportunity or action that will realize full and fair value to our shareholders.” Advisors Greenhill & Co. LLC and Deutsch Bank Securities remain on the payroll. “We’re not actively soliciting offers, but if an opportunity for us to monetize full value to shareholders comes along, we have an obligation to inform shareholders.”

According to Ranieri, “nobody gave us a fully funded bid. Conversations indicated nothing the board was going to agree with, so the conversations didn’t go any further.”

Pote also promised is improved transparency in reporting. AFR, he said, “will seek to conform its reporting of operating results to more closely reflect industry standards,” and promised to announce specific changes “shortly.” He does not anticipate further changes in management.

“We are in a ‘show me’ position now. I’m very confident we can show you,” Pote concluded. Immediately following the conference call, AFR stock dropped to $10.30 a share, down 8% from the close of the previous day. The 52-week high of $14.73 a share was reached on Sept. 16, 2005, and the 52-week low of $9.52 a share occurred on May 3 this year.

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