Firms JV for Sale-Leasebacks Opportunities

NEW YORK CITY-Locally based American Realty Capital has entered into an exclusive, multi-year agreement with Sandler O’Neill Mortgage Finance LP, an affiliate of Sandler O’Neill + Partners LP, to deliver sale-leaseback opportunities with a primary focus on middle market financial institutions having between $500 million and $50 billion in assets. Under the agreement, ARC and Sandler will identify and meet with select financial institutions to discuss the potential benefits of completing a sale-leaseback transaction, and where appropriate, according to a prepared statement, facilitate ARC’s acquisition and sale-leaseback of the financial institution’s real estate on a long-term, net lease basis.

“Building strategic relationships has always been a core focus of our business model, and the partnership formed between ARC and Sandler is a perfect example of such a strategic union,” notes Nick Schorsch, CEO of ARC. “For the banks, this ultimately translates into creating shareholder value and improved earnings.”

Schorsch tells GlobeSt.com that “American Realty Capital specializes in working with middle market financial institutions to structure sale-leasebacks that enable the bank to convert their non-earning assets and redeploy the capital generated into their core business operations. Sale leaseback transactions are one of the most cost efficient forms of capital and are accretive to shareholders.” He adds that “our relationship with Sandler O’Neil allows us to tap into their solid relationships and expertise in this very attractive market place and allows Sandler O’Neil the opportunity to offer their clients a world-class one-stop real estate solutions platform.”

Tom Killian, a principal in the Investment Banking Group and manager of the sale-leaseback effort at Sandler says that during this period of intense pressure on the banking industry, bank-owned real estate can be an important source of liquidity, earnings and capital for a banking institution. According to Killian, “the rationale for banks to consider sale-leaseback transactions of bank owned property is straightforward: such a transaction could enable the bank to raise cash to meet strategic and funding needs, convert non-earning 100% risk-weighted assets into potentially lower risk-weighted interest earning assets, mitigate potential risk of decline in market value of owned real estate, monetize off-balance sheet value into earnings over the life of the lease, and potentially bolster GAAP earnings.”

Mark Fitzgibbon, a principal and director of equity research says that “equity investors generally do not ascribe much credit to the off-balance sheet value of bank owned real estate when they value a company. Only by monetizing this value through the sale-leaseback of the property is that value recognized. During the difficult financial environment currently facing many banks, it is important for bank management to turn over all the rocks to find sources of earnings, capital and liquidity. Indeed major banks like Citi and SunTrust have announced significant sale-leaseback transactions in recent months. We think investors will likely view these types of transactions positively.”