Parties Enter into Agreement to Develop this Large and Attractive Market
Jenkintown, Pa. and New York – July 14, 2006 – American Financial Realty Trust (NYSE: AFR) and Sandler O’Neill + Partners, L.P., through its affiliate, Sandler O’Neill Mortgage Finance L.P. ("Sandler"), announced the signing of a multi-year agreement to work together to deliver sale-leaseback opportunities to middle market financial institutions having between $500 million and $40 billion in assets. AFR and Sandler will identify financial institutions that potentially could benefit from sale-leaseback transactions; meet with these institutions to discuss the benefits of the sale-leaseback format; and facilitate, as appropriate, AFR's acquisition and lease-back of the institution's real estate on a net lease basis. The agreement has a 5-year term, subject to certain levels of mutual performance.
"Based on our experience in the pooled trust preferred market, in which Sandler has executed transactions with an aggregate value in excess of $7 billion, we know that our banking clients favor one-stop shopping with certainty of execution," observed Thomas Killian, a principal in the Investment Banking Group and manager of the sale-leaseback effort at Sandler. Mr. Killian also noted that, "AFR is the industry leader in acquiring and leasing real estate occupied by financial institutions, with a proven track record of performance, with approximately $4.9 billion of transactions completed, and roughly 1,100 properties and 37 million square feet of owned real estate in the banking sector. We believe that by working with AFR, our clients will receive certainty of transaction consummation with seamless execution from analysis to transaction funding. Our ability, with AFR, to offer clients a premier sale-leaseback product is consistent with our on-going focus on helping our clients develop and manage their long-term capital plans to optimize franchise value."
In commenting on the agreement with Sandler, Nicholas Schorsch, President and Chief Executive Office of AFR, said that, "AFR is delighted to partner with Sandler. Over the past five years, Sandler has consistently ranked as one of the leading M&A advisors to financial institutions as well as one of the leaders in raising capital for the middle market banking sector." Jim Mirage, Vice President of Acquisitions for AFR, added that, "While AFR has historically focused on transactions with the largest banks in the United States, the affiliation with Sandler will enable AFR to efficiently access middle market financial institutions through a proven leader in this sector. Sandler brings a depth and breadth of coverage to this sector that will greatly enhance AFR's marketing."
According to Mr. 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."
According to Mark Fitzgibbon, a Principal and the Director of Equity Research at Sandler, "Sale-leaseback transactions are particularly timely for banks to consider, for a number of reasons: commercial real estate values are attractive, bank shareholders do not ascribe value to off-balance sheet assets like real estate until such value is monetized or realized, monetizing value through the sale of real estate results in a one-time gain that is excluded from recurring income for valuation purposes, banks are under increasing pressure to generate earnings because of declining net interest margins, and record inflows of capital into the real estate market have compressed capitalization rates." Mr. Fitzgibbon continued, "AFR has proven the sale- leaseback model for large investment grade financial institutions through the origination of almost $5 billion of transactions over the past 4 years. We think investors will likely view the recurring income generated from these types of transactions positively."
Brian Sterling, Co-Head of Sandler's Investment Banking Group added that, "In an M&A context, we are now seeing more buyers consider appropriate means to finance and capitalize acquisitions. This includes considering a sale- leaseback transaction whereby the target's real estate is sold to generate capital to fund a portion of the consideration and then leased back to the target entity on a long-term net lease basis. We think many banks may want to consider this as a potential M&A funding alternative for the cash portion of merger consideration."
About Sandler O’Neill + Partners, L.P.
Founded in 1988, Sandler O’Neill + Partners is a full-service investment banking firm dedicated to providing comprehensive, innovative advisory and transaction execution services to the financial industry. The firm specializes in strategic business planning, mergers and acquisitions, capital markets, mutual-to-stock conversions, investment portfolio and interest rate risk management, fixed income securities transactions and mortgage finance restructurings. Sandler O’Neill also is a market maker in hundreds of financial stocks and publishes equity and fixed income research focused on selected banks, thrifts and insurance companies, credit card companies, investment banks, asset managers, specialty finance companies, e-finance companies and transaction execution companies. Additional information about Sandler O’Neill can be found on the firm’s Web site at www.sandleroneill.com.
About American Financial Realty Trust
American Financial Realty Trust is a self-administered, self-managed real estate investment trust that acquires properties from, and leases properties to, regulated financial institutions. The Company owns and manages its assets primarily under long-term triple net and bond net leases with banks. The Company is led by chief executive officer Nicholas S. Schorsch and non- executive chairman Lewis S. Ranieri. The Company is traded on the New York Stock Exchange under the ticker symbol AFR. For more information on American Financial Realty Trust, visit the Company's website at http://www.afrt.com.
SOURCE: American Financial Realty Trust
Sandler O’Neill + Partners, L.P.
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