NEW YORK, Dec. 20, 2021 /PRNewswire/ -- American
Finance Trust, Inc. (Nasdaq: AFIN) ("AFIN" or the "Company")
announced today that the Company, through its Operating
Partnership, entered into a definitive agreement to acquire a
portfolio of 81 Multi-tenant Power, Anchored and Grocery
Centers2 (the "Transaction") from certain subsidiaries
of CIM Real Estate Finance Trust, Inc. for $1.3 billion, representing a 7.19% cash
capitalization rate3. The Company also announced that it
entered into a definitive agreement to dispose of a non-core
portfolio of three office buildings leased to Sanofi S.A. for
$261 million, representing a 6.38%
cash capitalization rate and a $10
million increase from its original purchase price. Both
transactions are expected to close during the first quarter of 2022
and the Company expects the net financial impact of the
transactions will be immediately accretive to AFFO per share.
The acquisition is expected to be funded through a combination,
to be determined at closing, of cash, including the anticipated
$261 million of proceeds from the
sale of its Sanofi office asset, borrowings under the Company's
credit facility, property level debt the Company will seek to
assume and $53 million of equity
issuance to the sellers. The acquisition is expected to result in a
near term increase in leverage and AFIN plans to resume its
previously announced and successful deleveraging initiative and
expects to return to leverage levels consistent with recent
quarters over time. Upon closing, the Company will be the
preeminent REIT focused on Necessity-Based retail with a
best-in-class portfolio that will comprise over 1,000 properties,
29 million square feet and $382
million in annualized straight-line rent. In connection with
the Transaction, the Company will be rebranded to "The Necessity
Retail REIT | Where America Shops and trade under the new
ticker "RTL".
"This immediately accretive off-market transaction represents a
unique value creation opportunity. We are adding significant scale
while further enhancing our best-in-class portfolio with
pandemic-tested assets on accretive terms," said Michael Weil, CEO of AFIN. "On a pro forma
basis, with these additional properties our portfolio will comprise
approximately $5 billion in real
estate investments, at cost, increase multi-tenant occupancy to
91%, which includes executed4 and pipeline
leases5, reduce our top 10 tenant concentration from 39%
to 30% of SLR and reduce our office exposure to just 1% from 7%.
The Company's unique and complementary necessity-based asset mix of
long-term single tenant net leases and necessity-based multi-tenant
portfolio with significant leasing upside that positions us for
sustained growth, supported by a dedicated asset management and
leasing platform with decades of experience. Our best-in-class
portfolio that will be rebranded as the preeminent Necessity-Based
retail REIT, will focus on tenants and locations where America
shops and partner with leading brands such as Wal-Mart and
Publix."
Strategic and Financial Rationale
- Immediately Accretive to AFFO: The transaction is
expected to be accretive immediately upon closing, adding
significant scale and value with pandemic-tested assets
- Amplified Scale: Strategic acquisition of a 9.5 million
square foot, 81-property portfolio of power, anchored, and grocery
centers2 acquired for $1.3
billion
- Office Concentration Reduced to 1% of SLR: Opportunistic
and accretive $261 million
disposition of Sanofi office asset, reducing Pro Forma
SLR6 derived from office assets to 1% from 7%
- Realized Cap Rate Compression on Sanofi
Disposition: Disposition Cash Cap Rate of 6.38% is 15bps
lower than the Cash Cap Rate at time of acquisition in 2014,
generating a $10 million increase on
its original purchase price
- Addition of Grocery Centers: 22% of Pro Forma
multi-tenant SLR is derived from grocery centers, which is expected
to enhance the desirability of the Company's properties and ability
to command strong rental rates
- Rebranded Company focused on Where America
Shops: The Necessity Retail REIT (NYSE: RTL) will be the
preeminent REIT focused on Necessity-Based retail, with a pro-forma
portfolio that is 55% leased to Service-Oriented or Necessity-Based
retail tenants
Pro Forma Metrics1
After closing the Transaction, AFIN will be the preeminent
retail REIT focused on Necessity-Based properties, consisting of
tenants where Americans shop every day. The Pro Forma portfolio
will feature:
- Real estate investments, at cost of approximately $5 billion7
- 1,048 properties totaling 28.8 million square feet
- Portfolio annualized straight-line rent of approximately
$382 million1
- Portfolio occupancy of 92.3%
- Multi-tenant occupancy of 89.5%, Executed Occupancy Plus
Leasing Pipeline of 90.4%
- Portfolio weighted-average remaining lease term of 7.5
years
- Top ten tenant base that is 65% investment grade
rated8
- 1% office exposure
- The ten largest tenants are expected to be Truist (4% of
annualized straight-line rent), Fresenius (3.9%), Mountain Express
Oil Co. (3.5%), AmeriCold (3.4%), Home Depot (3.3%), PetSmart
(2.6%), Stop & Shop (2.5%), Dick's Sporting Goods (2.3%),
Bob Evans (2.2%) and Best Buy
(2.2%)
- The ten largest industries are expected to be Discount Retail
(8% of annualized straight-line rent), Gas/Convenience (7%),
Specialty Retail (7%), Healthcare (6%), Grocery (5%), Quick Service
Restaurant (5%), Home Improvement (5%), Retail Banking (5%),
Apparel Retail (5%), Full-Service Restaurant (4%)
Name Change
In connection with the Transaction, the Company will change its
name and be rebranded as "The Necessity Retail REIT Where
America Shops" and expects that its Class A common stock
("Common Stock"), 7.50% Series A Cumulative Redeemable Perpetual
Preferred Stock ("Series A Preferred Stock") and 7.375% Series C
Cumulative Redeemable Perpetual Preferred Stock ("Series C
Preferred Stock") will begin trading on Nasdaq thereafter under the
ticker symbols RTL, RTLPP and RTLPO, respectively. The Company's
Common Stock, Series A Preferred Stock, and Series C Preferred
Stock will continue to trade on Nasdaq under the symbols AFIN,
AFINP, and AFINO, respectively, until the closing of the
transaction.
Footnotes/Definitions
1 All pro forma numbers are as of September 30, 2021 and exclude the Sanofi office
asset which is under a PSA.
2 Portfolio to be acquired includes 79 Power,
Anchored and Grocery Centers and two single tenant properties.
3 For acquisitions, cash cap rate is a rate of return
on a real estate investment property based on the expected,
annualized cash rental income during the first year of ownership
that the property will generate under its existing lease or leases.
For dispositions, cash cap rate is a rate of return based on the
annualized cash rental income of the property to be sold. For
acquisitions, cash cap rate is calculated by dividing this
annualized cash rental income the property will generate (before
debt service and depreciation and after fixed costs and variable
costs) by the purchase price of the property, excluding acquisition
costs. For dispositions, cash cap rate is calculated by dividing
the annualized cash rental income by the contract sales price for
the property, excluding acquisition costs Weighted average cash cap
rates are based on square feet unless otherwise indicated.
4 Occupancy represents percentage of square footage
of which the tenant has taken possession of divided by the
respective total rentable square feet as of the date or period end
indicated. Executed Occupancy Includes Occupancy as of a particular
date as well as all leases fully executed by both parties as of the
same date where the tenant has yet to take possession as of such
date. For Q3'21 and as of November 1,
2021, there are 15 additional leases executed where rent
commences over time between the fourth quarter of 2021 and the
first quarter of 2022 totaling approximately 122 000 square
feet.
5 For AFIN, Leasing Pipeline for Q3'21 includes
i) all leases fully executed by both parties as of November 1, 2021, but after September 30, 2021 and (ii) all leases under
negotiation with an executed LOI by both parties as of November 1, 2021. This represents six LOIs
totaling approximately 19,000 square feet. No lease terminations
occurred during this period. For the Transaction and Q3'21,
includes a 13,000 SF Leasing Pipeline acquired in the Transaction.
There can be no assurance that LOIs will lead to definitive leases
that will commence on their current terms, or at all. Leasing
pipeline should not be considered an indication of future
performance.
6 Pro Forma represents the combined AFIN and 81
property multi-tenant portfolio, including two single tenant assets
for 16.5 million that encompass 86,810 square feet and 1.2 million
of annualized straight-line rent, under the PSA with certain
subsidiaries of CIM Real Estate Finance Trust, Inc. as of
September 30, 2021, excluding AFIN's
Sanofi office asset also under a contract to be sold.
7 Represents the contract purchase price and excludes
acquisition costs which are capitalized per GAAP.
8 As used herein, investment grade includes both
actual investment grade ratings of the tenant or guarantor, if
available, or implied investment grade. Implied investment grade
may include actual ratings of tenant parent, guarantor parent
(regardless of whether or not the parent has guaranteed the
tenant's obligation under the lease) or by using a proprietary
Moody's analytical tool, which generates an implied rating by
measuring a company's probability of default. The term "parent" for
these purposes includes any entity, including any governmental
entity, owning more than 50% of the voting stock in a tenant.
Ratings information is as of September 30,
2021 and based on Annualized Straight Line Rent.
About American Finance Trust, Inc. soon to be rebranded The
Necessity Retail REIT Where America Shops
American Finance
Trust, Inc. (Nasdaq: AFIN) is a publicly traded real estate
investment trust listed on Nasdaq focused on acquiring and managing
a diversified portfolio of primarily service-oriented and
traditional retail and distribution related commercial real estate
properties in the U.S. Additional information about AFIN can be
found on its website at www.americanfinancetrust.com.
Important Notice
The statements in this press release
that are not historical facts may be forward-looking statements.
These forward-looking statements involve risks and uncertainties
that could cause actual results or events to be materially
different. The words "anticipates," "believes," "expects,"
"estimates," "projects," "plans," "intends," "may," "will," "seek,"
"would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. These forward-looking
statements are subject to risks, uncertainties and other factors,
many of which are outside of the Company's control, which could
cause actual results to differ materially from the results
contemplated by the forward-looking statements. These risks and
uncertainties include the potential adverse effects of the ongoing
global COVID-19 pandemic, including actions taken to contain or
treat COVID-19, on the Company, the Company's tenants, the assets
under contract to be acquired including their respective tenants
and the global economy and financial markets and that any potential
future acquisition of property is subject to market conditions and
capital availability and may not be identified or completed on
favorable terms, or at all, as well as those risks and
uncertainties set forth in the Risk Factors section of the
Company's Annual Report on Form 10-K for the year ended
December 31, 2020 filed on
February 25, 2021 and all other
filings with the SEC after that date as such risks, uncertainties
and other important factors may be updated from time to time in the
Company's subsequent reports including in particular the Company's
Current Report on Form 8-K dated December
20, 2021 and describing additional facts and risk factors
relating to the transaction described in this release. In
particular, the transactions described in this release are subject
to closing conditions, including conditions that are outside of the
Company's control, and the transactions described in this release
may not be completed on the contemplates terms, or at all, or they
may be delayed. The Company may not be able to obtain financing to
acquire the properties, and the anticipated sale of Sanofi may not
be completed on favorable terms or at all. Forward looking
statements speak only as of the date they are made, and the Company
undertakes no obligation to update or revise any forward-looking
statement to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results, unless
required to do so by law.
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any
time. Each rating agency has its own methodology for assigning
ratings and, accordingly, each rating should be evaluated
independently of any other rating.
Non-GAAP Financial Measures
This release discussed the non-GAAP financial measure Adjusted
Funds From Operations ("AFFO"). A description of these non-GAAP
measures and reconciliations to the most directly comparable GAAP
measure, which is net income, is provided on our press release
furnished as Exhibit 99.1 with our Current Report on Form 8-K on
November 3, 2021. In addition, please
see the press release for statements as to why the Company believes
that this measure is useful to investors and additional purposes
for the Company's use of this measure.
Contacts:
Investor Relations
investorrelations@americanfinancetrust.com
(866) 902-0063
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SOURCE American Finance Trust, Inc.