SunTrust Completes $736 Million Sale Leaseback of 433 Bank Branch Portfolio

Cityfeet / GlobeSt.com - April 7, 2008

Two affiliates of Inland Real Estate Group of Cos. Inc., based here, have completed the third and final closing of two portfolios for a total of $736 million from SunTrust Bank, a subsidiary of SunTrust Banks Inc., headquartered in Atlanta. The two affiliates acquired a total of 433 triple-net lease properties with nearly 2.3 million sf. Inland Real Estate Acquisitions Inc. recently closed on the final portion of the two portfolios, which includes 143 single tenant, triple-net lease properties for $230 million.

The affiliates had previously closed on 218 properties on Dec. 10, 2007 and 72 properties 10 days later, says Joe Cosenza, president of Inland Real Estate Acquisitions. The cap rate for the acquisition of the two portfolios is approximately 7.25%, Cosenza tells GlobeSt.com.

There are 159 locations in Florida, 74 locations each in Georgia and North Carolina, 43 locations in Tennessee, and 12 locations in South Carolina with the rest in Alabama, Maryland, Virginia and Washington, DC, Cosenza tells GlobeSt.com. Inland paid $93.7 million in cash and received a $281.2 million loan from LaSalle Bank NA, according to a filing with the US Securities and Exchange Commission on the portfolio acquisition. The interest-only loan matures Dec. 10, 2008, according to the filing.

SunTrust was looking to sell the portfolios for the same reasons a lot of banks and corporations are doing the same, Cosenza says. SunTrust did not want to “hold or own all of this real estate when the only thing you can do on your books is depreciate it every year,” he says. SunTrust builds approximately 40 to 50 branches each year. “Some of this money was actually put into a tax deferred exchange so they can apply it to the new facilities they are going to be building,” he says.

The majority of the properties in the two portfolios are retail bank facilities that are between 2,000 sf and 6,000 sf, Cosenza says. There are eight bank locations that also have some office space that average between 10,000 sf and 13,000 sf, he says. Additionally, there is a 78,308-sf data center in Virginia.

SunTrust Bank will lease all of the retail bank facilities for 10 years, with a 10-year renewal option and then subsequent five-year renewal options. The average rent is $23.34 per sf net with an annual 1.5% base rent increase, Cosenza tells GlobeSt.com. Inland was interested in the portfolio because “I have smaller type properties, in almost every case, (that) I can re-lease to any number of tenants who would love this kind of drive-up facility, including other banks,” Cosenza says.

Inland considers SunTrust a quality tenant. “We have over $25 billion in deposits at these locations,” Cosenza says. “These are very healthy retail branch locations.” SunTrust is also a subsidiary of a company with an S&P credit rating of AA- and that has “more than $18 billion in stockholder equity and they had virtually no sub-prime loans,” he says. Sphere: Related Content