American Finance Trust to Acquire Shopping Center Portfolio for $1.3B, Sell Office Assets as Part of Corporate Rebrand
NEW YORK CITY — American Finance Trust Inc. (NASDAQ: AFIN) has entered into a definitive agreement to acquire a portfolio of 81 retail centers from CIM Real Estate Finance Trust, a REIT managed by Los Angeles-based CIM Group. The transaction is valued at $1.32 billion.
The 9.5 million-square-foot portfolio comprises power retail and grocery-anchored shopping centers, as well as two single-tenant properties. The weighted average lease term of the portfolio is five years, according to CIM. The names and locations of the retail properties were not disclosed.
The transaction price comprises primarily cash considerations, as well as $53.4 million in AFIN’s stock and additional considerations based on performance metrics achieved in the first 180 days after closing. The transaction is scheduled to close in the first quarter of 2022.
“This immediately accretive off-market transaction represents a unique value creation opportunity,” says Michael Weil, CEO of AFIN. “We are adding significant scale while further enhancing our best-in-class portfolio with pandemic-tested assets on accretive terms.”
For CIM Real Estate Finance Trust, the sale repositions the REIT’s retail portfolio to 437 credit-leased retail properties with a weighted average lease term of 10.8 years. The remaining portfolio totals 13.2 million square feet across 45 states and was 98.2 percent occupied as of Sept. 30. CIM Real Estate Finance Trust is a public, non-listed REIT based in Phoenix.
Concurrently, AFIN is selling off three office buildings to Sanofi S.A., a global healthcare giant based in Paris. The non-core assets will trade for $261 million, which is about $10 million above the original transaction price, according to AFIN. The properties’ names and locations were not disclosed.
AFIN plans to allocate proceeds from the Sanofi sale to fund the CIM retail transaction. The Sanofi sale will limit AFIN’s office exposure of its straight-line rent collection (SLR) from 7 percent pre-closing to 1 percent post-closing. (SLR is the calculation of the total of all rents divided by the number of months in the term, which yields the average rent per month.)
The portfolio transactions are part of AFIN’s overall rebranding strategy. The New York-based REIT will change its name to “The Necessity Retail REIT Where America Shops” and trade on the Nasdaq exchange under the symbol “RTL.” Weil says the company is pivoting to focus its real estate holdings on shopping centers leased to service-based and essential retailers including supermarkets.
“Our best-in-class portfolio that will be rebranded [and] will focus on tenants and locations where America shops and partner with leading brands such as Walmart and Publix,” says Weil. “We will continue to focus on a diversified mix similar to the existing 40 industry sectors our current tenant roster falls in, with a continued emphasis on necessity-based retail industries such as discount retail, grocery, quick-service restaurants, hobby and sporting goods.”
Upon closing of the two transactions, Necessity Retail REIT will own a $5 billion retail portfolio spanning 28.8 million square feet across 1,048 properties. The portfolio has leasing upside potential as the properties were 92.3 percent occupied at the time of the announcement.
The 10 largest tenants in Necessity Retail’s portfolio will include Truist, Fresenius, Mountain Express Oil, AmeriCold, The Home Depot, PetSmart, Stop & Shop, Dick’s Sporting Goods, Bob Evans and Best Buy. Weil says the firm is eager to form relationships with the new tenants coming in from the CIM transaction, as well as expand on its ventures with their existing tenant base as part of the overall realignment.
“Brick and mortar retail is more important now than ever, with many of the biggest national brands drawing in more shoppers than before the pandemic; Target, Lowe’s, Dick’s Sporting Goods, Ulta Beauty and Bath & Body Works are just a few of the retailers mentioned, and are all tenants of ours,” says Weil. “We see this as a great opportunity at our well-located centers to drive occupancy growth over time and expand our relationships with these growing tenants.”
He adds that Necessity Retail will also look for new acquisitions in 2022 and beyond that fall in line with the company’s investment criteria.
“We will continue to source and acquire the best opportunities in the single-tenant and multi-tenant sectors as we target markets with strong demographics and dense suburban communities that will support these retail locations,” says Weil.
AFIN’s stock price closed on Monday, Dec. 20 at $8.13 per share, up from $7.87 a year ago. The company will trade under the AFIN symbol until the CIM transaction closes.
— John Nelson