Green shoots from Blue Owl
The market for large-scale sale/leaseback deals received a boost just two weeks into the year as SouthState Bank, N.A., a wholly-owned subsidiary of SouthState Corporation (NYSE: SSB) disclosed the execution of a definitive agreement to sell and leaseback 170 bank branch properties to affiliates of Blue Owl Capital (NYSE: OWL) for $475 million1.
Expected to close in 1Q2025, the deal includes branches located in Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia and represents the vast majority of the bank’s 204 owned properties2.
Simultaneous to the sale closing, SouthState will sign 15-year triple net lease agreements subject to 2.0% annual rental escalations.
With aggregate first year rent payments under the proposed lease agreements estimated at $36 million, the deal is priced at 7.6% going-in cap rate.
SouthState estimates a $225 million pre-tax gain from the sale/leaseback which will likely be used as an offset to losses on certain underwater investment securities under sale evaluation. Check out “Bank and file” in the October 22, 2024 release of the Net Lease Observer (Volume 1, Issue 10) for a detailed examination of the bank sale/leaseback market.
Going postal
Postal Realty Trust (NYSE: PSTL), the only net lease REIT focused on postal properties, disclosed updated 2024 activity including:
2024 acquisitions of 197 USPS-leased properties totaling $91 million and priced at a blended 7.6% cap rate
Receipt of executed leases from USPS on 85% and 95% of expired rent from 2023 and 2024, respectively (new leases contain 3% annual rent escalators and a mix of five and ten-year terms)
4Q2024 acquisitions of 63 USPS-leased properties totaling $30.7 million and priced at a blended 7.5% cap rate
At 12/31/2024, the PSTL portfolio encompassed 1,703 properties across 49 states with 99.6% occupancy and 6.4 million net leasable interior square feet.
-Sean Hostert
Thanks for reading Net Lease Observer! This post is public so feel free to share it.