Item 1.01 Entry into a Material Definitive Agreement.
On September 20, 2023, Atlantic Union Bank (the “Bank”), a wholly-owned subsidiary of Atlantic Union Bankshares Corporation (the “Company”), entered into and closed on an agreement for the purchase and sale of real property (the “Sale Agreement”) with Blue Owl AUB VA Owner LLC (the “Purchaser”), an affiliate of Blue Owl Capital Inc., which provides for the sale to Purchaser of 27 properties owned and operated by the Bank, which consist of 25 branches and a drive thru and parking lot, each adjacent to a sold branch (collectively, the “Properties”), for an aggregate cash purchase price of approximately $45.8 million. All of the Properties are located in Virginia.
Under the Sale Agreement, the Bank concurrently entered into absolute net lease agreements (the “Lease Agreements”) with Purchaser under which the Bank will lease each of the Properties. Each of the Lease Agreements will have an initial term of 17 years with specified renewal options. We will not close any branches or exit any markets as part of the sale-leaseback transaction.
The sale-leaseback transaction resulted in a pre-tax gain of approximately $27.9 million, or $22.0 million after tax, after transaction-related expenses. Aggregate first full year of rent expense under the Lease Agreements will be approximately $3.7 million pre-tax, or $2.9 million after tax, and will be partially offset by the elimination of the annual pre-tax depreciation expense on the buildings of approximately $969,000 and the estimated increase in annual pre-tax interest income of approximately $2.2 million generated by the investment of the transaction’s net cash proceeds. The Lease Agreements also include a 1.5% annual rent escalation during the initial term and a 2.0% rent escalation during the renewal terms, if exercised.
The foregoing description of the Sale Agreement, which includes the form of Lease Agreement as an exhibit thereto, does not purport to be complete and is qualified in its entirety by reference to the full text of the Sale Agreement, including the form of Lease Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
Subsequent to the closing of the sale-leaseback transaction, the Company restructured a portion of its investment portfolio by selling approximately $228.3 million in available for sale securities resulting in a pre-tax net loss of approximately $27.7 million, which will offset the net gain recognized from the sale-leaseback transaction. The Company expects to initially retain the net proceeds from these securities sales in its cash accounts at the Federal Reserve and subsequently reinvest the proceeds back into the investment portfolio. The Company expects the net transaction to be immediately accretive to net income and earnings per share.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
* Certain schedules and exhibits to this exhibit have been omitted pursuant to Item 601(a)(5). The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.
Caution About Forward-Looking Statements
Certain statements in this Form 8-K may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to, statements regarding our outlook and expectations with respect to the sale-leaseback transaction, the expected financial impact of the sale-leaseback transaction and securities portfolio sale, including that the net transaction will be immediately accretive to net income and earnings per share. Such statements are often characterized by the use of qualified words (and their derivatives) such as “expect,” “may,” “will,” “anticipate,” “could,” “should,” “would,” “believe,” “contemplate,” “estimate,” “continue,” “plan,” “project” and “intend,” as well as words of similar meaning or
