It was only a matter of time before Nicholas S. Schorsch started buying branch and office properties from banks again.
After resigning last year from a real estate company he co-founded that buys bank properties and leases them back to banks, Mr. Schorsch started a firm that does similar transactions with retailers.
But a noncompete with his former employer has expired, and now Mr. Schorsch is doing bank deals again. Late last month his new firm, American Realty Capital LLC in New York, said it would buy 14 branches and two office properties from Harleysville National Bank for $38.8 million and lease them back to the Pennsylvania bank.
Mr. Schorsch, the chairman and CEO of American Realty, said in an interview last week that it has other deals in the works.
It is targeting banks as well as retailers because demand for such transactions is high, he said. Though many bankers still prefer to own the properties they use, many are looking to sell the sites and reinvest the proceeds in loans or other high-yielding assets.
"In these turbulent times financial institutions are in need of more earning assets, and we feel that we meet that need by buying their nonearning assets and repositioning them," Mr. Schorsch said.
Since December of last year American Realty has bought or announced deals for 79 properties worth $570 million, he said. It is raising $1.5 billion to form a real estate investment trust, American Realty Capital Trust, which would use the capital to buy and lease back up to $4 billion of properties for banks and retailers.
Expanding American Realty's model to include both banks and retailers should bode well for both types of clients, Mr. Schorsch said. "Banks and retail clients" want to "occupy the corners of intersections, and we can reposition a former Walgreens location that would now be good for a bank," and vice versa. "This is really the next generation" in sale-leaseback transactions.
The deal with Harleysville was announced Nov. 21. Michael High, the chief operating officer of the bank's parent, the $3.8 billion-asset Harleysville National Corp., said in an interview last week that it intends to use the sale's proceeds to make loans.
"In this operating environment, it's difficult to increase earnings, so this is one thing we can do to help," Mr. High said.
Mr. Schorsch formed American Realty in September of last year, a month after parting ways with American Financial Realty Trust of Jenkintown, Pa. William M. Kahane, who had been a director of that company, joined Mr. Schorsch at American Realty as its president.
Mr. Schorsch said he left American Financial because of differences with other executives over its direction. He would not discuss specifics, but the general view of the company at the time was that it had been too slow to unload less valuable properties. In September of last year American Financial hired Harold W. "Hal" Pote to succeed Mr. Schorsch as its chief executive and said it would expedite the disposition of up to $2 billion of properties — while continuing to buy additional ones.
However, Mr. Pote died in June, and last month American Financial announced it would sell itself for $3.4 billion to the New York REIT Gramercy Capital Corp. On a conference call the day the deal was announced, Lewis Ranieri, American Financial's chairman and co-founder, said the board had been "evaluating alternatives" for 14 months and had to choose "whether to go it alone" or carry out the second phase of a repositioning plan that "would take time to execute."
Executives at American Financial would not discuss the situation for this article.
A source who asked not to be named said that competition among companies that conduct sale-leaseback transactions for banks is "extremely fierce," and that American Realty would do well if it does not overpay for properties it would have a hard time selling later.
Mr. Schorsch said that American Realty has not overpaid for any properties so far, since it buys in volume.
He also said he believes his company can utilize properties more effectively than its competitors by offering leases better suited to its clients' changing needs.
By yearend American Realty hopes to raise $150 million to $300 million of capital for a fund that would be used to buy vacant properties or those that would have short-term leases.
