SouthState Bank Sells and Leases Back 170 Branches

News Summary

SouthState Bank has announced a significant sale and leaseback of about 170 branches across six states, valued at $475 million. This strategic move aims to optimize operations while retaining a strong local presence. The deal, expected to complete by March 31, 2025, involves a partnership with Blue Owl Real Estate Capital for long-term leases of the properties. SouthState projects a pre-tax gain of $225 million, which will bolster its financial standing and support ongoing investments in market growth.

SouthState Bank’s Big Move: Selling and Leasing Back 170 Branches

In a strategic real estate maneuver, SouthState Bank is shaking things up by selling around 170 branches across six states. The eye-popping cash deal is valued at a whopping $475 million and aims to help the bank optimize its operations while keeping its presence in the local markets.

Details of the Deal

Freshly disclosed in a filing with the Securities and Exchange Commission on January 13, 2025, the sale is scheduled to be wrapped up by March 31, 2025. However, it’s worth noting that the final details could be tweaked a bit, depending on the buyer’s financial analysis. That buyer is Blue Owl Real Estate Capital, who will be entering into 15-year leases for the properties, with options to extend for another 15 years.

Where These Branches Are Located

The branches on the chopping block represent about 45% of SouthState’s total 372 branches. They are spread across several states including the Carolinas, Alabama, Florida, Georgia, and Virginia. While specific locations haven’t been revealed, customers can breathe easy knowing that the bank will not close any of these branches or exit the markets.

What’s in It for SouthState?

This sale is projected to generate a pre-tax gain of $225 million for SouthState Bank. The bank plans to utilize the proceeds for general corporate purposes, helping to bolster its economic standing. However, it’s important to keep in mind that this projected profit could be influenced by the sale of certain securities that are categorized as being “in a loss position.”

Rent and Financial Impact

SouthState’s first-year rent bill is estimated to be around $36 million, with a 2% annual increase expected thereafter. Lucky for SouthState, this rent payment will be partially mitigated by cutting down around $8 million in related real estate expenses. Plus, the bank expects to earn higher interest income by investing the proceeds from the sale.

Company Background

Founded over a decade ago from the merger of First Federal of Charleston and SCBT, SouthState Bank has made quite a name for itself. The institution moved its headquarters to central Florida around six years ago and, as of mid-2024, boasts deposits totaling $10.7 billion through its 82 branches in South Carolina alone. Recently, it has made headlines by extending its footprints into Texas and Colorado through a hefty $2 billion acquisition.

What Lies Ahead

SouthState is expected to address this massive transaction when it reveals its 2024 financial results on January 23, 2025. Analysts are keeping a close eye on how this move will affect the bank’s tangible book value. They anticipate that while this transaction might initially reduce earnings per share by about 1%, it could eventually lead to a 2% increase if the bank wisely deploys its capital.

Final Thoughts

In the world of banking, changes like these are crucial for growth and sustainability. SouthState Bank’s strategic decision to sell and lease back a significant portion of its branches is sure to set the stage for future development while maintaining a steady presence in its markets. As they navigate this transition, it will be exciting to see how they leverage this cash influx and what it means for customers and investors alike.

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Author: HERE Charleston

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