Bank of the Sierra, a wholly owned subsidiary of Sierra Bancorp, entered into two separate agreements for the sale and leaseback of 13 branches across central California in a type of deal that's become more popular over the past year.
Sale-leaseback deals let sellers reap cash from the sale of their property but continue to occupy it under a long-term lease. The deals also offer the new owners secure tenants with lengthy leases that provide bond-like income in exchange for providing operating capital to the sellers in return for their real estate.
Higher interest rates than in the past 15 years boosted sale-leaseback transactions among banks, a type of business that already had completed $119 million in such sales in 2023 for the highest annual volume over the past seven years, according to CoStar data.
Bank of the Sierra is selling the bank branches to an affiliate of Blue Owl Real Estate Capital, according to a filing with the U.S. Securities and Exchange Commission. The total sale price is $19.9 million.
The bank will lease each of the properties for an initial term of 18 years with specified renewal options. The aggregate first full year of rent expense will total about $1.7 million, according to the filing. The lease agreements include an annual rent adjustment of 2.25%.
The bank noted it is not closing any branches or exiting any markets as part of the sale-leaseback transaction.
The sale-leaseback transaction resulted in proceeds to the bank in excess of book value of about $14.3 million. The bank anticipates using the proceeds for general corporate purposes.