Restaurants Get Needed Refill on Tax Break

The recently passed Emergency Economic Stabilization Act of 2008 included an extension of the accelerated depreciation allowance for qualified leasehold and restaurant improvements and for certain improvements to retail space.

The National Restaurant Association hailed the passage of this “side order” provision extending the current 15-year depreciation schedule for improvements made to restaurant buildings in 2008 and 2009, and for new restaurant construction in 2009. 

According to Dawn Sweeney, President and CEO of the National Restaurant Association. “A faster, more accurate depreciation schedule has a direct impact on a restaurant’s bottom line. By shortening the depreciation schedule to 15 years, Congress has given operators cash flow to reinvest in their businesses, allowing them to grow and add more restaurant jobs.”

Cape Cod Bank Branches Included in Sale-Leaseback Deal

In May 2008, Rockland Trust completed a $33.0 million sale-leaseback transaction with American Realty Capital Trust, Inc. a Jenkintown, PA based REIT.

According to a SEC filing completed by the REIT in the same month, the real estate only transaction included a portfolio of 18 commercial bank branches, branch bank/offices and operation centers located throughout Southeastern MA and Cape Cod. Together the properties comprise 121,000 square feet of Gross Building Area (GBA). The sale price equated to about $272 per square foot of GBA, including associated transaction fees and closing costs.

Rockland Trust will be the sole tenant at each property and the total annual base rent for all 18 properties is just over $2.3 million. The terms for each lease are fully net and the base terms range from 10-15 years, not including four concurrent renewal options. The average base rent for all 18 locations is $19.05 per square foot as set forth in the SEC filing.

According to the Form 8-K filing the six Cape Cod branches located in Centerville, Chatham, Hyannis, Orleans, South Yarmouth and West Dennis, total almost 27,000 square feet of GBA and conveyed for $9.121 million. The collective sale prices for the six Cape Cod properties accounted for about 28% of the total acquisition price and equated to $338 per square foot of GBA. The average base rent per square foot for the Cape Cod locations was also higher than the portfolio average based on the transaction information reported to the SEC.

Rockland Trust acquired the Cape Cod properties in 2000 following the divesture of Fleet branches after its merger with BankBoston. The most recent real estate only transaction did not include all Rockland Trust properties located in Southeastern MA and Cape Cod.

The number of sale-leaseback real estate transactions involving national and regional banking entities has increased in recent years. In mid 2006, American Financial Realty Trust acquired a portfolio of 236 Citizens Bank and Charter One properties in a $317 million sale-leaseback deal. The 2006 transaction also included selected branch locations on Cape Cod. As investors such as REITS continue to be attracted to quality net leased opportunities and more banks seek to tap the equity in these prime assets, sale-leaseback transactions are likey to continue in the banking sector.  

Independent Bank Corp. (NASDAQ: INDB) the holding company for Rockland Trust Company, provides commercial banking, retail banking, and investment management services in Massachusetts. Rockland Trust has a network of 61 retail branches, ten commercial lending centers, five mortgage banking centers and four Investment Management Group offices all located in Southeastern Massachusetts and Cape Cod. The growing community bank founded in 1907 and headquartered in Rockland, MA has $3.3 billion in assets. 

In March 2008, Independent Bank Corp. acquired Slade’s Ferry Bancorp, parent of Slades Bank. The transaction added nine new Southcoast MA branches to the Rockland Trust franchise.