8-K: Orange County Bancorp Subsidiary Sells Middletown Branch for $2.535 Million, Leases Back Office Space

Orange County Bancorp's subsidiary, Orange Bank & Trust Company, has entered an agreement to sell its Middletown branch building and surrounding land for $2.535 million, while leasing back the office space.

Summary

• Orange Bank & Trust Company, a wholly-owned subsidiary of Orange County Bancorp, Inc., has agreed to sell its branch located at 33 Trust Way in Middletown, New York, to JRTN Properties LLC for $2,535,000.
• The agreement was finalized on April 17, 2025.
• The bank will lease back the branch office on a month-to-month basis until December 31, 2026.
• The sale is expected to close on or about April 23, 2025, subject to customary closing conditions.
• A deposit of $200,000 is being held in escrow by Blustein, Shapiro, Frank & Barone, LLP.
• The bank will pay $10,000 per month to lease the property back from the purchaser.
• The bank will pay monthly 1/12 of all real estate taxes on on the filed map (subject to final adjustment upon Seller vacating the Property, pay all utilities, costs to maintain, but not replace the Property, including landscaping and snow removal, and maintain general liability insurance in connection with the Property.

Sentiment

Score: 7

Explanation: The announcement is generally positive as it allows the bank to free up capital while maintaining operations. The terms of the agreement appear reasonable.

Positives

• The sale will provide Orange Bank & Trust Company with $2.535 million in capital.
• The leaseback agreement allows the bank to continue operating at its current location without interruption until December 31, 2026.
• The agreement includes customary representations and warranties, providing a level of security for both parties.

Negatives

• The bank will incur monthly lease expenses of $10,000 until December 31, 2026.
• The bank will pay monthly 1/12 of all real estate taxes on on the filed map (subject to final adjustment upon Seller vacating the Property, pay all utilities, costs to maintain, but not replace the Property, including landscaping and snow removal, and maintain general liability insurance in connection with the Property.

Risks

• The sale is subject to customary closing conditions, and there is a risk that the transaction may not be completed.
• The buyer could default on the agreement.
• The bank is responsible for costs to maintain, but not replace the Property, including landscaping and snow removal, and maintain general liability insurance in connection with the Property.

Future Outlook

The sale is expected to close on or about April 23, 2025, subject to customary closing conditions. Orange Bank & Trust Company will continue to operate at the location under a month-to-month lease until December 31, 2026.

Industry Context

Banks often sell real estate to free up capital and focus on their core banking operations. Leaseback agreements allow them to maintain a presence in key locations without the burden of property ownership.

Comparison to Industry Standards

• Sale-leaseback transactions are common in the banking industry.
• Comparable transactions include banks selling branches to real estate investment trusts (REITs) and then leasing them back.
• The terms of this agreement, including the purchase price and lease rate, appear to be within industry norms for similar properties in the region.

Stakeholder Impact

• Shareholders will benefit from the capital infusion resulting from the sale.
• Employees will experience no immediate changes as the branch will continue to operate under the leaseback agreement.
• Customers will continue to have access to the branch's services without interruption until December 31, 2026.

Next Steps

• Finalize the sale transaction on or about April 23, 2025.
• Execute the post-closing occupancy agreement.
• Transition property ownership to JRTN Properties LLC.
• Continue branch operations under the leaseback agreement until December 31, 2026.

Key Dates

Keywords

Orange County Bancorp, Orange Bank & Trust, property sale, leaseback, Middletown, real estate, JRTN Properties LLC, branch sale