Thursday, November 10, 2016

How State Farm's $825M deal in DFW sets 'blueprint'

 for Atlanta, Phoenix hubs

It's been less than a week since State Farm Insurance closed on a $825 million sales-leaseback of its Dallas-Fort Worth regional campus — the biggest deal of its kind in North Texas history — but the deal could pave the way for Bloomington, Illinois to strike similar arrangements in Atlanta and Phoenix.
Even though State Farm spokesman Chris Pilcic said "there was nothing to share on those properties at this time," real estate executives say the North Texas deal could be a blueprint for future similar State Farm sales-leaseback deals.
"It could signify a pathway for them to do the same thing with their other two properties," said John Alvarado, a senior vice president at CBRE's Dallas office.
"The negotiation of a joint venture is a complicated process and once a document has been created it's easier to replicate the document with the same structure on future deals with that particular buyer, entity or partner," he added.
Alvarado has no involvement in the transaction, but has decades of experience brokering large real estate investment deals.
The sales-leaseback deal was a complicated real estate deal that took two years of globetrotting and lots of late nights to complete. It was the biggest deal Transwestern Investment Group President Laurie Dotter has ever worked on in her career.
Transwestern Investment Group, which has a 30-year business relationship with State Farm Insurance, led the formation of the new ownership group and eventually brought in Seoul, South Korea-based Mirae Asset Global Investments Co. to the deal.
The new ownership group — Corporate Properties Trust I LP — will be the owner of the four building, 2.2 million-square-foot mixed-use development near a DART rail line in Richardson. The property is being leased back to Illinois-based State Farm Auto Insurance Co.
Dotter said her team plans to sit down with the South Korean real estate investment firm in the near future to "listen and learn more about their long-term investment goals."
"We want to work to meet those objectives with them," Dotter told the Dallas Business Journal, who also said the deal was struck by a foreign investment firm because there was no U.S. investor that could step for the entire deal.
Dotter declined to disclose if future State Farm Insurance regional campuses, which are still under construction, were some of the future investment properties on the table for the newly formed partnership.
Even though it's unlikely a single investor would want to have that much exposure to one tenant, the real estate investment trust structure could be telling, said Evan Stone, a longtime office investment broker in Dallas.
"It is certainly possible that Mirae could take down more State Farm campuses given their access to capital and interest in the real estate with their prime locations, new urban design and long term leases to such a high credit tenant," Stone told the DBJ.
Like Alvarado, Stone has no involvement in State Farm's sales-leaseback deal, but has decades of experience brokering large real estate investment deals.
"Interestingly, if what's been reported that the owning entity is a REIT, it could foretell a strategy to easily syndicate their interest to other investors and allow them to acquire more State Farm complexes," he added.

Written by Candice Carlisle - Dallas Business Journal