Friday, March 17, 2017

Cash for campuses


Corporations sell their complexes and rent back space

Vernon Bryant/Staff Photographer
State Farm Insurance sold its CityLine campus in Richardson for $825 million to a partnership of South Korean and U.S. investors. It has signed a long-term lease to keep its offices there.
Want to buy a corporate campus? There are plenty to choose from on the market in North Texas.

New corporate facilities that house Raytheon, FedEx Office and Geico Insurance are all up for grabs.

Sales of these new business enclaves have been some of the biggest real estate deals in the Dallas-Fort Worth area in the last year.

“People are paying large amounts of money for these assets,” said Cushman & Wakefield’s Rick Hughes. “Well-located corporate campuses with good tenants and in good locations can go for $400 per square foot or more.”

Last year, some of the largest property trades in North Texas were corporate
campuses, adding up to more than $1 billion. The biggest deals included:

State Farm Insurance’s new four-tower regional office campus in Richardson sold for $825 million to a partnership of South Korean and U.S. investors. The insurer will continue to occupy the almost 2 million-square-foot project in the CityLine development on a long-term lease.

J.C. Penney sold its 1.8 million-square-foot headquarters campus in West Plano for more than $353 million to Dallas investors who will remodel the buildings. The retailer will downsize its operations into part of the 40-acre campus in Legacy business park, and the rest of the project will be rented to other companies.

Verizon sold its longtime 51-acre complex in Las Colinas for $344 million to Meisrow Financial of Chicago. Verizon will continue to occupy the 1.1 million-squarecommercial foot office campus on a longterm lease.

“The sellers of these properties are looking to monetize the real estate,” Hughes said. “These are nothing more than financial transactions.”

Upside for investors
Investors who buy big business centers are getting stable, long-term income, property brokers say.

“You have almost a bond type of investment with cash flows,” CBRE vice chairman Gary Carr said. “The value of the property is all about the creditworthiness of the building tenant.”

Carr said most of the companies rent back the office space for 10 or even 20 years.
“A lot of the businesses that are selling these want to invest the dollars they are getting in their core businesses,” he said.

CBRE is marketing several large North Texas corporate offices.

For several months, the real estate firm has been hunting for a buyer for Raytheon’s new twobuilding office campus in the CityLine project on the Bush Turnpike.

Almost 2,000 workers for the Massachusetts-based defense contractor are housed in the 500,000-square-foot project.

Also in Richardson, CBRE is seeking a buyer for Geico Insurance’s regional office center on Greenville Avenue. Last year, Geico moved about 1,600 people into the newly remodeled office complex east of U.S. Highway 75.

The insurance firm has leased the property through 2028 from the investment firm that renovated the Fossil office and warehouse buildings.

The new FedEx campus in Plano’s $3 billion Legacy West development is also up for grabs. Designed by architects HKS and HOK, the 265,000-square-foot project on Legacy Drive houses about 1,200 FedEx Office workers.

With D-FW office building prices at record levels, Carr wouldn’t be surprised to see more campuses hit the market.

“Corporates want to reinvest those dollars because the margins are higher in their core business,” he said.
‘Buying a bond’

Jonathan Napper of Eastdil Secured worked on the State Farm Insurance campus sale. He said the recent construction of several stateof-the-art business complexes in North Texas attracts investors’ interest.


Steve Brown/Dallas Morning News