Transwestern, Mirae Pay Hefty Price for State Farm Campus

The sale-leaseback of the 2.2 million-square-foot property is reportedly one of the largest ever real estate trades in North Texas.
CityLine State Farm, courtesy of Transwestern Investment Group

CityLine State Farm, courtesy of Transwestern Investment Group

Richardson, Texas—Corporate Properties Trust I LP, a new partnership of Transwestern Investment Group and Seoul, Korea-based Mirae Asset Global Investments Co., has steered its way into the regional real estate history books. The company just acquired the 2.2 million-square-foot State Farm Auto Insurance Co. regional headquarters in Richardson, Texas, in a sale-leaseback transaction being called not just one of the largest ever real estate trades in metropolitan Dallas, but one of the largest in North Texas.

Transwestern isn’t confirming any rumorslike the one that puts the acquisition price of State Farm’s four-building home at more than $800 millionbut it’s not maintaining radio silence altogether either. “We can disclose the amount of equity capital Mirae invested in the ownership entity,” Laurie Dotter, president of Transwestern Investment Group, told Commercial Property Executive. Mirae coughed-up $348 million, a Transwestern entity also invested an undisclosed amount, and Goldman Sachs and Deutsche Bank provided $452 million of mortgage debt.

Take a brand-new Class A+ office property, combine it with a credit tenant under a long-term lease and a location within developer KDC’s $1.3 billion CityLine mixed-use project, and you have an investor’s dream. State Farm’s home consists of the 13-story 1150 State St., the 15-story 1251 State St. and the 21-story 1201 State St., all three of which were delivered in 2015; the fourth tower, the 12-story 3661 N. Plano Road, reached completion just last month. Additionally, each of the Corgan Architects-designed towers features roughly 30,000 square feet of ground-level retail. Together, the state-of-the-art LEED Gold-certified buildings comprise the centerpiece of the transit-oriented CityLine live-work-play destination, which will ultimately offer five million square feet of office space, approximately 3,900 multifamily residences, more than 60 dining and retail options, two hotels and public green space.

CPT I is just getting started. The partnership is pursuing sale-leaseback transactions involving premier, fully leased institutional properties for long-term hold. For a good portion of the investment community, it’s the right strategy at the right time. “Many investors are interested in earning a stable, attractive level of current yield on their investment, derived from the reliable rental payments generated from longer term leases with credit tenants. Matching their equity investment with debt capital, which is available at attractive terms and low interest rates, in a conservatively capitalized vehicle provides returns that meet their targets. Many investors cannot meet their objectives in fixed-income investments with comparable corporate credit,” Dotter said.

The sale-leaseback market may not be as hot as it was a few years ago but it’s still highly competitive, with the office sector leading the game, according to a report by commercial real estate services firm JLL. Credit and leasehold remain top components of valuations, particularly for properties with investment-grade tenancies and leaseholds with 10-plus years remaining, achieving 14 basis points over the average office net lease asset. As CPT I continues its hunt for additional prospects, Transwestern is undaunted by other investors plying the sale-leaseback market . “We do not think it will be challenging. We are working on a pipeline of opportunities,” Dotter added.