W. P. Carey Closes $110M Sale-Leaseback of State Farm Operation Center in Austin
- Aug 22, 2013
Two W.P. Carey REIT affiliates - CPA 17 – Global and CPA 18 – Global – have acquired the State Farm Operations Center in Austin, Texas, in a sale-leaseback for $110 million, the REIT’s first Class A office property in the city.
It is also the first investment made by CPA 18 – Global. Both the REITs are publicly held and non-traded.
The 448,898-square-foot facility, located on 83.5 acres in the Amber Oaks Corporate Center, has been State Farm’s Operations Center in Austin since 1994. The initial term of the lease is 15 years with two five-year options to renew. The sale-leaseback is part of an ongoing strategy by State Farm to sell many of its properties in the United States, according to an Aug. 20 internal memo obtained by The News Tribune of Tacoma, Wash. The Tacoma newspaper reported that State Farm was also planning on selling its Dupont, Wash., office building in a sale-leaseback arrangement.
The memo, from Mary Crego, senior vice president, confirmed the sale-leaseback of the Austin operations center as well as a similar facility in Tempe, Ariz. The News Tribune published the entire memo in its Aug. 20 edition and noted that the real estate transactions were occurring as part of a five-year review and reorganization of the privately-held insurance company’s business operations. Tacoma is one of several U.S. cities as well as Dallas, Atlanta and Phoenix, where State Farm is expanding its operations.
An Aug. 21 report in the Northern Colorado Business Report said the insurance company is selling 23 buildings in 18 locations, including three building in Greeley, Colo. A State Farm spokesperson told that publication that the company was continuing its operations at the Greeley sites under new leases.
The State Farm memo published in The News Tribune notes that the company owns more than 100 buildings and that it was still assessing its options but was undertaking the new real estate strategy to provide “appropriate operational flexibility.”
Officials of W.P. Carey, a New York-based publicly-traded REIT and leading provider of corporate sale-leaseback financing, cited State Farm’s strong credit rating as one reason for purchasing the Austin operations center.
“In addition to being a Class A office building with a prime location in one of the nation’s top performing metro areas, the property is leased to State Farm, which is an AA credit-rated tenant,” Gino Sabatini, W.P. Carey managing director and co-head of global investments, said in a news release. “Given these characteristics, the asset is a strong addition to the portfolios of CPA 17 – Global and CPA 18 – Global, consistent with our strategy of generating stable cash flow and long-term value for investors.”
While W.P. Carey owns numerous properties in Texas, including an AutoZone retail store in Austin, a spokesman told Commercial Property Executive that the State Farm property was the first Class A office acquisition it had made in Austin. Asked about the two REITs sharing the purchase, the spokesman said it was “not uncommon for large acquisitions to split them between two different entities.”
W.P. Carey, which is celebrating its 40th anniversary, also provides build-to-suit financing for companies around the world and owns and manages in investment portfolio totaling about $15.4 billion. This is the first purchase for the CPA 18- Global investment program, but CPA 17 – Global has been active, including the July acquisition of an 897,000-square-foot logistics center for international retailer H&M Hennes & Mauritz AB in Poznan, Poland, for $85 million. That same week, CPA 17- Global had purchased the newly built European Innovation Center of Royal Friesland Campina in the Netherlands for $41 million. Also in July, W.P. Carey announced it planned a merger with CPA 16, another publicly-traded, non-listed REIT affiliate, for about $4 billion. If the merger goes through, the combined company would have a portfolio of 734 properties and 86 million square feet in 10 countries