Insurance Giant Completes Sale of 24 Office Buildings Across the Country; Lone Star Funds Believed to be Buyer
The State Farm Mutual Automobile Insurance Co. continues its sell off of owned real estate. The insurance company disclosed in its third quarter report to insurance regulators that it sold 24 of its facilities this month and will lease the properties back from the buyer for terms of between five to 15 years at a total lease cost of $750.1 million.
While State Farm did not disclose the buyers or addresses, Lone Star Funds is the known buyer of 23 of the facilities. Lone Star Funds, a global private equity firm, acquired operations centers consisting of 6.2 million square feet in 16 states for an undisclosed price.
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A loan document filed as part of Lone Star’s purchase of one of the State Farm operations centers in Jacksonville, FL, show that affiliates of the private equity investor borrowed $416.5 million from the Royal Bank of Canada this month to fund the Jacksonville purchase. The document lists other affiliated borrowing entities for the total amount on properties in Bakersfield, CA; Winter Haven, FL; West Lafayette, IN; Frederick, MD; Newark, OH; Concordville, PA; DuPont, WA; Malta, OH: and Greeley, CO.
In August, State Farm said it would seek a sale/leaseback of office facilities it owned in 18 markets across the country. In addition to the markets mentioned above, the insurer sold facilities in the following markets:
Ballston Spa, NY,
New Albany, OH,
Newark, OH, and
State Farm expects to realize a net gain of $397.1 million from the sale of all 24 properties. The Bloomington, IL-based firm was exclusively represented by Transwestern managing directors Brad Cohen, Gary Nussbaum, Larry Thiel and Thomas Gorman in the latest property dispositions, as well as by senior associate Dave Matheis. Lone Star Funds represented itself.
According to memo sent in August of this year by Mary Crego, a senior vice president at State Farm, on the insurer’s real estate plans, the sale and lease-back of facilities was part of the firm’s real estate strategy to provide appropriate operational flexibility and did not indicate that the company was exiting a location or closing operations in a particular location.
The firm had simply conlcuded that leasing rather than owning provided greater flexibility to respond to customers’ changing needs and expectations, she said in her memo.
In August 2013, State Farm owned more than 100 buildings.
At that time, the company had sale/leaseback transaction pending for operations centers in Atlanta and Duluth, MN, for terms of 10 years with two five-year options to renew. It was also exploring options for its Dallas operations center as it moved more employees to that hub.
Previously this year, State Farm sold and leased back its Austin operations center for a term of 15 years with two five-year options to renew. Affiliates of W.P. Carey acquired the property for $115.6 million.
It also completed a $73 million sale of a 372,408-square-foot Tempe operations center and announced plans to build a $600 million, five-building regional headquarters in Tempe.
In those two previous transactions, State Farm posted after tax net gains of $78.28 million.