Westcore Grabs 520 KSF Clorox HQ in Sale-Leaseback Deal

By Barbra Murray, Contributing Editor

In a sale-leaseback transaction, Westcore Properties has acquired the headquarters building of The Clorox Co. in downtown Oakland, Calif. The consumer products manufacturer, which has owned the 24-story tower at 1221 Broadway since 1988, will continue to occupy 57 percent of the 520,000-square-foot building.

The transaction comes two years after Clorox completed a lease of nearly 300,000 square feet at a multi-structure corporate campus in nearby Pleasanton, where it relocated its research-and-development operations.

Westcore, now left with 163,000 square-feet of vacant Class A space on its hands at 1221 Broadway, has tapped commercial real estate services firm Cushman & Wakefield to lure tenants to the high-rise. The 36-year-old property has its selling points, which will be vital in a market where, according to a report by Cushman, the vacancy rate for Class A office space in the central business district is 12.2 percent.

For starters, the LEED Platinum-certified building boasts a location directly atop a BART station that can get riders to and from downtown San Francisco in two stops. Additionally, as Westcore president and CEO Don Ankeny said in a prepared statement, “This tower will offer the only substantial block of contiguous office space in the City Center submarket. It will be an appealing option for Oakland companies needing a larger, high-image location, as well as spillover tenants from San Francisco who are seeking alternatives to the rising rents in that market.” And with Westcore now at the helm, 1221 Broadway will also benefit from renovations and a repositioning program.

In the sale-leaseback deal with Westcore, Clorox made a commitment of 15 years to the space under an agreement that allows a15-year renewal.

After a notable drop between 2007 and 2008, the sale-leaseback market went back on the upswing in 2009 and continued to rise through 2011, per a report by commercial real estate services firm CBRE Group. Earlier this year, CBRE forecasted more of the same for the future. “The inherent benefits of sale-leaseback transactions should continue to render them viable tools for raising equity for any corporation that wants to focus capital on its core businesses. At the same time, intense institutional investor interest in single-tenant sale-leaseback assets has led to rising values on such assets. As a result, we expect that sale-leaseback transactions will rebound this year and beyond.”

The financial terms of the Westcore and Clorox sale-leaseback transaction have not been disclosed. However, the price tag is likely to have reflected the increasing strength of the sale-leaseback market. “For transactions with good tenant credit, long lease terms and good real estate fundamentals, pricing has returned to pre-recession levels,” Brian Scott, a senior managing director with CBRE, said in the report.

Other sizeable office sale-leaseback deals this year include Clarion Partners’ $137 million acquisition of the 598,000-square-foot high-rise at 1600 Seventh Ave., in Seattle, Wash., from tech company CenturyLink. And in Chicago, a joint venture between GlenStar Properties L.L.C. and USAA Real Estate Co. agreed to shell out $151.5 million on two buildings accounting for 1.3 million square feet of the Chicago Board of Trade in a transaction that allowed the seller, CME Group, to remain in 150,000 square feet under a 15-year term.

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