Business

Tuesday, Aug 20 2013 06:47 PM

State Farm puts Bakersfield center on the market

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    By Felix Adamo / The Californian

    The grand entrance to State Farm Insurance at 900 Old River Road.

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    By Felix Adamo / The Californian

    State Farm Place intersects with Old River Road where State Farm Insurance is located.

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    By Felix Adamo / The Californian

    State Farm Insurance building at 900 Old River Road.

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BY JOHN COX Californian staff writer jcox@bakersfield.com

State Farm Insurance is putting its Bakersfield Operations Center up for sale, injecting uncertainty into the lives of its 1,300 local employees and the health of the city's economy.

The insurer said Tuesday its 556,000-square-foot building at 900 Old River Road would be part of a 23-property package sale spread across 18 undisclosed North American locations, the goal being greater flexibility as the insurer moves to rent more and own less.

"Operational flexibility includes all the things we may need to adjust quickly -- processes, systems, staffing, training -- so that we may anticipate and respond to customers' changing needs," spokesman Sevag Sarkissian wrote in an email.

Any buyer would have to agree to lease the Bakersfield property back to the Bloomington, Ill.-based company for five years, and offer two additional five-year lease-back options, he said.

Members of the local business community have worried for months about the effect a departure would have on the Bakersfield economy.

Watching State Farm accumulate new office space in Arizona and Texas, they have theorized that selling the Bakersfield center would remove a large number of good-paying jobs in Bakersfield.

The loss of such white collar jobs would affect both the housing market and discretional spending.

Already the Panama-Buena Vista Union School District has considered the possibility of losing enrollment from State Farm families as it struggles to plan for realigning its school attendance boundaries.

Panama is trying to distribute students more evenly next year because some of its schools are overcrowded while others are underused.

The district has heard rumors about State Farm possibly leaving town, said Assistant Superintendent Gerrie Kincaid.

The president and CEO of the Greater Bakersfield Chamber of Commerce, Cindy Pollard, asked the company to give Bakersfield a chance to counter any relocation offer.

"When questions begin to arise as to the viability of (State Farm's) success here, I would hope that we as a community and as a state have an opportunity to do what we can to address their concerns and hold onto their business," she wrote in an email.

Sarkissian dismissed speculation about the company's future moves.

"The sale of this building does not indicate a change in the workforce in this location," he said.

Bakersfield commercial real estate developer Greg Bynum said State Farm's sale plans would allow it to recapitalize at a time of relatively strong property values.

The five-year lease-back deal would be an uncommonly short term that could make a purchase less attractive, Bynum said, adding that few entities beyond large investment groups have that much buying power.

But if the company can find a buyer, he said, the flexibility for State Farm is substantial.

"If you're looking at it from State Farm's perspective, they can either stay here or they can leave at the end of five years and have all the flexibility to move their kind of business divisions anywhere they want to," he said.

Tony Olivieri, a commercial real estate broker in Bakersfield, said State Farm faces a significant challenge to find a buyer, given that banks don't usually want to make large loans with such a short lease commitment.

Olivieri said rumors of State Farm's relocation plans arose last week in a meeting he had with Santa Barbara investors looking to build a multi-family apartment complex in Bakersfield. He said the group was worried that the insurer's departure could weaken the local rental market.

In February, the Phoenix Business Journal reported that State Farm plans to build a "massive," 1 million-square-foot regional headquarters in Tempe that would bring thousands of new jobs to Arizona.

State Farm is also looking to expand in the Dallas area, where the company signed a lease for 1.5 million square feet in late 2012, according to the Dallas Business Journal. It said the complex could accommodate up to 5,000 workers.

"We are continuing to make decisions on the number of employees that will occupy this facility and do not have final numbers at this time," the company told the Dallas publication.

In November 2010, State Farm disclosed plans to consolidate its Rohnert Park and Fresno operations to Bakersfield. It also ended leases at smaller offices in Chico, Lancaster, Modesto, Palm Desert, San Francisco, San Luis Obispo, San Marcos, San Ramon and Watsonville.

The move resulted in some 300 employees relocating to Bakersfield.

Eight years earlier, the company went from 66 California offices to 21.

-- Staff writer Courtenay Edelhart contributed to this report

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