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Franchises Jenny Craig trims the fat with building’s sale

Real Estate: Deal Eliminates Property From Potential Sale of Local Weight-Loss Firm

In selling its corporate headquarters building to next-door neighbor National University for more than $21 million, Jenny Craig Inc. booked a hefty profit and improved its balance sheet to any potential acquirers.

Earlier this month, Jenny Craig confirmed it entered into escrow to sell the two-story, 75,000-square-foot building to National University. The struggling weight-loss firm said last month it hired an investment banking firm to explore a potential sale.

While neither Jenny Craig nor National University released the purchase price, saying the buyer was still conducting due diligence, Jenny Craig paid about $8 million for the building in 1996. After it pays off the $5 million mortgage and expenses related to the sale, Jenny Craig said it would net about $16 million from the transaction. That translates to a price tag of about $21 million.

“This is one of those business deals that works out for both parties,” said Jim Kelly, CFO for Jenny Craig. “We get to realize the appreciation of the building and get to move to a more functional building, and that’s just a smart thing to do.”

For National University, the deal makes sense as well. The state’s second-largest private university with 27 locations has been on a growth spurt in recent years and is seeking more space for its administrative staff, said Kevin Casey, National University vice president for administration and business.

“We think it’s a very attractive addition to the university because it’s co-located to our existing building and will allow us to share our support staff.”

The Jenny Craig building at 11355 N. Torrey Pines Road was the former headquarters for the Henley Group, a technology company that was started by Michael Dingman and moved to New Hampshire in the early 1990s.

National University occupies the building that once was headquarters for Signal Corp. and was purchased by National in 1996 for $8.15 million. The buildings are connected by a second-story walkway that is not used today.

John Bucher, a National University board member whose real estate firm represented the university in the transaction, said negotiations on the building began soon after the property was put up for sale about a year ago.

“There is no other land available at all in this area,” Bucher said. “We’re like the University of San Diego. We’re going to be around for a long time.”

National opened a new academic center and library in Kearny Mesa in September at a cost of $30 million.

David Allen, director of research for the Granite Financial Group in La Jolla, said the timing of the sale surprised him.

“I know it’s one of the things (Jenny Craig) had been exploring, but the timing is somewhat surprising in light of their recent hiring of the investment banking firm (Koffer & Co.).”

Kelly said Jenny Craig has been looking for an alternate headquarters space for the past few months, but has an agreement with National that allows the firm to stay until next March.

“We’re looking at areas that are most convenient to where our employees come from,” Kelly said. “That means we’re considering places as far north as Palomar Airport Road and as far south as the UTC area.”

Kelly said the company’s current headquarters is too large for its needs. It houses only 160 of the firm’s 3,200 employees. The building contains large offices, wide hallways and lavish features such as a fountain in the lobby, which reminds some of a Japanese spa.

“We can fit into a space between 40,000 to 45,000 square feet,” Kelly said. “The biggest thing (about the sale) is that we’ll be moving to a more functional building and will be able to save money from its operation.”

David Marino, a principle with Irving Hughes, a San Diego tenant representation firm, said the sale makes a good deal of sense for both parties.

Jenny Craig had far more space than it needed and the building’s main purpose was serving as the back office operations center for the company’s network of weight reducing centers. National University is a growing entity and needed space, and couldn’t have found a better place than right next door, he said.

For Jenny Craig, the deal also removes real estate from any potential sale, he said.

“It takes the real estate asset off the company’s financial statement so prospective buyers don’t have to discount that from the purchase price for the company,” Marino said.

Marino wasn’t surprised by the high price.

“To some degree they had a captive buyer in National University. There’s virtually no office space available in the Torrey Pines area,” he said.


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