As I review the sales of Westchester office buildings over the last three years or so, it has occurred to me how much of our office inventory has turned over to new ownership.
As we have REIT owners, institutional owners, large real estate partnership owners and private owners of office buildings in Westchester, the reasons to sell a property vary widely. But one thing is sure: there has been plenty of investment sale activity in our county. The total Westchester multitenant office building inventory is a little more than 27 million square feet. Our leasing market is in a pretty healthy place. Inventory has been reduced by the demolition of obsolete buildings, and repurposings of other buildings or their sites to new uses, such as multifamily residential and retail.
Some sellers are taking some profits. Some are selling off noncore properties to redeploy their capital. Some buyers are buying income in place, and others are looking to add value and rent at higher numbers.
REITS: THE BIG SELLERS
The public REITs (Real Estate Investment Trusts), notably S.L. Green and Mack-Cali Realty Corp., have been selling off very significant portions of their Westchester portfolios. In the last two years or so, S.L. Green has sold off the following buildings: the 71,000-square-
foot Renaissance Square (the office condo portion of the Ritz-Carlton complex); 140 and 150 Grand St. in White Plains (221,000 square feet); and 520 White Plains Road in Tarrytown (180,000 square feet). The Ritz-Carlton space (substantially leased) was sold to a New York City-based investment group. The Grand Street buildings were sold to Westport Capital, and the Tarrytown building was sold to a Rockland County-based investment group. It has also sold 115 and 117 Stevens Ave. in Valhalla (183,000 square feet) as well as the six-building Reckson Executive Park in Rye Brook (560,000 square feet) to Geo. Comfort and Sons, which also owns the Centre at Purchase. That is 12 buildings in total. In addition, it has sold off what was a development site for a 350,000- square-foot office building at Reckson Executive Park to a residential developer, who is building duplex (semi-attached) and free-standing homes in the $950,000 to $1,400,000 price range. The remaining properties it owns in the county are 360 Hamilton Ave. in the White Plains Central Business District, and the three-building Summit office park
Mack-Cali (which is the successor company to the Robert Martin Co., a prolific residential and commercial developer in the 1970s and ‘80s) has sold the 571,000-square-foot Westchester Financial Center, located across the street from the Metro-North station in White Plains, as well as 1 and 3 Barker Ave. (which total 135,000 square feet), all in the Central Business District. It has emptied the 46,000-square-foot office building at 1 Water St. of office tenants and transferred it to their Roseland multifamily subsidiary, which reportedly plans to demolish the building and construct a multifamily rental building. Mack-Cali no longer owns any office space in the White Plains CBD, where it once held almost 670,000 square feet. The company’s Warehouse Lane industrial park in Elmsford is for sale and it is widely rumored that it will sell off all of their flex parks, located in Yonkers, Elmsford and Hawthorne, and exit the Westchester market.
S.L. Green is the largest office landlord in New York City. Mack-Cali has extensive holdings in New Jersey. In both cases, their Westchester properties are what is referred to as “non-core” buildings, that are not the key economic drivers of their vast portfolios.
Westchester has had zero rent growth in its office product since the mid-1980s, with the notable exception of an uptick in the White Plains CBD over the last couple of years. It seems that these large public owners are selling non-core properties to reap some of the value they have created over the years and/or to redeploy the cash from the sales into what they believe will be higher-yielding assets.
ON THE WEST SIDE
On the west side of the county, RXR is selling off its flagship Tarrytown Corporate Center on Route 119. The investment holding period with its Australian pension fund partner in these properties has come to an end, and the fund must be liquidated to return the
capital to its investors. They have sold the flagship building at 660 White Plains Road (the 279,000-square-foot building known as “The Pyramid”) to GHP. They have also sold 555 White Plains Road in Tarrytown to the Robert Martin Company, which has announced it will demolish this building as soon as its only tenant (Tappan Zee Constructors, which is completing the construction of the new Mario Cuomo Bridge) vacates, and will likely build a fitness center and self-storage building on the site. This will remove another 135,000 square feet from our office inventory. RXR has also sold 560 and 580 White Plains Road (totaling 295,000 square feet) to a new Australian-based group, which has plans to spend the capital needed to upgrade these long-neglected buildings. In 2017, it sold 80 and 100 Grasslands Road in Elmsford, which totaled 155,000 square feet.
Also in Tarrytown, Keystone Property Group has sold 570 Taxter Road in Elmsford, a 78,000- square-foot office building, to a New City-based investor. This owner has also given back over 534,000 square feet of buildings to its lender, which consist of the Talleyrand Office Park (200 and 220 White Plains Road in Tarrytown, totaling 180,000 square feet) and Taxter Corporate Park (555 and 565 Taxter Road in Elmsford, which total 354,000 square feet). GHP has bought the debt on the Elmsford buildings and will likely foreclose and become the new fee owner. Reportedly the Tarrytown buildings are in contract to be sold, and it is expected that the new owner will convert the 200 building to multifamily residential, taking more office space off the county inventory.
Both the RXR sales and Keystone defaults will lead to new owners for some of the buildings and demolition or repurposing of others. GHP has clearly been the biggest buyer in the county, adding over 800,000 square feet of assets to its portfolio.
MAJOR SALES IN THE WHITE PLAINS CBD
In the White Plains Central Business District, Beacon Capital sold the 907,000-square-foot Westchester One building in White Plains to an investor group that is new to the
Westchester market. Ivy Realty bought White Plains Plaza out of receivership. This is a 734,000-square-foot project at the North Broadway side of the White Plains CBD. It consists of two office buildings, One N. Broadway and 445 Hamilton Ave., as well as the retail building that Walmart recently vacated. Ivy has invested millions of dollars in upgrades to lobbies, public hallways, entrances, bathrooms and the parking structure. It has leased this project quickly at rents, which have escalated due to high demand for these improved buildings. Some smaller sales have taken place as well, including GHP’s sale of 7-11 South Broadway (70,000 square feet) and the sale of 75 South Broadway (91,000 square feet). Silverman Realty bought 200 and 202 Mamaroneck Ave. (82,000 square feet) in
TURNOVER ON THE PLATINUM MILE
Normandy Partners sold five office buildings totaling 421,000 square feet on Corporate Park Drive for a new multifamily residential development by Toll Brothers and a new 125,000- square-foot Wegman’s supermarket. It also sold 925 and 1025 Westchester Ave. in White Plains (totaling 193,000 square feet) to RPW Group.
Also on the Platinum Mile (which is now more commonly known as the Medical Mile among real estate professionals), 3 Westchester Park Drive (159,000 square feet) was sold to a residential developer, who plans to demolish the building and build
RPW Group sold the 120,000-square-foot 2975 Westchester Ave. in Purchase after successfully completing a re-leasing program. This owner then bought 925 and 1025 Westchester Ave. from Normandy, as it had little vacant space in its existing portfolio and needed new inventory to lease. Some buyers purchase buildings for the lease income that is already in place, while others look for “value-add” plays where they can purchase buildings at an advantageous price, renovate their dated lobbies, public corridors and bathrooms, and add amenities to create value by leasing up their newly
411 Theodore Fremd Ave. (112,000 square feet) in Rye was sold in 2016.
In Port Chester, the 40,000-square-foot Gateway Building has been sold and is quickly being upgraded to Class A quality.
In Yonkers, the two largest office buildings in the downtown area were recently sold. The 148,000-square-foot 20 S. Broadway in Getty Square was sold to an owner new to Westchester, who has planned to improve this classic 1931 building with its sweeping Hudson River views. The building at 86 Main St. (70,000 square feet) was sold, and the new owner intends to re-clad the upper three floors of this six-story building in a glass curtain wall to better take advantage of its river views.
CHANGE IN THE NORTHERN SUBMARKET
In the Northern Submarket, One Pepsi Way (540,000 square feet and sold in 2015) and the IBM complex (1.2 million square feet), both in Somers, were sold to the Mexican billionaire Carlos Slim. It was recently reported that the IBM complex has applied to
Somers for a change of zoning to permit a private STEAM (science, technology, engineering, arts and mathematics) school aimed primarily at boarding students. If this project is successful, it will dramatically reduce the approximately 40 percent office vacancy rate in this submarket, and would potentially reduce the countywide office vacancy rate to near or below 20 percent. This may finally answer the question that those in the real estate industry have had for a number of years: Who will lease this huge campus so far north?
The former MBIA headquarters (281,000 square feet) near the Westchester County Airport was sold to a large developer in 2015. This large campus has significant developable land, in addition to its office space, so there may well be some new uses seen here in the future.
As our entire multi-tenant office space market in Westchester is a little over 27 million square feet, it is easy to see how large a percentage of the market these recent sales have represented. Almost all of them have been at prices well below replacement cost (what it would cost to build the building today), giving the new owner the opportunity to make long-needed capital investments in the buildings. Along with the many repurposings of buildings and sites that have taken place over the recent past, I think it shows the rebounding health of our market.
Howard E. Greenberg is president of Howard Properties Ltd., White Plains. He has represented commercial tenants in Westchester and throughout the U.S. for more than three decades. He can be reached at 914-997-0300 or firstname.lastname@example.org.