Jones Lang LaSalle
Gale Co. selling office parks to rival for $545M
Cranford-based firm will become largest landlord in Morris
BY TIM O'REILEY DAILY RECORD
02/17/06 - Posted from the Daily Record newsroom
Mack-Cali Realty Corp.
Headquarters: Cranford.
Financials: Revenues of $164 million in the nine months ended Sept. 30. Net income of $20.6 million.
Holdings: Owns or manages 270 office buildings with 30 million square feet in eight states. Slightly more than half in New Jersey; most of the rest in New York. Morris County roster includes 24 buildings with 3.5 million square feet. Most in Parsippany but also buildings in Florham Park, Morris Plains and Morris Township.
Employees: Nearly 350.
History: Cali Associates started in 1949, building homes in northern New Jersey. Went public in 1994. Merged with Mack Co. in 1997.
Gale Co.
Headquarters: Florham Park.
Financials: Privately held; not disclosed.
Holdings: Owns 20 buildings with 2.75 million square feet in partnerships, with some of the interest held individually by Stan Gale. Manages offices containing 60 million square feet for others.
Employees: About 600, including 180 in Florham Park.
History: Started as Gale & Wentworth in 1988. Became Gale Co. in 2001 after departure of Finn Wentworth.
FLORHAM PARK --Veteran developer Stanley C. Gale, whose office parks dot numerous towns in central and northern New Jersey, has agreed to sell a large part of his holdings to cross-state rival Mack-Cali Realty Corp. for as much as $545 million.
Gale will keep the Florham Park office in place and stay active in the business.
The three-stage deal calls for Mack-Cali to pay as much as $40 million for Gale Real Estate Services Co., the management, construction and maintenance division of the complex empire that goes under the umbrella name Gale Co.
It will spend $505 million more for 20 office buildings containing 2.75 million square feet, including four in Parsippany with 627,000 square feet.
This would add to the 20.3 million square feet in Cranford-based Mack-Cali's New Jersey portfolio and entrench it as the largest landlord in Morris County.
When the deal closes, Mack-Cali would control about 15 percent of the total office market in the county and 30 percent of the Class A space, the newest and most opulent.
The companies did not disclose a projected timetable for completing the deal.
While staying on as a nonexecutive vice chairman of the services operation, Stan Gale will remain head of the separate Gale Holdings/International, which is undertaking a massive $25 billion project in South Korea called New Songdo City.
Gale Holdings/International would retain its offices in New York, Boston and Irvine, Calif.
Tapping outside investors to finance individual projects or in packages has propelled Gale Co. since it started as Gale & Wentworth in 1988.
Although Stan Gale said Mack-Cali's size and status as a public company would help raise capital for future projects, he added, "This was not a financially driven deal."
Instead, he said it began last autumn as a proposal circulated among real-estate investors to refinance a package of properties that the company had purchased two years ago.
These included not only the New Jersey buildings but those in Illinois and Michigan as well.
As offers came in, the Midwestern buildings were split into a separate sale. Selling the New Jersey ones would have left Gale without anything of its own.
"I said, 'That's all fine,' but I wanted to know how they (potential buyers) would look at the Gale Co. in their future plans," Gale said.
Gale has sold dozens of buildings in the past but never has taken its collection down to zero.
The services division's income flows not only from offices owned by outside clients, such as AT&T and GlaxoSmithKline, but also those that other parts of Gale built and owned.
Currently, Gale contracts cover about 60 million square feet.
In the past two weeks, Mack-Cali came back with the offer to buy Gale Real Estate Services and keep it in place.
Mack-Cali chairman and chief executive Mitchell E. Hersh said some functions, such as accounting and technology systems, would be combined with the parent company's.
Stan Gale said the company's 180 employees in Florham Park, and 600 companywide, would keep their jobs and the number of employees would grow.
Top level
At the top level, Hersh will be the division's chairman and chief executive, with Gale as the nonexecutive vice chairman.
Mark Yeager will continue running the operations and making investment decisions as president.
To ensure that key people stay in place, the $40 million purchase price includes $12 million in cash and $10 million in ownership units in Mack-Cali. The remaining $18 million would be earned during an unspecified time as the division reaches certain business goals.
Some in the industry wondered how long the arrangement would last.
"The fallout will be interesting. In a merger, it's always the first announcement that the office will stay," said Peter D. Blanchard, a principal at the brokerage Garibaldi Group in Chatham. "But in the end, the two are blended together and there is a lot of fallout."
As part of the deal, Mack-Cali will take over the development rights that Gale holds on certain properties, including the 175,000-square-foot office building under construction at the Center of Morris County in Parsippany, a 100,000-square-foot neighbor still on the drawing board, and a massive redevelopment of the former ExxonMobil International headquarters in Florham Park, The last project is a joint venture with Rockefeller Group Development Corp.
Part of that project is one of five finalists for an office and training complex for the New York Jets.
Even if the Jets go elsewhere, the plans are being redrawn to scale down the proposed 2 million square feet of offices in favor of assisted-living housing for senior citizens, Stan Gale said.
Split in two
The real-estate portion of the Mack-Cali purchase was broken into two parts.
Mack-Cali will pay $373 million for almost total ownership of one package of a dozen buildings containing nearly 1.7 million square feet, held by a joint venture of New York-based SL Green Realty Corp. and the Gale division. With an average of 95.1 percent occupancy, they are essentially full.
The second group, including eight buildings with nearly 1.1 million square feet, but only 55 percent leased, will cost $168 million for about one-half ownership. SL Green and Stan Gale individually would retain the other half.
The addition to its building collection leaves Mack-Cali with potentially more power to wring higher rents from corporate tenants, particularly in Morris County.
"Are they going to use that market power? Sure," Blanchard said. "But I think they will be a lot more genteel about it than some other people I can think of."
Mack-Cali, in its announcement of the deal, made a point of saying it agreed to buy a "major competitor."
As a result, Hersh said, "I would suggest I have developed some competitive advantages in the marketplace."
Since 1920s
Stan Gale's family has been in the residential real-estate business on Long Island since the 1920s, and the family still owns the Daniel Gale Agency.
After working for others in commercial real estate, Stan Gale struck out on his own 18 years ago in partnership with Finn Wentworth.
In 2001, Wentworth left to become president of the YankeeNets, a company that owned the Yankees, Nets and Devils sports team. The company later was broken up.
Wentworth returned to Morristown as a principal of Normandy Real Estate, which purchases office buildings.
What was renamed Gale Co. after Wentworth left focused on developing buildings from scratch, building them for others and managing them.
Recently, the development and construction parts slowed dramatically from the boom years of the 1990s, although construction has started to rebound, Stan Gale said.
Attempts to move beyond Gale Co.'s New Jersey base have met with mixed results.
The company completed and sold a 36-story tower in Boston and may soon announce new projects there, Stan Gale said.
The office in Irvine, intended as the company's beachhead in the Southern California office market, has been converted to a sales office for residential units in New Songdo City because of the large Korean population nearby.
Gale Co. selling office parks to rival for $545M
Cranford-based firm will become largest landlord in Morris
BY TIM O'REILEY DAILY RECORD
02/17/06 - Posted from the Daily Record newsroom
Mack-Cali Realty Corp.
Headquarters: Cranford.
Financials: Revenues of $164 million in the nine months ended Sept. 30. Net income of $20.6 million.
Holdings: Owns or manages 270 office buildings with 30 million square feet in eight states. Slightly more than half in New Jersey; most of the rest in New York. Morris County roster includes 24 buildings with 3.5 million square feet. Most in Parsippany but also buildings in Florham Park, Morris Plains and Morris Township.
Employees: Nearly 350.
History: Cali Associates started in 1949, building homes in northern New Jersey. Went public in 1994. Merged with Mack Co. in 1997.
Gale Co.
Headquarters: Florham Park.
Financials: Privately held; not disclosed.
Holdings: Owns 20 buildings with 2.75 million square feet in partnerships, with some of the interest held individually by Stan Gale. Manages offices containing 60 million square feet for others.
Employees: About 600, including 180 in Florham Park.
History: Started as Gale & Wentworth in 1988. Became Gale Co. in 2001 after departure of Finn Wentworth.
FLORHAM PARK --Veteran developer Stanley C. Gale, whose office parks dot numerous towns in central and northern New Jersey, has agreed to sell a large part of his holdings to cross-state rival Mack-Cali Realty Corp. for as much as $545 million.
Gale will keep the Florham Park office in place and stay active in the business.
The three-stage deal calls for Mack-Cali to pay as much as $40 million for Gale Real Estate Services Co., the management, construction and maintenance division of the complex empire that goes under the umbrella name Gale Co.
It will spend $505 million more for 20 office buildings containing 2.75 million square feet, including four in Parsippany with 627,000 square feet.
This would add to the 20.3 million square feet in Cranford-based Mack-Cali's New Jersey portfolio and entrench it as the largest landlord in Morris County.
When the deal closes, Mack-Cali would control about 15 percent of the total office market in the county and 30 percent of the Class A space, the newest and most opulent.
The companies did not disclose a projected timetable for completing the deal.
While staying on as a nonexecutive vice chairman of the services operation, Stan Gale will remain head of the separate Gale Holdings/International, which is undertaking a massive $25 billion project in South Korea called New Songdo City.
Gale Holdings/International would retain its offices in New York, Boston and Irvine, Calif.
Tapping outside investors to finance individual projects or in packages has propelled Gale Co. since it started as Gale & Wentworth in 1988.
Although Stan Gale said Mack-Cali's size and status as a public company would help raise capital for future projects, he added, "This was not a financially driven deal."
Instead, he said it began last autumn as a proposal circulated among real-estate investors to refinance a package of properties that the company had purchased two years ago.
These included not only the New Jersey buildings but those in Illinois and Michigan as well.
As offers came in, the Midwestern buildings were split into a separate sale. Selling the New Jersey ones would have left Gale without anything of its own.
"I said, 'That's all fine,' but I wanted to know how they (potential buyers) would look at the Gale Co. in their future plans," Gale said.
Gale has sold dozens of buildings in the past but never has taken its collection down to zero.
The services division's income flows not only from offices owned by outside clients, such as AT&T and GlaxoSmithKline, but also those that other parts of Gale built and owned.
Currently, Gale contracts cover about 60 million square feet.
In the past two weeks, Mack-Cali came back with the offer to buy Gale Real Estate Services and keep it in place.
Mack-Cali chairman and chief executive Mitchell E. Hersh said some functions, such as accounting and technology systems, would be combined with the parent company's.
Stan Gale said the company's 180 employees in Florham Park, and 600 companywide, would keep their jobs and the number of employees would grow.
Top level
At the top level, Hersh will be the division's chairman and chief executive, with Gale as the nonexecutive vice chairman.
Mark Yeager will continue running the operations and making investment decisions as president.
To ensure that key people stay in place, the $40 million purchase price includes $12 million in cash and $10 million in ownership units in Mack-Cali. The remaining $18 million would be earned during an unspecified time as the division reaches certain business goals.
Some in the industry wondered how long the arrangement would last.
"The fallout will be interesting. In a merger, it's always the first announcement that the office will stay," said Peter D. Blanchard, a principal at the brokerage Garibaldi Group in Chatham. "But in the end, the two are blended together and there is a lot of fallout."
As part of the deal, Mack-Cali will take over the development rights that Gale holds on certain properties, including the 175,000-square-foot office building under construction at the Center of Morris County in Parsippany, a 100,000-square-foot neighbor still on the drawing board, and a massive redevelopment of the former ExxonMobil International headquarters in Florham Park, The last project is a joint venture with Rockefeller Group Development Corp.
Part of that project is one of five finalists for an office and training complex for the New York Jets.
Even if the Jets go elsewhere, the plans are being redrawn to scale down the proposed 2 million square feet of offices in favor of assisted-living housing for senior citizens, Stan Gale said.
Split in two
The real-estate portion of the Mack-Cali purchase was broken into two parts.
Mack-Cali will pay $373 million for almost total ownership of one package of a dozen buildings containing nearly 1.7 million square feet, held by a joint venture of New York-based SL Green Realty Corp. and the Gale division. With an average of 95.1 percent occupancy, they are essentially full.
The second group, including eight buildings with nearly 1.1 million square feet, but only 55 percent leased, will cost $168 million for about one-half ownership. SL Green and Stan Gale individually would retain the other half.
The addition to its building collection leaves Mack-Cali with potentially more power to wring higher rents from corporate tenants, particularly in Morris County.
"Are they going to use that market power? Sure," Blanchard said. "But I think they will be a lot more genteel about it than some other people I can think of."
Mack-Cali, in its announcement of the deal, made a point of saying it agreed to buy a "major competitor."
As a result, Hersh said, "I would suggest I have developed some competitive advantages in the marketplace."
Since 1920s
Stan Gale's family has been in the residential real-estate business on Long Island since the 1920s, and the family still owns the Daniel Gale Agency.
After working for others in commercial real estate, Stan Gale struck out on his own 18 years ago in partnership with Finn Wentworth.
In 2001, Wentworth left to become president of the YankeeNets, a company that owned the Yankees, Nets and Devils sports team. The company later was broken up.
Wentworth returned to Morristown as a principal of Normandy Real Estate, which purchases office buildings.
What was renamed Gale Co. after Wentworth left focused on developing buildings from scratch, building them for others and managing them.
Recently, the development and construction parts slowed dramatically from the boom years of the 1990s, although construction has started to rebound, Stan Gale said.
Attempts to move beyond Gale Co.'s New Jersey base have met with mixed results.
The company completed and sold a 36-story tower in Boston and may soon announce new projects there, Stan Gale said.
The office in Irvine, intended as the company's beachhead in the Southern California office market, has been converted to a sales office for residential units in New Songdo City because of the large Korean population nearby.
posted by Jones Lang LaSalle NJ News Blog at 9:40 AM
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