This is a company blog used by the New Jersey Jones Lang LaSalle Team to keep track of current events within the real estate sector. All items posted on this website are originally written by other authors from various sources. This is simply used as a searchable tracking system for news we found relevant to our business.
Three Sign for Space at College Park By Eric Peterson Last updated: February 16, 2006 02:28pm
PRINCETON, NJ-Three leases totaling 33,500 sf have been signed for locations within College Park at Princeton Forrestal Center here. In the largest of the three signings, Ascend Media has taken 18,800 sf at 103 College Road East. The publisher of medical and healthcare journals is relocating from its current home in Monroe Twp., NJ.
Ascend was represented by Doug Petrozzini of Grubb & Ellis. All three transactions were arranged by Vincent Marano, COO, and leasing executive Tom Stange of locally based National Business Parks. The latter manages and leases the 40-acre campus on behalf of the owner, New York City-based Lawrence Zirinsky Associates.
Also, Princeton Gamma-Tech Instruments has leased 13,000 sf at 303 College Road East, and will move its headquarters offices and labs from nearby Rocky Hill, NJ. The company, which supplies gamma-ray and x-ray detectors an analyzers, was represented in the long-term lease by Sab Russo of CB Richard Ellis. Finally, Zensar Technologies, an IT company, is expanding and relocating from 2 Research Way within College Park, to 2,700 sf at 103 College Road East.
posted by Jones Lang LaSalle NJ News Blog at 10:13 AM
Washington Mutual to cut 2,500 jobs Bank cuts costs as mortgage market cools By Alistair Barr, MarketWatch Last Update: 6:57 PM ET Feb 15, 2006
SAN FRANCISCO (MarketWatch) -- Washington Mutual announced 2,500 job cuts at its home-loan business late Wednesday, another sign of a cooling real-estate market.
The bank, one of the largest mortgage lenders in the U.S., said its network of processing offices that provide administrative support to its home-loan businesses will be reduced to 16 from 26. The job cuts represent more than 4% of Washington Mutual's total workforce of about 60,000. After an acquisition spree, Washington Mutual (WM : Washington Mutual Inc is trying to boost efficiency by reducing the real estate it uses and moving back-office functions to lower-cost domestic and offshore locations.
But the bank also said in a statement on Wednesday that it's cutting costs at its home-loan business to "better match current and anticipated mortgage-market conditions."
Signs that the once-hot housing market is beginning to cool have accumulated this year.
U.S. banks reported weaker demand for mortgages in the past three months, a Federal Reserve survey of senior loan officers found in January.
Homebuilder KB Home (KBH : kb home com said on Feb. 13 that it's seen a surge in cancellations and a decline in orders during the first two months of fiscal 2006.
Last week, luxury homebuilder Toll Brothers (TOL : Toll Brothers, Inc. cut its outlook for fiscal 2006 home deliveries for a second time, citing slowing demand. See full story.
Washington Mutual's 2,500 job reductions will be partially offset by new hiring, the lender said. ' The bank also said it will continue to pursue strategies designed to fuel profitable growth, such as last week's announcement of 150 to 200 new retail banking stores in 2006.
posted by Jones Lang LaSalle NJ News Blog at 10:10 AM
RadioShack Net Plunges, Will Close Up to 700 Stores By Mark Clothier
Feb. 17 (Bloomberg) -- RadioShack Corp., the third-largest U.S. electronics chain, said fourth-quarter profit plunged 62 percent after a disappointing holiday season. The retailer may close up to 700 stores as part of a turnaround plan.
Net income dropped to $49.5 million, or 36 cents a share, missing analysts' estimates. A year earlier, the company earned $130.9 million, or 81 cents. Sales rose 4.9 percent to $1.67 billion, Ft. Worth, Texas-based RadioShack said in a statement today.
RadioShack reported weak sales of wireless calling plans and struggled to compete against Best Buy Co. and Wal-Mart Stores Inc. for holiday electronics sales. Chief Executive Officer David Edmondson, who this week admitted lying about his college degrees, announced a plan today to revive profit that includes closing stores, shutting two distribution centers and trimming overhead. The plan may cost as much as $100 million.
``Wireless sales struggled,'' RBC Capital Markets' Scot Ciccarelli wrote in a research note Feb. 14. The slowdown ``was exacerbated by Verizon-related transition issues and the inability of Sprint to pick up the slack. The first half of 2006 will remain challenging.''
Ciccarelli, top rated by StarMine Professional, estimated fourth-quarter profit of 68 cents, which is the consensus estimate of 15 analysts surveyed by Thomson Financial. Thomson doesn't provide the parameters for the estimates in its survey.
Gross Margin
RadioShack shares fell 52 cents to $20.75 in New York Stock Exchange composite trading yesterday. The shares declined 38 percent in the year through yesterday. Comparable store sales rose 4 percent for the quarter. Gross margin, or the amount of sales left after subtracting the cost of goods sold, narrowed to 41.1 percent from 49.3 percent as the company wrote down the value of $62 million in inventory and offered more discounts during the holidays.
Selling, general and administrative costs rose to 34.4 percent of sales from 34.2 percent. Edmondson said he lied about his academic degrees on his resume and the company's Web site. ``I clearly misstated my academic record and the responsibility for these misstatements is mine alone,'' he said in a statement on Feb.15.
The company hired an independent legal counsel for the probe. Edmondson, 46, claimed he earned degrees in theology and psychology from Pacific Coast College in California, the Fort Worth Star-Telegram reported in its Feb. 14 online edition. The school told the newspaper that Edmondson attended only two semesters and that it never offered psychology degrees.
Wireless Plans
Wireless calling plans, which make up about one-third of RadioShack's sales, rose 6 percent as sales at kiosks in malls and stores performed well, RadioShack said last month. Wireless sales in RadioShack stores were lower, the company said.
Sales of personal electronics, including less-profitable products such as MP3 players and digital cameras, rose 13 percent, RadioShack said last month.
Edmondson cut his 2005 profit forecast twice. Analysts estimate fiscal 2005 profit of $1.69, excluding a tax gain of 38 cents. RadioShack earned $2.08 per share a year ago. The company said in December that it probably wouldn't achieve its earnings goal for the quarter.
RadioShack said last month that same-store sales rose as less profitable products such as digital music players and satellite radios sold well. Sales of more profitable items such as cell phone chargers, batteries and other accessories, weren't as strong, the company said.
Verizon Deal
Ciccarelli expected a same-store sales increase of 2 percent and a total sales gain of 2.9 percent. Ciccarelli, based in New York, rates the shares ``sector perform.''
In August, RadioShack extended a 10-year agreement with Sprint and did not renew a resale agreement with Verizon Wireless that expired Dec. 31. The company also has a 10-year agreement with Cingular.
RadioShack sales, which have grown an average of less than 1 percent the prior three years, have suffered as consumers shopped more at Best Buy and Circuit City, which stock more items including digital and flat-panel televisions.
Sales at Best Buy grew an average of 16 percent in three years. At Circuit City, sales have increased an average of 3 percent in the same period.
Of the 20 analysts tracked by Bloomberg, two rate RadioShack shares as ``buy,'' 16 say ``hold,'' and two say ``sell.''
(RadioShack's earnings conference call begins at 9:30 a.m. New York time. See the investor relations page of http://www.radioshackcorporation.com/ .)
To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net Last Updated: February 17, 2006 08:10 EST
posted by Jones Lang LaSalle NJ News Blog at 10:08 AM
Mills Corp. hires advisers on possible Xanadu sale State says it anticipates project to be completed Friday, February 17, 2006 BY MATTHEW FUTTERMAN Star-Ledger Staff
In a move that raises serious questions about redevelopment plans for the Meadowlands, the troubled Mills Corp. has hired two top investment banks to advise the mall developer on a potential sale, executives confirmed yesterday.
The same executives, who asked to remain anonymous because they were not authorized to comment on the company's long- term strategy, said last week that Virginia-based Mills had retained JPMorgan and Goldman Sachs to help finance construction of several ongoing projects. However, those banks' efforts are now focused on a sale, prompting state officials to worry about the future of the $1.3 billion retail and entertainment center known as Xanadu, now under construction at the Meadowlands Sports Complex.
"Of course I am concerned, because it's my job to be concerned," said George Zoffinger, chief executive of the New Jersey Sports and Exposition Authority, the agency that operates the sports complex. "But the worst thing we can do here is panic before we know all the facts." The news that Mills was considering a sale of the entire company or some of its prime assets was first reported yesterday by the Wall Street Journal. The developments surprised officials in New Jersey, who had been assured by Mills Chief Executive Larry Siegel in a meeting two weeks ago that an accounting scandal and a series of poor earnings reports would not jeopardize the future of Xanadu. Siegel said his company, which is now the focus of a federal inquiry, remained totally committed to Xanadu.
The project, now a steel shell and a parking deck, is supposed to include dozens of high-end stores, North America's first indoor ski mountain and a minor league ballpark. Mills' partner in the project is Cranford-based Mack-Cali Realty.
Yesterday, Mills spokesman David Douglas declined to answer several questions about the future of Xanadu or the company. However, the financial community began digesting the prospect of a sale of the once-high-flying real estate investment trust, or REIT.
Jonathan Litt, an analyst with Citigroup, said Mills was likely still discussing construction financing with the banks, but noted the company could fetch $53 a share in a sale -- roughly a 25 percent premium on its current price. Shares of Mills closed yesterday at $42.14, down 8 cents.
"CEO Larry Siegel, however, did say on Jan. 6 that Mills would take 'all necessary steps' to 'create shareholder value' in response to whether Mills is looking at selling the company," Litt wrote. "Potential bidders are likely doing homework."
Industry experts said potential buyers include Paramus-based Vornado Realty Trust, mall owner Simon Property Group of Indianapolis and Westfield Development of Denver.
State Senate President Richard Codey, who during his 14 months as governor signed a deal to keep the Giants and Jets in New Jersey so the Meadowlands would remain a sports and entertainment destination, said the likelihood that Mills would be sold raised questions about what will ultimately be built at the sports complex.
"Somebody has to take a hard look at what is going on," Codey said yesterday. "The most important thing is that the entertainment part is lived up to, because the criticism was that this was just a mall."
Gov. Jon Corzine's office said the governor is keeping a close watch on developments with Mills and the sports authority.
"We expect Mills to live up to its contractual obligations, and if there were to be a substitute, we would expect them to do the same," said Anthony Coley, Corzine's chief spokesman. Carl Goldberg, chairman of the Sports and Exposition Authority and an ardent defender of Xanadu and Mills, spent a frustrating day yesterday trying to get answers from Mills executives about the company's future.
Goldberg said he wanted to make it clear to the company and any potential suitors that the sports authority had no interest in changing the scope of Xanadu to make it more focused on the lucrative retail business rather than on entertainment venues.
"We want the project we bargained for, and we are going to get the project we bargained for, either from Mills or someone else," Goldberg said. "The land uses are restricted, and any potential purchaser of Mills or this project should be warned they must have the ability to complete the project with full a complement of entertainment components."
Mitch Hersh, chief executive of Mack-Cali, predicted yesterday Xanadu would be completed, but would not speculate on whether his current partner, Mills, would be able to finish the job. "The project is going to be built and be successful, but that is a question I'm not in the loop on," Hersh said.
Despite the uncertainty, Zoffinger and Goldberg said the state could rely on its contract with Mills and Mack-Cali to make sure the project would be built. However, both men are veteran real estate executives and well aware of the possibility that any developer that bought Mills could try to play hardball with the state and refuse to do any more work on Xanadu until officials allowed for changes in the scope of the project.
In that case, Zoffinger said the state could use a portion of the $130 million it has already collected from Mills and Mack-Cali to deconstruct the steel shell that has been erected so far and pursue other opportunities on the site.
"We know there is value in this project," said Zoffinger, who is monitoring developments while on vacation in Mexico. "It is safe to say this documentation protects the interest of the state better than anything else we have. I think it puts most of the cards on our side of the table."
posted by Jones Lang LaSalle NJ News Blog at 10:07 AM
Developer offers plan to construct townhouses Friday, February 17, 2006 BY PAULA SAHA Star-Ledger Staff
K. Hovnanian, one of the state's largest developers, has filed plans with Rockaway Township to build 188 age-restricted townhouses along Green Pond Road on a piece of property that was originally approved for a shopping center.
The plan for Four Seasons at Rockaway would replace The Villages at Rockaway, an English-village style retail strip that was to be anchored by a supermarket and restaurant near the intersection of Sanders Road. The planning board approved that development in 2000. But Richard Oller, the attorney representing the current property owners, said it took so long for the developer to get the appropriate water permits that the supermarket tenant lost interest. "We had to rethink the whole project," he said.
The 51-acre property was not on the market for long, Oller said. Hovnanian became the contract purchaser about a year ago.
"We need this kind of housing in northern New Jersey, for this age group," said Doug Fenichel, a spokesman for Hovnanian. Various regulatory restrictions are making it harder for builders to find land, he said.
"It is hard to put housing in northern New Jersey," Fenichel said. "This is going to give Rockaway Township a ratable that's less intense in many ways than the Villages at Rockaway was going to be, that will not impact the school system and that would help the town take care of some of its affordable housing obligations."
The development would be about a mile away from where the 5,000-member Christ Church wants to build a new facility with a sanctuary for more than 2,500 people and a K-5 school. That project, which is still before the planning board, has encountered considerable opposition, with opponents citing traffic and environmental impact.
Many neighbors of the proposed townhouse development said they had not heard about or seen the plans. Hovnanian would need approvals from the township's zoning board of adjustment because they would need a use variance to build. The property is in a zone where residential use is not permitted.
Phyllis Hantman, the township's planning and zoning secretary, said the plans are still being reviewed to make sure they are complete, and no hearings have been scheduled.
Former Councilman Max Rogers, whose property neighbors the proposed townhouse development, said it appeared that the housing would have less of an impact than the shopping center originally approved.
"We won't have as many cars going in and out as you would a shopping center," Rogers said. According to Fenichel and the blueprints, the units would be "stacked," with first-floor garages and townhouses starting on the second floor. The blueprints also show spaces in each unit for "optional lifts" or elevators.
The townhouse development would have a 6,589-square-foot clubhouse, swimming pool and bocce and tennis courts, according to plans on file with the planning board. There would be a 105-space common parking lot and access to the site would come from Green Pond Road. A Sanders Road entrance would be used for emergency access, according to the plans.
K. Hovnanian has built Four Seasons communities across New Jersey, including complexes in Bridgewater, West Paterson and Warren Township. Another is under way in Parsippany, Fenichel said.
Paula Saha cover the Rockaways. She may be reached at psaha@star ledger.com or (973) 539-7910.
posted by Jones Lang LaSalle NJ News Blog at 10:06 AM
USA 02 16 06 IT TAKES A FREIGHT VILLAGE Roberta Weisbrod
International trade continues to expand after setting a double digit pace over the past decade, and freight transport is projected to double over the next two decades. So it is easy to understand the need for super-efficient distribution centers where containers carrying international and domestic goods are broken down and recombined for the customer.
The industrial real estate sector is riding the crest of global trends and building to keep up. The action is hottest at border crossings and ports in major cities. The Los Angeles metropolitan area is the continental mouth open to the onslaught of low cost goods from Asia, primarily China. According to data from CB Richard Ellis, by the third quarter of 2005, Southern California had a vacancy rate of 2.7% with 36 million square feet of leasing activity, of which 61% was in the Inland Empire. Chicago industrial operators and developers leased t 31.5 million square feet in 2005, with 18.3 million square feet of new construction starts in a market with an 8.6% vacancy rate.
Dan O'Connor, director of research at Global Real Analytics in California, notes that there is "healthy demand" in the industrial sector nationwide. "There is improving occupancy, development is at moderate levels from a historical standpoint, and Global trade createing need for modern space around the world," says O'Connor.
There are, however, challenges from every direction to the standard business model of building distribution centers on cheap land, which is typically at a distance from more pricey real estate near cities, ports and border crossings. The first is from the customers the truckers (and the shippers who send them) transporting goods between port/border, distribution center, and consumer. The longer distances they have to travel limits the number of local runs a day. Other forces, including a driver shortage, reductions in the allowable hours of service and congestion severely exacerbate this problem.
A second challenge is, simply put, neighbors and neighborhoods. Small towns resent the congestion and get limited benefits from the through traffic. Urbanites who consume trucked goods nonetheless dislike the truck-clogged streets, for which they are paying more in both cost and quality of life.
But a third challenge also creates the most opportunities to resolve some of the issues outlined above: distribution tenants are not getting the services they need. Under the current model, the individual distribution center tenant must procure a-la-carte services that they need in order to do business. Security? A chain link fence and a guard. Place for a meeting? Go offsite. Food for workers and management? Go offsite. Banking; hiring; training; conferencing? Offsite. Transport for workers? Private automobile. A dignified workplace with landscaping, and maintenance, and advanced communication options? Dream on!
One alternative that goes a long way toward solving or reducing these issues has been launched in Europe, and is beginning to receive serious attention in the U.S.: freight villages: large-scale developments that house several distribution centers and other freight businesses, with 24 hour perimeter CCTV security, intermodal operations, business services, amenities and urban-friendly features.
There are more than sixty freight villages in Europe. They are designed for the tenants, enabling them to do business efficiently by concentrating their anticipated workforce and management needs on site. They are all within a few miles/minutes of the cities they serve, making it easier to do business and to attract a concentration of workers. The ZAL (Zona Actividades Logisticas) Freight Village in Barcelona is owned by CILSA, a Spanish public private corporation that is 75% owned by the Port of Barcelona and 25% by the private corporation SEPES, offers free transit from the city for the workers. By being closer to a city, the numbers of truck miles are reduced; there are accessible jobs for residents; and the freight villages with their commitment to quality can become amenities for the urban area landscaped, well maintained, and a potential canvas for architecture. Additional value-added features include extra warehouse space for short-term needs; conference centers; hiring halls; training centers; restaurants; banks; jogging trails; and even nature paths.
Overall, the freight village can offer a setting of such high quality that the distribution center can function as a showroom. Business operations become more efficient and can expand with the synergies of agglomeration. Additional opportunities may arise through contacts within the international freight village network.
It all sounds great, but what about America? We have no freight villages yet, although Watsonland in California comes closest. The opportunity exists here to build on the European model, primarily through the ability to acquire large parcels of land and apply proven corporate standards of ownership and management. The New Jersey Transportation Planning Authority is exploring reusing brownfields for distribution centers and other types of freight-related real estate. Brownfields may be purchased cheaply but the cleanup imposes an investment that surface parking, for example, cannot return. The New York Metropolitan Transportation Council has recently undertaken a similar study. But with high-value, high-quality freight villages, the investment can be recouped. Freight villages set the stage for a high return on investment by attracting higher-quality tenants willing to pay premium rents for more efficient, amenitized workplaces.
In a study of European freight villages, conducted by the Partnership for Sustainable Ports for Union County, N.J., we looked at patterns of ownership and operation. Critical to the success of developing freight villages is the structuring of private-public partnerships with local and regional governments involving land donations, tax and other incentives, perhaps in exchange not only for job creation but also environmental stewardship.
Roberta Weisbrod of the Partnership for Sustainable Ports is a consultant working in the arena of freight transportation land use.
posted by Jones Lang LaSalle NJ News Blog at 10:00 AM
Bucking the trend of REITs gobbled up by private interests, Mack-Cali Realty Corp. (nyse: CLI) is acquiring 20 properties and the privately held Gale Real Estate Services Corp. for some $545 million. The deal adds about 2.8 million square feet of New Jersey office space to CLI's already substantial portfolio in the state, and partners CLI CEO Mitchell Hersh not only with entrepreneurial investor/developer Stan Gale, but also with his joint-venture partner, SL Green Realty Trust (nyse: SLG).
Gale and SLG, which bought the portfolio together, will retain a 50% interest in eight of the 20 properties Mack-Cali is buying. The interest in those eight buildings, trading at $168 million, represents a key opportunity for CLI (and also for SLG) because they are only 55% leased. The larger group of 12 buildings, which Mack-Cali is acquiring whole ownership of, is valued at $337 million, and are 95% leased. Hersh says the acquisition bulks up his company s portfolio by 10% and estimates that it will add 0.11/share to CLI's earnings, or about $8 million in NOI.
Citigroup Smith Barney REIT analysts Jonathan Litt and Jordan Sadler, in a report on the transaction published Thursday, noted that the deal is likely to bring cash to the bottom line from the get-go. "While rare these days to see immediately accretive acquisitions in the REIT space," they write, "this is largely afforded by CLI's underleveraged balance sheet." According to the report, Mack-Cali's debt load is at a modest 35% of gross asset value, though the funds it will have to draw from its credit lines to close the deal, which includes the assumption of $139 million in debt, will boost that to 39%. That's still below the REIT office-sector average of 42%. The peg the cap rate for the properties in the deal at just below 7%, with the entire transaction coming off at a 6.6% cap rate.
Litt and Sadler add that "the transaction provides the company with significant scale and pricing power in the densely populated region.
"In an interview, Sadler remained unexcited about CLI because of the company's current valuation and its New Jersey concentration. The Gale deal, he said, is "not a home run, and doesn't meaningfully change the company's growth profile." The company, he added, "is still an 800-pound gorilla, and now perhaps a 900 pound gorilla in New Jersey." Nonetheless, he called the deal a "good defensive play in that they are buying a competitor from a leasing and management standpoint, and will certainly control some New Jersey markets" once the transaction closes.
The intriguing notion that ultra-suburban Mack-Cali will now be working in joint-venture partnership with the very Manhattan-centric SL Green is also potentially rewarding, and leads to speculation about the two companies eventually joining forces to dominate two important regions of the nation's dominant real estate marketplace. While that is, if anything, well down the road, SL Green, seeking to expand its opportunities into New Jersey, joined with the entrepreneurial Gale on the purchase of the so-called Bellemead portfolio. Hersh characterizes the new arrangement, with SLG and Gale retaining their 50% ownership in some of the properties, as an "experiment that has the benefi of allowing us to work withone another in creating value in the unstabilized part of the portfolio.
"For Mack-Cali, the most significant piece of the deal involves the $40 million acquisition of Gale Real Estate Services Corp., a third-party services company. This transaction, Hersh told Forbes.com, is a "phenomenal opportunity to get involved in a company with a significant book of business in everything from leasing, asset and property management to development and construction." The company is active not just in Gale's (and Mack-Cali's) backyard of New Jersey suburbs, but also in the U.K. and Europe, says Hersh. Gale gets an upfront payment of $10 milliion in common operating partnership units and $12 million in cash, but his eventual payout will total $40 million. Hersh points to the fact that Gale is taking just over half his compensation up front shows that Gale is "fully aligned" with the transaction.
The sale will also free Stan Gale to pursue a pet project in South Korea, where he is developing the 1,500-acre New Songdo City outside Inchon. The Mack-Cali deal involves none of Gale's interests there or in the Midwest. Gale's principal backing outside of his partnership with SL Green has historically come from Morgan Stanley Real Estate Funds, and those interests will also remain outside of the present deal. However, as part of the transaction, Hersh notes that Mack-Cali is acquiring strategically important development sites in Parsippany and Florham Park, N.J., the township where both Mack-Cali and Gale are headquartered.
posted by Jones Lang LaSalle NJ News Blog at 9:53 AM
NYC 02 14 06 MORGANS' IPO: THE LOUNGE, THE NICHE AND THE WARDROBE Peter Slatin
If, on a balmy evening, you've enjoyed a high-fashion cocktail served by a nearly nude nymph (or at least an aspiring actress or model) while seated poolside at the Delano Hotel in South Beach or on a mattress in the Mondrian's SkyBar in West Hollywood, then you may be tempted to dip into this week's IPO of Morgans Hotel Group (OTC: MHGC). Morgans is the hotel company that owns these and seven other supercharged boutique properties in the U.S. and U.K. Management is hoping to raise some $275 million to pay down debt and make an acquisition when it goes public at a price that underwriters Morgan Stanley and J.P. Morgan Chase have pegged at between $19 and $21/share.
Well, put down that passion-fruit mojito and have some coffee: you'll need a clear head to think this one through. Even in the middle, at $20/share, this may be a rich brew. According to respected real estate securities analysts Green Street Advisors, the company warrants a share price of $16.25.
Why so stingy? Perhaps because Morgans is loaded with debt, hasn't turned a profit in at least three years, and is in the hands of a new management team that may have mastered finance but isn't known for the kind of fashion sense needed to keep its properties on the knife-edge of desirability in an increasingly competitive marketplace.
Nonetheless, the roughly $1 billion Morgans portfolio is a stellar, storied one, with sex appeal in spades. Its nine properties, in New York, San Francisco, Los Angeles and London, are the handiwork of Studio 54 founder Ian Schrager, now resigned from Morgans' leadership. Schrager basically created the high-end boutique hotel business back in 1984 with the launch of the company's namesake hotel in Manhattan. Schrager's golden touch (i.e., his control-freak, hands-on management style) made his hotels, even those, like New York's Hudson Hotel, with postage-stamp-sized rooms and stripped-down furnishings, highly desirable places to see and be seen.
And to stay. According to Green Street, Morgans' RevPAR (revenue per available room, a hotel industry benchmark) is in line with that of five-star brands like Four Seasons and Orient Express. In addition, with the hotel cycle likely to stay in the sweet spot in the gateway cities that are Morgans' turf for the next few years, those numbers should continue gain.
But the group's success, in financial as well as in fashion terms, has also spawned a host of competitors, mostly from private companies such as Kimpton Hotels, with its more laid-back hotels, which dominate the boutique world in cities like San Francisco, Chicago and Washington, D.C.; Kor Group, now expanding rapidly from a small group of smart, sophisticated properties in California; and Andre Balasz's Standard hotels. The biggest competitor of the bunch is the mighty W, which, backed by Starwood capital and marketing muscle, has become a global brand in less than a decade. Today, there are 19 Ws in ten U.S. cities and three countries, with more than 5,000 rooms; plans are afoot to add another nine hotels in five U.S. cities and three more countries. Among the expansion cities: Miami Beach, just down the street from the signature Delano.
These competitors are hard to ignore. Easy to overlook, though, is a very likely rival that, at the moment, controls 7% of the stock: Morgans founder Ian Schrager, who last June resigned from the company but remains as a non-exclusive consultant through 2007, with a hefty set of perks and no non-compete. Schrager and the company's principal financial backer, NorthStar Capital, will be selling approximately $46 million worth of stock in conjunction with the IPO, taking money off the table even as the guests are invited into the dining room. That's just one of the factors giving pause to analysts; another is the continuing responsibilities of Morgans Chairman David Hamamoto and CEO Edward Scheetz at NorthStar, the investment firm they founded in the mid-1990s when Hamamoto left Goldman Sachs' Whitehall Funds and Scheetz left Apollo Rea Estate Advisors.
Even as Scheetz and Hamamoto are distracted by their duties at NorthStar, where they have other investments to track (including personal stakes in some Morgans properties, according to Green Street), they will also be tasked to upgrade and revivify their legacy hotels. Such properties are critically dependent on being as au courant as fashion itself. The appeal of these hotels depends on a daring tightrope walk between exclusivity and the mass market. Extreme vigilance, heretofore exercised by Schrager, is essential to avoiding a tilt in either direction. With Schrager out of the picture and Hamamoto and Scheetz (both regarded as smart and shrewd real estate investment bankers but neither with a provenance as tastemaker) focused on the financial rather than the fashionable, the Morgans hotels are vulnerable to a slide in upkeep. It may seem unduly skeptical to note that this danger could be exacerbated by the current strong market conditions and performance that the hotels are enjoying, but that very success could make it easier to postpone the updating they will require.
On the other hand, Morgans' management will have its hands full with several new projects, including one repositioning, an expansion and two ground-up developments. The first is the acquisition of the 194-room James Hotel in Scottsdale, Ariz., from New York restaurateur and nascent hotelier Steve Hanson; it will be reborn as the Mondrian Scottsdale. The hotel is under contract for $47.5 million, and funds for the purchase are to come in part from the IPO. (One source with knowledge of the deal, who spoke on condition of anonymity, says the James was a "practice run" for Hanson, who has ambitions of his own as a boutique hotelier. "So Ian Schrager's old hotel company is now taking on practice-run hotels," sneers the source.)
Management is also practicing on something it's perfected, with plans to add a hotel tower across the street from the Delano in Miami. Its most ambitious project, though, is a 50-50 joint venture with Boyd Gaming at Boyd's Echelon project along the Strip in Las Vegas, where Morgans is slated to build a 600-room Delano and 1,000-room Mondrian as part of this multi-billion-dollar, 5,500-room buildout. Both hotels are slated to open in 2010. Morgans has pledged $350 million toward the partnership, at around 33% of its asset base, a huge stake in a single location. In this high-profile project as in virtually all of its properties, positioning the new hotels will be crucial, as will the health of the Vegas market; another mega-development, MGM's Mirage CityCenter, is due to come online in 2009.
Meanwhile, the designer whose touch helped catapult Schrager's hotels into the fashion, media and art-world spotlight is himself a potential competitor to Morgans. Philippe Starck is a co-founder with developer John Hitchcox in YOO, a global residential builder. Now, according to Green Street, Starck "may be partnering with a capital source to launch several new innovative boutique hotels.
"As for Schrager? Freed from his responsibilities at Morgans (where, following the IPO, he can divest his holdings entirely after six months), Schrager has already begun building a new company. He is selling luxury condos that are attached to the Gramercy Park Hotel, which he redeveloped but which will be managed by Morgans; he is quite close to announcing a major condo conversion project nearby at 1 Madison Avenue, a historic building now owned by SL Green Realty Trust; and he has acquired three Miami Beach properties as well. All of these deals are being done with new, well-financed partner Aby Rosen of RFR Holdings, which controls Manhattan's legendary Modernist masterpieces such as the Seagram's Building and Lever House on Park Avenue.
"Ian is ramping up," says a former Schrager executive. "He may circle back around and buy back the company at a tremendous firesale price.
"Scheetz and Hamamoto, who first bought into the company in the late 1990s, have long planned to take Morgans public. They've been stymied along the way by factors from street dissatisfaction with the deal, problems at some hotels (like the Clift in San Francisco, which was put into bankruptcy protection), and the roiled post-9/11 hotel market nationwide. Today, hotel and real estate industry insiders are highly skeptical of the IPO; many feel that going public is a last resort for management in its quest to lighten a hefty debt load. In addition, the challenge of growing in a crowded marketplace where Morgans already own dominant properties is a daunting one. If the IPO goes according to plan and management follows through with absolute attention to detail (and the market cooperates) Morgans could be on its way to finding new value for its existing and future properties. But that's a big if.
posted by Jones Lang LaSalle NJ News Blog at 9:44 AM
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
S. Bruns. planners kill proposal for warehouses Home News Tribune Online 02/17/06 By DEBORAH LYNN BLUMBERG STAFF WRITER dblumberg@thnt.com
SOUTH BRUNSWICK — Bill Klimowicz and his neighbors on Davidsons Mill Road have rallied against warehouses for years.
Existing warehouses in the area contribute to flooding in nearby woodlands and attract added cars and trucks that clog the roads, residents have said. Officials have been unsympathetic to residents' plight, Klimowicz said, by approving new warehouses that only exacerbate conditions. "Some of my neighbors and I have have been fighting these warehouses and the plague that they have brought to our neighborhoods for 12 years," Klimowicz said. "Warehouses and residential areas mix like oil and water."
But Wednesday, residents scored a small victory.
Planning Board members struck down a developer's proposal to build three new warehouses at Davidsons Mill Road and Route 535 in a 4-4 vote after hours of testimony from concerned community members. Proposals before the planning board are rejected in the case of a tie vote. Residents said they were shocked by the decision.
"The vote was a relief and a surprise," said Jean Dvorak, who lives on Davidsons Mill Road. "I had the feeling somebody was finally listening to what we're saying."
Like many meeting attendees, Dvorak is also a member of the Eastern Villages Association, or E.V.A., a resident group dedicated to preserving the history and character of the northeastern section of town.
The building proposal, submitted by Trammell Crow South Brunswick, Inc., would have added another 1.8 million square feet to the area's 8 million square feet of warehouse space. Officials said the site is one of the last open tracts of land in South Brunswick large enough to accommodate new warehouses.
Planning Board member and former mayor Debra Johnson voted against the project, calling traffic and flooding issues "a complicated mess." Johnson doubted engineers' testimony that a new traffic light in the area would drastically reduce congestion and said more information is needed.
"Something will be built there," Johnson said, "but things need to be studied further." Johnson also cited the last warehouse project approved by the board as reason to proceed with caution. State officials are examining the CNJ warehouse proposal approved in August for possible drainage system design problems, Johnson said.
"CNJ was a mistake," she said. "And at some point you need to learn from your mistakes." Johnson said that if Trammell Crow representatives truly believe their design won't cause flooding, they should help the town conduct a drainage study in the warehouse district.
Trammell Crow's design includes porous pavement, which helps water seep into the ground. Trammell Crow's attorney, Richard Goldman, had not returned calls about the proposal by press time last night.
Dvorak has repeatedly asked officials to study the area's drainage system. Too many warehouses use too few drainage pipes, she said, and the buildings' storm-water basins are too small. The inadequate system has led to flooding in the Green Acres land west of the New Jersey Turnpike, she said.
"I had serious concerns about the fact that this new warehouse would be using part of (the existing) drainage system," Dvorak said. "By and large this applicant's plan was one of the better ones, but there are still so many unresolved questions."
Mayor Frank Gambatese voted for the proposal, calling the application the best warehouse plan he's ever seen. Trammell Crow offered to put up a performance bond guaranteeing storm ater would be recycled into the ground, and offered to contribute $1.3 million to the town's affordable-housing fund, Gambatese said.
The new traffic light would also reduce drivers' wait time at Davidsons Mill Road and Route 535 from 6-8 minutes to 35 seconds, the mayor said.
"I'm very concerned that some other applicant will come in with another plan and take all of these things we agreed to off the table," Gambatese said.
Gambatese understands residents' concerns, but said warehouses are not to blame for extensive flooding in the area. Several warehouses were built in the 1990s, he said, but the Turnpike Authority told officials flooding intensified only in June of last year.
But Gambatese still wants to study flooding. Last week, he proposed forming a task force to examine drainage and traffic issues, and requested $1,000 for the project from council. Dvorak said Gambatese asked her and Klimowicz to participate in the three-month study.
As for the Trammell Crow project, Gambatese said the developer can appeal the board's decision, but at this time the proposal is no longer an issue.
"As far as I'm concerned, this is a vote that's over and done with," Gambatese said. Deborah Lynn Blumberg: (732) 565-7264; dblumberg@thnt.com
posted by Jones Lang LaSalle NJ News Blog at 9:37 AM
State makes, the world takes Wednesday, February 15, 2006
By HUGH R. MORLEY STAFF WRITER
Exports of New Jersey goods increased by 9.8 percent to a record $21 billion in 2005.
Canada remained the top recipient of New Jersey goods, followed by the United Kingdom, Germany, Japan and Mexico, according to federal data analyzed by the World Institute for Strategic Economic Research.
The value of goods imported into New York ports also increased, rising 7.5 percent to $246 billion, the organization said. Most of those goods come into ports in Newark, Jersey City and Elizabeth.
Canada was the largest importer. China was second with a 24 percent hike in exports to New Jersey - the biggest increase of any country in the top 20 importers. After China, the next biggest importers were Japan, Germany and the United Kingdom.
James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said the exports were helped by the weak dollar and a stronger world economy.
"Exports are dependent on overseas demand, so those are boosted usually when we have strong economic growth in Canada, Japan and Europe," he said. A weak dollar makes New Jersey goods cheaper for foreign buyers, he said.
Precious metals and stones was the largest category of exports by dollar value, at $2.5 billion. Industrial machinery and computers came next, followed by electrical goods, optical and medical equipment and plastics.
Mineral oil and fuel was the largest category of imports, followed by precious metal and stones. Third was vehicles.
posted by Jones Lang LaSalle NJ News Blog at 10:09 AM
Hartz Mountain sues over a neighbor's drainage plan Firm wants county OK for Hanover runoff proposal overturned Thursday, February 16, 2006 BY LISA VERNON-SPARKS Star-Ledger Staff
A Secaucus real estate company is seeking to overturn Morris County's approval of a road drainage plan that would allow a Hanover Township car company to build a new dealership.
This is the second time in five months that Hartz Mountain Industries Inc., the largest private owner of commercial real estate in the United States, has sued the county over this issue.
In the latest suit, filed yesterday, the company charged that the county overstepped its authority in approving Warnock Motors' drainage plan. The runoff would overload Hartz's detention basin at its Hanover Square development and affect the adjacent property and future plans at that site, according to the suit.
The freeholders "were arbitrary, capricious and unreasonable" in their decision, and their actions, and those of the county planning board, were contrary to the policies contained in the State Planning Act, according to court papers filed in Morristown.
"Bottom line, they are still dumping water from their property to ours without permission. They have never sought our permission," said Irwin Horowitz, an attorney for Hartz. "They were looking for an exemption from all county regulations. They are taking advantage of our property and that's something we don't think is correct."
The State Planning Act allows county planning boards to issue approvals for site plans that comply with county standards, solely to be considered for the "limited purpose of assuring a safe and efficient county road system," according to court papers filed in Morristown.
Hartz contends the county "exceeded its authority," and because it violated its own rules, the action is void, Horowitz said.
Freeholder Director Margaret Nordstrom said Hartz came to the freeholders previously to ask the board to overrule the planning board's decision. The board listened and decided it was perfectly comfortably with the actions taken by its board, Nordstrom said.
Warnock wants to build a 63,935-square-foot building for a Lexus dealership, to include sales and service, plus parking for 957 cars on a 15.5-acre tract. The property abuts a 45-acre parcel bounded by Route 10, Melanie Lane and Algonquin Parkway owned by Hartz.
According to the suit, all of the drainage from the Warnock site would be shunted onto the Hartz property. Doing that would use up all of the water detention and wetlands capacity on the Hartz property.
The first time Hartz sued the county was in September. A Superior Court judge remanded the case to the freeholders for a second hearing, which garnered the same results: The freeholders upheld the county planning board's decision.
posted by Jones Lang LaSalle NJ News Blog at 10:08 AM
Developer set to leave jail, fueling new probe Sources: FBI suspects Kushner lied to get out Thursday, February 16, 2006 BY JOHN P. MARTIN Star-Ledger Staff
After serving less than half his sentence at an Alabama prison camp, millionaire developer Charles Kushner has won his release to a halfway house in New Jersey, a transfer that has outraged federal prosecutors and sparked a new criminal investigation, according to sources familiar with the case.
Kushner, the 51-year-old Livingston businessman sentenced to two years in prison for cheating on his taxes, hiding campaign donations and retaliating against a grand jury witness, qualified for the less restrictive setting and shaved several months off his term by saying he was an alcoholic who wanted help.
The admission made him a candidate for residential substance-abuse treatment, the only program in the federal prison system that allows inmates to earn credit against their sentences.
Kushner recently completed the 500-hour program and is to be transferred Feb. 28 from the camp at Maxwell Air Force Base in Montgomery, Ala., to the unidentified halfway house, the sources said.
At his new location in New Jersey, he will be required to hold a job, and could ostensibly return to the real estate empire that bears his family name.
Prosecutors and FBI agents have been scrambling to try to prove Kushner faked his way into the program, the sources said. In a grand jury probe that began late last year, FBI agents have interviewed liquor-store owners, Kushner's doctor and his one-time employees, trying to build a case that Kushner perjured himself by swearing to a debilitating alcohol addiction, the sources said.
A spokesman for U.S. Attorney Christopher Christie declined to comment yesterday, as did Kushner's attorney, Benjamin Brafman.
A public affairs officer for the U.S. Bureau of Prisons would not discuss Kushner's pending transfer but said he had completed the treatment program.
"His release method is the substance-abuse program, and that allows for time off," said the official, Carla Wilson. "It's the only program that allows for time off."
The twists are the latest developments in an investigation that has continued even with its primary target, one of the region's most prominent businessmen, behind bars.
Kushner, the son of Holocaust survivors and a noted benefactor to schools, hospitals and social agencies, was a rising political player when he came under federal scrutiny four years ago. He had been the single largest individual contributor to Gov. James E. McGreevey and was poised to become the powerful board chairman of the Port Authority of New York and New Jersey.
But a bitter feud with his brother, Murray, over control of the family real estate business, Florham Park-based Kushner Cos., led to civil accusations of fraud and a federal criminal probe.
In August 2004, Kushner pleaded guilty to tax and campaign violations. He also acknowledged he had retaliated against a grand jury witness -- his own sister -- by hiring a prostitute to seduce her husband and then sending her a videotape of the encounter.
His admission spared Kushner a public trial that might have offered a window into his lifestyle, business operations and family infighting.
But despite the plea, Kushner refused to cooperate with investigators, and the acrimony between prosecutors and his defense team lasted through his sentencing last March.
At that time, Kushner and his attorneys gave his sentencing judge hundreds of pages of documents, including letters from supporters, family and Kushner himself. None mentioned a drinking problem, the kind of admission a judge might consider.
By contrast, friends and acquaintances have portrayed the slim businessman as an avid runner and exercise buff. And Kushner himself told the judge his downfall had inspired and focused him.
"What has gotten me through the past months has been my daily thoughts about projects and endeavors I intend to take on in what I refer to as my 'after-life' -- the hopefully not so distant time when I return from prison," he wrote in a letter to U.S. District Judge Jose Linares.
As part of the sentencing, Linares ordered Kushner to undergo a mental health examination, but made no reference to substance abuse. He also recommended Kushner be sent to the minimum-security camp in Alabama, in part because it was particularly accommodating to the diets and religious need of Orthodox Jewish prisoners.
Sources say Kushner told U.S. probation officials during a presentence interview that he was a social drinker who had been drinking more since his guilty plea. He arrived at the Alabama prison camp last April 8 and immediately applied to be accepted into the residential substance-abuse treatment program.
Wilson, the prisons bureau spokeswoman, said she could not discuss Kushner's participation in the program, but said each applicant is screened before being approved.
"They have to have a documented substance-abuse history and be a nonviolent offender," she said.
According to bureau policies, inmates in the program live together in a unit away from the general population. Participants spend half of each weekday in intensive group and individual counseling and therapy.
Those who complete the program can get as much as a full year cut from their prison sentence, with the amount determined by the bureau of prisons. Congress added the incentive in 1994 to encourage more prisoners to seek substance-abuse treatment.
Federal inmates already could earn up to 54 days off each year for good behavior. Under that formula, Kushner stood to be free from federal custody sometime in December, four months ahead of his original release date.
By yesterday, the bureau of prisons had moved his projected release date up to Aug. 26.
posted by Jones Lang LaSalle NJ News Blog at 10:06 AM
Junction site gets redevelopment OK Skeptical neighbors will remain vigilant Thursday, February 16, 2006 By CHRIS STURGIS Special to The Times
WEST WINDSOR -- The state has designated 350 acres around the Princeton Junction Train Station for redevelopment, but the neighborhood coalition that has been skeptical of the redevelopment proposal is vowing to remain vigilant.
Mayor Shing-Fu Hsueh announced the redevelopment designation at a news conference yesterday morning, along with the receipt of $55,000 in grants from the state's Smart Future program for planning and research.
"This is only the beginning," said Hsueh. "I anticipate that the planning effort will take about two years to complete. We need to ensure that all stakeholders, including property owners and residents, have ample participation in the process."
He pledged to make certain the redevelopment efforts benefit all the residents and that the redeveloped area remains an asset to the township in the future.
Hsueh said the Smart Future funds include $35,000 for the redevelopment plan and $20,000 for research and outreach in the creation of the plan.
The public has responded favorably to Hsueh's efforts to give West Windsor, a once-agricultural town that is now a fast-growing suburb, some semblance of a downtown, a Main Street in the vicinity of the busy train station.
He has called for traffic improvements on Route 571, also known as Princeton-Hightstown Road, the main thoroughfare through Princeton Junction, to make travel safer for pedestrians and bicyclists and also to add sidewalks.
The Princeton Junction redevelopment idea previously hit a snag when the Princeton Junction Neighborhood Coalition invited Princeton attorney Bill Potter to speak to their group about redevelopment.
Potter said governments that create redevelopment areas receive unchecked power. They can borrow money through bonds without a public referendum, choose a master developer without seeking competitive proposals and take land by eminent domain simply because they view it as "underutilized."
"We didn't sour on the project, we soured on the process," one of the neighborhood group's leaders, Meg Chicco, said yesterday.
She said the group remains interested in the mayor's ideas for giving the township a stronger sense of community. He will be speaking at the group's March 2 meeting in the Senior Citizen Center.
Chicco said she is interested in hearing what the township council, led by president Charles Morgan, will say at its special meeting at 7 p.m. on Feb. 21, about the redevelopment area.
Chicco said the coalition is not opposed to the project, just concerned that since they live closest to it, they will be affected the most. "We stand to benefit considerably from this if it's done correctly," she said.
Hsueh touted his doctorate in water resources engineering from Rutgers University and career with the state Department of Environmental Protection at the news conference yesterday, emphasizing that his background enables him to ensure the township benefits from governmental funding beyond property taxes.
Though some residents balked at the redevelopment designation and the powers that accompany it, Hsueh said the designation simply had to come first because that's how the procedure is designed.
He will make presentations today to a state task force representing various state agencies involved with transportation and environmental concerns in hopes that they prioritize West Windsor.
"I want people to understand we have to take this one step at a time," he said.
posted by Jones Lang LaSalle NJ News Blog at 10:05 AM
Jobs picture unclear after BlackRock deal `Too early to tell' says Merrill Lynch Thursday, February 16, 2006 By ROBERT STERN Staff Writer
Brokerage giant Merrill Lynch & Co., the Princeton region's largest private employer, has agreed to trade its Plainsboro-based investment-management business for a major stake in one of the largest U.S. asset-management companies.
It's unclear if the deal with New York City-based BlackRock Inc. will cost jobs at Merrill Lynch's investment-management division. That division has almost 1,200 of its 2,569 worldwide employees based in Plainsboro, Merrill Lynch spokeswoman Megan Frank said yesterday.
"In terms of layoffs, it's too early to tell," Frank said. "I just know we're going to have a presence in Plainsboro. I don't know how big it's going to be at this point."
Merrill Lynch has reduced its employment in the Princeton area from about 8,000 in 2002 to 6,400 at the end of 2005, primarily at its Hopewell and Plainsboro locations.
It also slashed its global workforce from a peak of 72,000 in 2000 to fewer than 50,000 a couple of years ago.
At the end of last year, Merrill Lynch had 54,600 full-time employees, Frank said.
The company's total Plainsboro employment figure wasn't readily available yesterday, Frank said.
Merrill Lynch is Plainsboro's largest employer, said Mayor Peter Cantu. He said Merrill Lynch's Plainsboro work force has fluctuated in the range of 2,000 to 3,000 over the years, though he didn't have the current number available.
It has been speculated for years that the company would consolidate its Princeton-area work force from its historic base in Plainsboro to a newer corporate campus it built in Hopewell Township.
"Strategically, it appears that Merrill Lynch, from what I've heard, is backing out of Plainsboro and moving as many of its operations as possible down to Hopewell," said commercial real estate broker Aubrey Haines, president of Mercer Oak Realty in Mount Laurel.
"Merrill Lynch and a number of (other) companies in the Route 1 corridor are finding that their center of gravity . . . is further south and west," Haines said.
That's because property and income taxes are lower in Pennsylvania, making riverside towns like Hopewell Township more appealing, from an employee viewpoint, without sacrificing the Princeton sphere of influence that makes central New Jersey so valuable to corporations like Merrill Lynch, Haines suggested.
But Cantu said yesterday he's not "specifically aware" of any plans by the company to reduce its Plainsboro presence.
"We certainly are interested in what impact (the BlackRock deal) would have on Plainsboro employment," Cantu said.
The deal would transform BlackRock into one of the world's top money managers, with an asset base of about $1 trillion and more than 4,500 employees worldwide, according to the two firms.
It wasn't clear yesterday how many current employees of BlackRock or Merrill Lynch's asset-management division will retain their jobs or if additional staff would be hired.
BlackRock spokesman Walter Montgomery did not return repeated telephone calls for comment. On its Web site, BlackRock indicates it has more than 1,560 employees.
Merrill Lynch's asset-management division -- Merrill Lynch Investment Managers (MLIM) -- brings in about 10 percent of the company's earnings, Frank said.
"MLIM is definitely the smallest" Merrill Lynch branch, she said.
Merrill Lynch draws the bulk of its business from its two other divisions -- the global private client group, which also has offices in Plainsboro, and the global markets, investment banking and institutional investments group, she said. Employees in those two divisions won't be affected by the BlackRock deal, Frank said.
The transaction between Merrill Lynch and BlackRock comes as more and more top-tier Wall Street firms are looking to smaller, more specialized competitors for alliances or acquisitions.
Robert Doll, chief investment officer of Merrill Lynch's asset-management business, will become vice chairman and chief investment officer of global equities for BlackRock. Doll, who Frank said will remain in Plainsboro, also is expected to join BlackRock's board.
"The biggest thing now is to execute on our potential," Doll said. "You look on paper, this deal is awesome. But there's a fine line between excellent execution and not-so-good execution, or keeping your client and losing your client."
Merrill Lynch becomes the second major Wall Street firm in less than a year to sell off its asset-management business. In June, Citigroup agreed to swap its asset-management division to Legg Mason Inc. for Legg Mason's broker-dealer operation.
As part of the BlackRock deal, Merrill Lynch Chairman and CEO Stan O'Neal will serve as his firm's designee on the new company's board, along with Gregory Fleming, Merrill Lynch's president of global markets and investment banking.
Merrill Lynch will have a 49.8 percent stake in BlackRock and a 45 percent voting interest in the combined company, which will retain the BlackRock name.
The deal has been approved by the boards of directors of both companies but still requires various regulatory approvals, client consents and approval by BlackRock shareholders, the firms said in a joint announcement.
BlackRock Chief Executive Laurence Fink will be CEO and chairman of the company after the deal. BlackRock President Ralph Schlosstein will remain in his post.
BlackRock shares rose $5.29, or 3.6 percent, to close at $151.25 yesterday on the New York Stock Exchange, while shares of Merrill Lynch rose 14 cents to close at $75.30.
BlackRock and Merrill Lynch are coming off very strong financial performances in 2005.
The Associated Press contributed to this report.
posted by Jones Lang LaSalle NJ News Blog at 10:01 AM
Colliers ABR-AEW Capital Management JV Scores Manhattan Offices for $100M February 15, 2006 By Paul Miller, News Editor
In a $100 million acquisition, a joint venture between Colliers ABR Inc. and AEW Capital Management L.P. jointly said this afternoon that it has obtained a 22-story block-thru office tower at 119 West 40th St. and a five-story building with additional development rights at 120 West 41st St., both in midtown Manhattan. AEW acquired the property on behalf of AEW Partners V L.P., a real estate opportunity fund.
The 22-story building on West 40th Street (pictured) is 327,650 square feet; the other building consists of 15,000 square feet, but is zoned for up to 50,000 additional square feet. It is 88 percent occupied, with one-third of it leased to investment grade tenants. With its additional air rights, the West 41st Street building gives the joint venture several redevelopment opportunities. Existing rents in the building are below-market and there are significant near-term lease expirations.
For the Colliers-AEW partnership, the companies' strategy in obtaining buildings like these is to source off-market deals through their respective network of contacts. "We sourced this transaction through information obtained from people on staff and others," Bob Billingsley, Colliers-ABR's vice chairman, told CPN this afternoon. "We pieced together the facts and like a detective story we put the pieces together and solved the case."
The companies were drawn to the buildings because they are close to public transportation and are not well-known. That, he said, "will allow us to re-position them from scratch."
The acquisition is the second for the Colliers-AEW joint venture, the first for 229 W. 28 St. in Manhattan having closed late last year. In addition to last year's deal and the new one, the joint venture aims to acquire more than $300 million in assets, concentrating on opportunities where investment returns can be generated by effectively managing leasing risk, development risk and market risk. The joint venture will seek existing Class B office and retail properties, as well as development sites in strategic locations near major transportation hubs.
posted by Jones Lang LaSalle NJ News Blog at 9:59 AM
High Expectations for Madison Square Garden's Rumored $750M Move February 15, 2006 By Colleen Corley, News Writer
The potential relocation of New York City's sports palace, Madison Square Garden, to a new site a block away is inching toward reality. In the midst of a $1 billion Manhattan real estate shuffle that would create a transportation hub in the James A. Farley Building (post office) on Ninth Avenue, a block away from the present Garden, the owners of the famed sports arena are believed to be close to an agreement with developers to build a new location by the west portion of the Farley building. The New York Times reported this morning that move's cost is estimated to be $750 million.
The proposed transplant of Madison Square Garden to the new Moynihan Station site faces such wide-ranging obstacles as New York City mayor Michael Bloomberg and those New Yorkers still smarting from the demolition of the original Penn Station more than 40 years ago. The Garden--whose owner, Cablevision Systems, effectively campaigned to thwart the Bloomberg-trumpeted stadium proposition for the football New York Jets last year--stands atop Penn Station.
A spokesperson from the New York Regional Planning Association explained to CPN this afternoon that if Madison Square Garden moves one block over to Moynihan Station, the preservation of the historic post office will be a top priority. The first Penn Station was razed to make room for the arena at its current location between Seventh and Eighth avenues and West 31st and West 33rd streets. A far less charming Penn Station was rebuilt beneath the Garden.
"We see a tremendous once-in-a-lifetime chance to fix a lot of the wrong that was done," the spokesperson said, referring to the 1963 demolition. With Madison Square Garden off the 8th Avenue site, the city-appointed Moynihan Station development team of Vornado Realty Trust and The Related Cos. will build an office complex with a glass over-hang above Penn Station. No one has yet seen an official proposal from the development team or Madison Square Garden' owners.
"It can't be all about the office space, and putting some glass on the train station," he said of the proposed redevelopment of Penn Station, the busiest transportation hub in North America. The station serves more than 500,000 commuters a day.
"It needs to be a bold stroke; a bold plan to fix the train station," he said. "If they do that, we'd be open to the idea and (to) working with the developers on the proposal."
posted by Jones Lang LaSalle NJ News Blog at 9:58 AM
New ProLogis Industrial Fund Pursues $4B Capitalization February 15, 2006 By Colleen Corley, News Writer ProLogis has created an open-end, infinite-life industrial fund with an expected capitalization of $4 billion, the company said this morning. ProLogis will contribute 77 properties--about 12.2 million square feet--to the ProLogis North American Industrial Fund L.P.
The distribution facility properties were acquired in January from three ProLogis North American Properties Funds affiliated with Arcapita Banks B.S.C., a spokesperson for ProLogis told CPN today. The portfolio included properties in markets such as Chicago; St. Louis; Portland, Ore.; northern New Jersey and Florida (an Orlando property, pictured).
The new fund differs from the usual ProLogis structure by the open-ended nature of investment, which allows multiple investors to increase or decrease their involvement as needed. Most ProLogis funds have just one investor, the spokesperson noted, and have set expiration dates. Third-party equity will account for about $1.5 billion of the fund's capitalization, while ProLogis will add equity interest and leverage. Macquarie Capital Partners and Eastdil Secured advised the new fund.
posted by Jones Lang LaSalle NJ News Blog at 9:55 AM
In New Jersey, home sales may be falling but prices are still red hot.
In its quarterly survey, the National Association of Realtors found existing home sales in New Jersey, which includes single-family home and condos, dipped 7.7 percent in the fourth quarter compared with the same period a year earlier.
Nationally, existing home sales rose an ever-so-slight 0.3 percent during the fourth quarter.
But across the country, home prices continued to soar. Nationally, the median price of a home rose 13.6 percent to $213,000. Of the 145 metro areas surveyed, 72 showed double-digit gains, according to the NAR.
In the Northeast, the median price of a home rose 8 percent to $240,300. The strongest gains in the region could be found in the New York City-Wayne-White Plains area of New York and New Jersey, where the median price of a home soared 19.2 percent to $537,300. The larger region of the New York-Northern New Jesey-Long Island area climbed 16 percent to $459,600.
posted by Jones Lang LaSalle NJ News Blog at 9:52 AM
Ten years after founding a drug discovery company, F. Raymond Salemme successfully sold it to Johnson & Johnson and was recruited to head another promising company, Linguagen. Less than two years later, he is leading that 22-person firm in a major expansion.
Linguagen, a molecular biology firm, develops ingredients used to improve the taste of food, beverages and pharmaceutical products. It will more than triple its space with a move from 5,100 square feet at Eastpark at Exit 8A in Cranbury to 18,577 feet at 7 Graphics Drive in Ewing. Tom Giannone of Cushman & Wakefield represented Linguagen in the lease with BioMed Realty Trust, a real estate investment trust that owns the 72,000 square-foot building formerly occupied by J.D.S. Uniphase; another tenant of the building is Medeikon.
"We have plans to expand our range of capabilities," says CEO Salemme. "One of our key product development areas has to do with the creation of more acceptable and more efficacious formulations. To put those together and test them requires some unique facilities."
Salemme started out as a crystallographer, described as "a physical scientist who is interested in biology." It is actually similar to his late father's profession, metallurgy, which focuses on the crystal structures of metal.
Even as a child, Salemme was drawn to crystal structures. He tells of wanting Tinker Toys when he was 12 years old. "My mother asked me what I wanted for Christmas, and I pointed to the toys with the little sticks and nodes. Like many good mothers, she read the age group for that toy, ages six through nine, and said, 'This is not an advanced enough toy for you.' But I have spent my whole life investigating those kinds of structures," says Salemme. At age 14 Salemme bought his own set of "sticks and nodes" and notes, "In my career I have spent quite a few tens of millions of dollars doing similar stuff."
A molecular biophysics major at Yale University (Class of 1967), Salemme has a PhD in chemistry from the University of California at San Diego. He set up drug-discovery groups specializing in structure-based drug design, biophysics, and computational chemistry at Sterling Winthrop Pharmaceuticals and DuPont Merck Pharmaceuticals, and he founded 3-Dimensional Pharmaceutical in 1993.
When he came to Linguagen in 2004, he left crystallography behind. "I broadened my technological capabilities to many aspects of drug discovery besides crystallography," he says, "and now I do a half dozen things reasonably well, including building a company."
He has his name on more than 25 patents from his 3DP days, and in his 18 months at Linguagen he has filed some more. Says Salemme: "That's one of the best parts about working in a small company, you can contribute to the projects." Linguagen, 2005 Eastpark Boulevard, Eastpark at Exit 8, Cranbury 08512; 609-860-1500; fax, 609-860-5900. F. Raymond Salemme, CEO. www.linguagen.com
posted by Jones Lang LaSalle NJ News Blog at 9:51 AM
If your company webpage gives driving directions from the New Jersey Turnpike, you may need to change them. After three years of construction, a new ramp for Exit 8A opened on February 11 with little fanfare. The $5.8 million project calls for a new traffic light that has not yet been installed.
The former ramp at the 8A tollbooth led to Route 32. Now, to get to Princeton, you will turn left on Route 535, cross Route 32, turn left on Route 130, and take a quick right on Route 535, so you can turn right on Plainsboro Road, which leads to Scudders Mill Road and Route 1.
A trooper at the turnpike police barracks says signs make this route easy to follow: "Once you are exiting, Route 535 is the only way you can go. Everything is visible from where you used to be dropped off."
The $5.8 million project was designed by Dewberry-Goodkind Inc., based in Arlington, Virginia, and the contractor was the Crisdel Group Inc. of South Plainfield is the contractor working on the project .
A turnpike spokesperson says the following road improvements were made: north and southbound lanes of Route 535 were widened at the intersection with Route 32; a left turn lane was added to westbound Route 32, and an acceleration lane was added to Route 32 traffic that is merging onto Route 535 south.
To come by spring: a new traffic light at the intersection of Route 32 and Route 535 and some repaving.
posted by Jones Lang LaSalle NJ News Blog at 9:49 AM
Three Industrial Leases Add Up to 200,000 SF By Eric Peterson Last updated: February 16, 2006 08:23am
(To read more on the industrial market, click here.) MONROE TWP., NJ-Three long-term industrial leases have been signed, one a renewal, totaling nearly 200,000 sf at two adjacent properties in the New Jersey Turnpike 8A submarket here. In the largest of the three transactions, Hair Systems Inc. has signed a new lease for 75,884 sf at 3 Fitzgerald Ave., bringing the 151,400-sf building to 100% occupancy. The tenant, a manufacturer of hair care products based in Englishtown, will use the facility for additional warehouse and distribution space.
The remainder of 3 Fitzgerald Ave. is occupied by Avery Dennison, which in the second recent transaction has just renewed its lease for 75,556 sf. The tenant, a maker of office products, pressure-sensitive labeling and branding systems, has had a light manufacturing and distribution operation on-site for the past 20 years. Jules Nissim and Stan Danzig of Cushman & Wakefield of NJ’s East Rutherford office brokered the transaction for Avery Dennison, a C&W national account headed on the West Coast by Scott Evans.
“The transaction is the third renewal we have handled for Avery Dennison at this location,” Nissim says. “The space continues to meet the company’s regional needs for a central location.” The third signing came at 17 South Middlesex Ave., where 1-800-Pack-Rat, a mobile self-storage franchise, has signed a new lease for 39,720 sf. The company, which will use the space for a warehouse operation, was represented by Connor Faught of GVA Advantis of Washington, DC, and locally by Steve Tolcash of GVA Williams Buschman of Lawrenceville. In all three cases, the property owner was represented by Frank Caccavo, Jason Goldman and Andrew Siemsen of the Iselin office of Cushman & Wakefield of NJ.
According to Faught, 1-800-Pack-Rat’s space includes 1,700 sf of office space, and the property’s ownership is creating a customized 20-foot-wide drive-in loading dock for the new tenant. The lease also brings 17 South Middlesex Ave. to full occupancy, with Neilsen & Bainbridge, a Paramus custom framing company, occupying the remainder of the building. Both buildings, currently owned by SSR, are within the CenterPoint at 8A business park, and were originally built by Matrix Development Group.
posted by Jones Lang LaSalle NJ News Blog at 9:48 AM
