$65M New Jersey Office Loan Shows Money Still Available—If Property is Right

With the finance industry on its knees, securing a loan for a suburban New York City office property is not the cakewalk it used to be. However, lenders are still willing to fork over the funds for certain area assets, like Livingston, N.J.’s 385,000-square-foot Eisenhower Corporate Campus, which recently attracted a $64.8 million financing package. Property owners Eastman Cos. and The Sagner Cos. turned to Holliday Fenoglio Fowler L.P. to mine the market for money–and the commercial real estate capital intermediary came through with a $44.7 million adjustable-rate loan from Wells Fargo and TD BankNorth, and just over $20 million in joint venture equity from Fidelity Real Estate Group. Located on 33.6 acres at 290 W. Mount Pleasant Ave., Eisenhower Corporate Campus (pictured) sits approximately 20 miles west of New York City. The Class A property consists of four interconnected buildings and features a 300-seat cafeteria, a fitness center and an auditorium/media center. Since its doors opened 25 years ago, the office complex has consistently served as a single-tenant location–Prudential Insurance Company of America was the last business to call the campus its own–but Eastman and Sagner, with funds in hand, plan to redevelop the complex to accommodate multiple tenants seeking premier space. The fact that New Jersey’s office vacancy rate is 19.42 percent, according to a fourth quarter report by real estate services firm CB Richard Ellis Inc., clearly did not send the banks running. “It was all about the yields that could be realized through execution of the business plan,” HFF senior managing director Jon Mikula told CPN; Mikula and managing director Jim Cadranell orchestrated the financing deal for Eastman and Sagner. “This was a lease-up value add transaction and we led with a tenant that’s leasing about one-third of the building.” News emerged last month that Verizon had committed to 153,000 square feet at Eisenhower Corporate Campus for a new customer service and support center that will open later this year. “And it didn’t hurt that we were recapitalizing and brought in new equity,” Mikula added. “And the borrowers are good operators.” Other recent office financing deals in New Jersey include a $35 million first mortgage refinance that CB Richard Ellis’s Debt & Equity Finance Group arranged on behalf of M. Alfieri Co. A New Jersey commercial bank provided the three-year fixed rate loan, secured by a 330,000-square-foot Class A office building in Edison that was 93 percent leased. Though limited, financing availability certainly hasn’t been confined to the office market. The Westport, Conn., office of HFF just facilitated a $33.2 million first mortgage loan through Freddie Mac for Seaboard Properties’ acquisition of the 261-unit Newbury Common Apartments in Stamford’s Central Business District. The two-building property, developed 22 years ago, features 9,000 square feet of ground-level commercial space, a 295-space underground parking facility and a list of coveted amenities ranging from an indoor pool to a screening room. “The fact is, Newberry Common is in a good market,” Alvin Epstein, senior managing director with HFF, told CPN. “It’s a block away from the Stamford campus of the University of Connecticut, two blocks away from the entertainment district, and it’s not in an overbuilt area. There are high barriers to entry in New England and Stamford, in particular. Another important factor is it has a good leasing history and a proven track record.” Presently, the community is 96 percent leased. And, as was the case with the Eisenhower Corporate Campus, the borrower’s reputation went a long way. “Seaboard Properties is very well established and well respected, so it had a great deal of credibility,” Epstein said. “These days, the credit of the borrower is very important.” The apartment market is, indeed, still in big demand in New Jersey. In January, PNC Real Estate Finance orchestrated a $214 million loan for a joint venture’s construction of The Monaco, a 524-unit luxury apartment project in Jersey City. So, there is some liquidity in the market but Mikula concedes that it takes far more to attain it than it did just a couple of years ago. “There’s less leverage, you have to have skin in the game and cash flowing assets,” he said. That’s the way it used to be. It’s all an adjustment. A lot of people don’t like that.”