Mack-Cali Realty Corp. has sold again in Westchester County, this time receiving $70.25 million for its Elmsford Distribution Center, a six-building industrial park comprising roughly 387,000 square feet off Saw Mill River Road.
The buyer is Realterm Logistics, a Maryland-based company with a national portfolio of facilities serving the transportation industry. The building, at 1-6 Warehouse Lane in Greenburgh, includes tenants such as UPS, Herr’s Potato Chips and XPO Logistics.
In its deal announcement, Mack-Cali described the sale as part of the company’s strategy to wind down its flex-warehouse sector and focus investment on its Jersey City office properties and multifamily development. The deal also continues the pruning of Mack-Cali’s Westchester office and warehouse portfolio, which is among the largest in the county. Since the start of 2018, the company has sold more than a million square feet of its Westchester holdings.
Last year, the real estate investment trust effectively exited the downtown White Plains office market. First, Mack-Cali sold the 570,000-square-foot Westchester Financial Center to Ginsburg Development Cos. in the spring for $83 million. Then, in the fall, the company sold 1 Barker Ave. and 3 Barker Ave., which total about 133,000 square feet, to a Rockland County buyer for $16 million.
As part of its effort to focus in on the Jersey City market, Mack-Cali has sold more than $500 million in assets in 2017, with another $400 million planned for 2018, Mack-Cali wrote in its 2017 annual report.
Mack-Cali CEO Michael J. DeMarco said in a statement that the Elmsford Distribution Center sale “serves as a significant milestone in our plan to strategically consolidate the Mack-Cali portfolio. While we expect the park’s new owner will experience leasing success in an industrial market that has seen strong rent growth in recent years, the disposition enables us to pay down debt levels from investments we made in creating our multifamily platform.”
The Elmsford Distribution Center is behind the Sam’s Club off Saw Mill River Road, about a half-mile north of the Elmsford I-287 entrance. Mack-Cali has had the Elmsford Distribution Center buildings since 1997, when it acquired them as a part of a $440 million acquisition of Westchester developer Robert Martin Co. The deal saw the company, then just Cali Realty Corp., acquire 65 properties totaling almost 5 million square feet in Westchester and Fairfield counties. Cali Realty Corp. became Mack-Cali a year later through a billion-dollar merger with fellow New Jersey firm Mack Co.
Individually, the Elmsford Distribution Center properties sold for a total of $26.4 million in 1997, county property records show. The buildings at 1, 2 and 3 Warehouse Lane, about 95,000 square feet, went for $3.6 million; 4 and 5 Warehouse Lane, about 270,000 square feet, sold for $18.3 million and 6 Warehouse Lane, 22,100 square feet, sold for $4.5 million.
Five of the six properties were built in 1957, with 6 Warehouse Lane the newest addition, built in 1982, according to Mack-Cali’s 2017 annual report. Mack-Cali reported the building 97.9 percent leased as of the end of 2017, with an average base rent of $11.77 per square foot.
Mack-Cali was represented in this month’s transaction by the HFF investment sales team of Senior Managing Director Jose Cruz and directors Jordan Avanzato and Marc Duval.
Mack-Cali’s remaining holdings in Westchester County include the nearby Cross Westchester Executive Park flex office space in Elmsford; flex office space at the Mid-Westchester Executive Park in Hawthorne and office space at the South Westchester Executive Park in Yonkers.
Realterm Logistics is one of three logistics-oriented private equity funds managed by Realterm, which lists an office in Annapolis. With the three funds, the company said it manages more than $4 billion in assets worldwide. Realterm Logistics owns and manages more than $1 billion in assets, the company reports, with more than 250 properties in the U.S. and Canada.
The sale comes at a time when industrial space is in demand for Westchester. Zoning changes in areas such as the Bronx and Queens have pushed industrial and warehouse tenants farther north. At the same time, e-commerce has driven demand for distribution facilities close to population centers, such as New York City.
As the Business Journal reported in July, the dual trends have pinched an already tight Westchester industrial market. At the start of 2018, Newmark Knight Frank reported the industrial and flex space vacancy rate at 4.8 percent, down from 6.2 percent at the end of 2016. In July, broker and Business Journal columnist Howard Greenberg reported that flex industrial space in the county — which typically rents for $8 to $10 per square foot — is routinely approaching asking prices of $15. “Never in my 30-plus years in the market have I seen this type of rent growth,” the Howard Properties Ltd. president wrote.
The strength of the market could be interpreted through the cost per square foot of the Elmsford deal compared to the Westchester Financial Center sale, which was last year’s most expensive office transaction. Mack-Cali received about $146 per square foot in the Westchester Financial Center deal. The Elmsford Distribution Center grabbed just under $182 per square foot.