Robert Martin Company, headquartered in Elmsford, has recapitalized its industrial real estate portfolio consisting of 45 properties and entered into a new joint venture with affiliates of Dune Real Estate Partners LLP, a New York City-based real estate investment firm.
In an interview with the Business Journal, Robert Martin’s CEO Tim Jones made it clear that the recapitalization and involvement of Dune does not diminish Robert Martin’s interest and belief in Westchester and Connecticut real estate.
“The recapitalization just basically means that there are new capital partners. From an operating standpoint, Robert Martin continues to be the operating partner and group that is responsible for the properties on a day-to-day basis,“ Jones said. “From a market and tenant standpoint things really don’t change but any entity like this very frequently has significant capital partners beyond the operating partner. Sometimes it’s just lenders, sometimes it’s lenders and equity partners, sometimes it’s just equity partners. In this case it’s a lender and equity partner, which is the same structure that we had prior to this.”
The professional services firm JLL (Jones Lang LaSalle Incorporated) was involved in the transaction, including procuring the $455 million loan with Bank of America.
Jones said the transaction also involved equity that he characterized as being “fairly significant” on top of the loan, while electing not to disclose the amount.
“There was a $455 million mortgage, which was recorded, but we actually didn’t borrow $455 million,” Jones said. “It made sense for us to record a mortgage in excess of the actual money we borrowed because if certain things happen in the future or we need capital for certain things it made sense to record it early even though when you record a mortgage you pay a mortgage tax.”
Jones said that Robert Martin’s tenants will not notice any differences as a result of the recapitalization except that the lockbox address to which they’ll send their rents will change.
“In the real estate business periodically you have to replace your capital,” Jones said. “This was a good moment for us to do that particularly the way the capital markets view industrial properties today.”
Jones said that agreement on the recapitalization was reached in the fall and since that time the market for industrial/flex space in which Robert Martin specializes has become stronger.
“The market is very strong for industrial. We have some space that also does very well with life sciences technology,” Jones said. “We have a little bit of office in this portfolio. The office market is not as strong as the other two and not as well-perceived as the other two from an investment standpoint. Coming out of Covid, hopefully we’ll see a change there.”
Jones said that one of the concerns they had regarding timing of a recapitalization was what the Federal Reserve might do with respect to raising interest rates.
“I think the bad news about interest rates going up is that it will affect returns and with longer leases you can only get your returns to change when the leases go up,” Jones said. “Our industrial space is unbelievably strong. We’re running out of industrial space; we don’t have much space left. We would definitely be interested in any opportunity for expansion of that product.”
Jones suggested that long-term, the health of the Westchester and Fairfield markets still is dependent on what happens in New York City.
“One of the things we’ve benefited from is people leaving the city and coming into the suburbs because of Covid but long-term the city needs to be strong too,” Jones said. “We have to continue to work on the cost of living in Westchester and we really need more housing that more people can afford. When I say affordable housing, I don’t just mean for low income. I mean housing that a very large percentage of the population can afford, not just the low end or high end.”
Robert Martin’s entire portfolio includes more than six million square feet of properties and 200 acres of developable land. Its Connecticut properties include Stamford Executive Park, 129 Worthington Ridge in Berlin and The Glenbrook in Rocky Hill. It also owns properties in Florida.
“This is almost three million square feet and we’ve just invested a chunk of money in it. We have another couple of million feet in Westchester beyond this,” Jones said. “We’ll continue to do business in Westchester without question. It’s our home base.”
