Kalikow group set to develop old Singer factory for storage

Real Estate Weekly, June 28, 2000

The Kalikow Group, through its affiliate K & S Storage II, LLC, will develop a new, state-of-the-art 740-unit 100,000 square-foot self-storage facility at the site of the former Singer Sewing Machine facility at 102-21 95th Avenue, one block off Atlantic Avenue in Ozone Park, Queens. Edward Kalikow, president of Kalikow Development, made the announcement.

The project will be Kalikow's second transaction with Shurgard Storage Centers, Inc. (NYSE:SHU), a leading self-storage REIT, for the purchase and development of self-storage facilities in the New York Metropolitan area. Shurgard will consult on the construction of the property and will manage the project upon its completion in early 2001.

"Less than 1,200 storage units currently exist within the three-mile radius of our site," said Mr. Kalikow. "The population within this three-mile trade area is in excess of 600,000. Statistically, 4 percent of the population uses self-storage. With 24,000 potential users, we see a tremendous opportunity in an under-served market."

The Ozone Park facility marks Kalikow's s second venture with Shurgard. "Our Melville facility, with 681 units, opened in February of 1999 and is already 80 percent leased," Kalikow said. "In Melville, we were able to accommodate Shurgard by buying the facility from them so as to enable them to take it off their books during the lease-up period, thereby freeing up their capital invested and enabling them to do additional facilities while preserving the right to buy the facility back upon stabilization. This arrangement reflects our flexibility in accommodating the financial and development needs of a public REIT."

The Ozone Park site represents K&S' first outright acquisition of a facility. Shurgard will act as consultant and manager of the facility for the joint venture. "Shurgard had previously identified this facility as a superior opportunity, but was unable to close within certain time constraints," explained Kalikow. "Should we sell this facility in the future, Shurgard has a first option to buy it."

Shurgard owns or manages more than 390 storage centers in the U.S. and Europe. Construction financing for the project will be provided by Heller Financial, Inc. and the loan will be placed through the Manhattan office of the mortgage banking firm Holliday, Fenoglio and Fowler, LLP. John Notaro is the architect for the project, and Lorich Builders will be the general contractor.

The project will take advantage of New York City's Industrial and Commercial Incentive Program (ICIP), which will reduce the tax burden on the property, making pricing more competitive.

Site History

Merit Hosiery Company originally constructed the eastern end of the four-story concrete-frame building at 102-21 95th Avenue in the early 1920s. A matching four-story addition was constructed along the northern end of the property in the 1930s. During the 1950s, Singer Sewing Machines purchased the property and built a separate office area at the western end of the site. Singer also constructed two one-story steel-frame additions.

In the early 1970s, Singer Sewing Machines vacated the property, which remained empty for several years until the Adams Brush Company purchased the building for the manufacture of painting supplies, rollers and brushes. Adams vacated the property in late 1998.

Joint Ventures Mark Growing Project Finance Trend

The latest arrangement with Shurgard adds to Kalikow Development's growing "land banking" and off-balance-sheet financing business. In 1999, Kalikow Development closed two residential land sale transactions in East Orlando, FL with Centex Corporation (NYSE: CTX), one of the largest single family home builders in the U.S., and Morrison Homes, a subsidiary of George Wimpley PLC, a British-based, publicly held company and another of the country's largest home builders. With the recent joint ventures with Shurgard, Kalikow's ability to provide off balance sheet financing has now extended itself to the REIT market, where it can be especially helpful in furthering these public corporation's goal of maintaining a diversified capital base and the emphasis on growth through the development of high quality assets.