G&W to revive four New Jersey buildings

Real Estate Weekly, Sept 13, 1995 by Lois Weiss

Gale & Wentworth, Inc.'s recent North Jersey buying spree has expanded its real estate investment portfolio by more than a half-million square feet and given new life to four nearly vacant, underachieving properties.

In a matter of months, the Florham Park, NJ-based real estate organization took two distressed office buildings and turned them into properties that increased the market's short supply of quality space; created several hundred new jobs; boosted the local economy; and placed them on the tax roles as performing assets.

"Now, we're in the process of doing the same for two more buildings," said Mark eager, president of G&W's commercial division.

According to Yeager, G&W's bullish pursuit of opportunistic acquisitions is an investment strategy that is working well in North Jersey, a marketplace populated by many worthy commercial facilities that befell hard times during the economy's downturn.

"Functional, sizable buildings in Class A locations are good candidates to benefit from the hands-on management, marketing, and capital improvements that our full-service firm can provide," Yeager explained. "The quality of a building can always be improved or upgraded, but function, size and location are key ingredients that can never be reproduced."

Aptly fitting that criteria was 1599 Littleton Road, the company's most recent success story. The 96,000 square-foot Parsippany building, vacant for seven years, had been foreclosed on by its lender, who wanted to dispose of it. Having developed property adjacent to the building, G&W was familiar with the facility and comfortable with the challenge to reposition it.

"Because of the premium on 100,000 square-foot blocks of space and the credibility the property gained from our involvement, we were very confident it would be well-received," Yeager noted. "A purely speculative investment, it was underwritten with the assumption that we would need six to nine months to renovate it and achieve full occupancy."

But before G&W even had a chance to paint a wall, New Jersey Manufacturers Insurance Company, a Trenton-based firm surfaced with a large space requirement and then decided to purchase rather than lease the building. The transaction assures 1599 Littleton Road a long-term owner/tenant and a bright future.

Similarly, G&W was drawn to 465 South Street, a 140,000 square-foot Morristown office building that sat incomplete and vacant for nearly five years. Within months of its purchase, the building received a $2 million renovation and attracted several high profile tenants who leased 90 percent of its space. Pending transactions should bring the building to 100 percent occupancy shortly, a full year ahead of G&W's expectations.

"The activity this property generated was definitely a reflection of its prime location," said Yeager. "However, tenants had the added benefit of moving into never occupied, quality space, something that has not been available in the Morris County market in quite some time."

The success of these properties has provided the impetus for G&W to continue the trend with the acquisition of two more facilities - 250 James Street in Morristown and 190 River Road in Summit. The former home of publisher Silver Burdett, the 105,000 square-foot James Street property is located immediately off Route 287 and has four-way access to the highway. The River Road building offers 160,000 square feet of space off Route 24, directly across from the upscale Short Hills Mall which has just undergone a major expansion.

While these properties have superior locations, they are not considered as high quality as the buildings that are typically associated with G&W. But, according to Yeager, they offer the efficiencies and economy important to the price-sensitive tenants of the 90s.

"Most users today focus on cost first and luxury second," he explained. "While the image a corporation conveys is important, cost-effective use of space is what continues to drive many real estate decisions in the current marketplace."

"The buildings we are buying certainly can be brought up to luxury standards if required by a potential tenant, although our experience indicates that the value of these properties, from both our own and our tenants' perspectives, is in their location, functionality, and economies, not in overdesigned, expensive building overhauls."

Having laid the foundation for its investment approach in early 1994, G&W has targeted additional growth through repositioning opportunities.

As before, its focus will be on institutional owners who are interested in selling properties without making any capital expenditures. The firm will also will be pursuing corporate owners whose surplus facilities represent an inventory of good quality real estate that has never been available on a speculative basis.

"I think we are right on target for our growth in the 90s" observed Yeager. "Motivated by our most recent success stories, we're ready to do some more buying."