Big Ticket Deals: Some go cold, some heat up

NJBIZ, Nov 1, 2004 by P, Shankar

New Jersey held its head high when pharmaceutical giant Sanofi-Aventis of France last month picked the state for its U.S. headquarters. But it might be too early to cheer. Sanofi-Aventis has said that it will locate those offices at Bridgewater Crossing in Bridgewater, where Aventis has its U.S. headquarters and reportedly the company's location of choice. But SanofiSynthelabo, the company which merged with Aventis to become Sanofi-Aventis, has significant lease obligations at its offices on Park Avenue in New York City.

Sanofi may have at least 12 years left on its existing lease at the Park Avenue offices. The value of those lease obligations is said to be in tens of millions of dollars. One estimate put that at $50 million. Sanofi-Aventis will obviously have to negotiate its way out of those lease obligations before it can carry out its plans to relocate its roughly 600 employees at those offices to Bridgewater.

Sanofi-Aventis has yet to sign a lease at Bridgewater Crossing, which is made up of 600,000 sq. ft. spread out over two buildings. Aventis leases 415,000 sq.ft. ofthat.

Two other big-ticket deals are reportedly in trouble. Pfizer reportedly has concluded it can't sell the former AT&T complex in Basking Ridge. Pfizer inherited the 140-acre campus with 1.3 million sq. ft. of office space when it acquired Pharmacia two years ago; Pharmacia had bought it months earlier from AT&T for $200 million. Pfizer had appointed Cushman & Wakefield to help find a buyer.

Although several prospective buyers checked out the campus, no serious offers have come to the table. The most eager contender so far has been Atlantic Health System of Morristown, but it is believed to have asked for a significant discount on market prices, to which Pfizer responded coolly.

The other deal that may come a cropper is Mellon Financial's requirement of between 700,000 sq. ft. and 1 million sq. ft. The Pittsburgh bank had sought to consolidate operations in seven New Jersey offices and one in Manhattan to the new location. As of September 1, Mellon has 2,800 employees in the state. Mellon was last said to be in advanced negotiations to sublease space in Jersey City from the financial services company UBS Worldwide.

In recent weeks, though, the grapevine has it that Mellon may sell off significant portions of its non-core businesses and will have a sharply reduced need for space.

Earlier this year, Mellon identified some non-strategic businesses that it plans to exit, and reclassifled them as "Other Activity sector" in its financial statements. These include its online financial planning and advice services and some of its merchant card business.

Some other big-ticket deals, however, are approaching a handshake. Barely two months after specialty chemicals maker Rhodia put its 83-acre Cranbury campus with 350,000 sq. ft. on the market, it has sighted at least several willing buyers. One of them is Preferred Real Estate Investments of Conshohocken, Pennsylvania.

Preferred is emerging as an active buyer of properties in New Jersey. Last month, it closed on a 388-acre campus in Phillipsburg that was once occupied by Ingersoll-Rand. In its first phase, Preferred plans to redevelop 100 acres for build-to-suit industrial projects. It's also close to completing a 460,000-sq.-ft. Class A office building in Hamilton that it bought last year from American Standard.

Rhodia is looking for smaller quarters in Bucks County, Pennsylvania, as well as Middlesex and Mercer counties.

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