RIDGEWOOD, NJ-Newly formed Heritage Capital Group has teamed up with equity partners Barrow Street Capital and Greenfield Partners to buy three distribution centers from KB Toys. The three properties, totaling 2.2 million sf in three states, traded for $77.5 million, or about $35 per sf.
The deal marks the second pick-up by the trio of partners. As reported by GlobeSt.com, Heritage Capital was formed in May by Jeffrey and Steven Greenberg, principals of Heritage Management, and veteran real estate executive Robert Martie. In June, the new group teamed with Barrow and Greenfield to buy the 112,568-sf Plaza Nine office building in Woodbridge, NJ for $22 million.
The three KB properties are located in Clinton, NJ with 730,000 sf, Glendale, AZ with 620,000 sf and Montgomery, AL with 840,000 sf. Under the terms of the deal, KB has leased back all three buildings for six months. After that, the toy retailer will remain in 480,000 sf in Clinton and 375,000 sf in the Arizona property, and will vacate the Alabama site.
“KB Toys saw that it had over-capacity in their distribution network and tremendous value in their real estate,” says Tom Consiglio of Resource Realty, who represented the retailer in the deal. “We studied many alternatives, and the sale and partial leaseback gives KB the opportunity to capture that value while creating operating efficiencies.”
“For us, this portfolio is an opportunity to create significant value by leasing up the vacant space when it comes online,” says Jeffrey Greenberg. “The Clinton property is just off I-78 midway between Philadelphia and the Port of Newark. The Glendale distribution market is one of the strongest in the Southwest. And the Montgomery property is in the heart of an up-and-coming automotive industry hub.”
“This purchase is a great example of uncovering off-market, value-add opportunities that play to strengths in leasing, expense cutting and cap rate arbitrage,” says Jon Mikula of Holliday Fenoglio Fowler, who secured debt financing for the deal through Capmark Financial Group and with HFF Securities arranged the equity partnership. “With the capital markets' recent shift in risk pricing, this acquisition strategy plays well with those equity and debt providers that are seeking access to well-positioned operators and real estate.
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