The property was listed with Sperry Van Ness and the sale was orchestrated for both sides by brokers Joseph French and Thomas Dalzell of that firm's White Plains, NY office. The two tenants are Home Depot, which occupies about 116,000 sf, and furniture purveyor Raymour & Flanigan, which has the other 47,000 sf.
440 Commons was originally developed by Starwood Heller, which sold it to Inland Retail Real Estate in 2003 as part of an eight-property portfolio. The property commanded an individual price of just less than $18 million in that deal. It became part of the Beachwood, OH-based DDR's portfolio in early 2007 when that company bought Inland Retail Real Estate for a reported $6.2 billion.
As for the latest sale, French terms it "one of the most challenging assignments we've undertaken. Jersey City has undergone massive gentrification, but it's been almost exclusively along the Hudson River. 440 Commons is on the opposite side of town in a largely run-down industrial and lower-income housing area facing the Hackensack River and the massive fuel tank farms of New Jersey. The site and area also have environmental issues from its long history of industrial use."
The transaction came in at 95% of asking price, which would put the latter in the $26-million range, and also equates to a 6.76% cap rate. "And with just two tenants, it provides an easily managed property with a secure return with rent bumps every five years," French says.
The upside is that the west side of this city is about to undergo a major redevelopment in its own right. "For this reason, this investment offers more upside potential than most other investments in the metro New York market," he says.
Surrounding the 440 Commons property are a series of contiguous lots slated for that redevelopment. A new campus for New Jersey City University will rise to the north, while 2,000 residential units are proposed for tracts to the south and east. And the city council earlier this your approved a plan for a 100-acre site directly across Route 440 that could lead to 8,000 residential units and 1.5 million sf of office and retail space.
"That's more than 10,000 new residential units, major new office and retail development and an entire university campus, all directly next to the 440 Commons property," French says.
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