RUTHERFORD, NJ—The Kislak Company Inc. helped a client use a novel 98-year ground lease to take control of the Union Bridge Apartments, the largest multifamily property in Rutherford, with 115 units located at 152 Grand Avenue and 153 Darwin Avenue. The tranasaction included an initial payment of $9,980,000 and will include annual payments of an undisclosed amount over the life of the lease.
"There was no change of title, that's something that the owner was very specific about,” Kislak vice president Andrew Scheinerman tells GlobeSt.com exclusively. “Because it was 98 years, the bank treated it like a normal mortgage, 75% financing, and my buyer will pay the owner a ground lease payment every year. Over the course of the next 98 years, this is a $70 million lease, essentially.”
The arrangement is similar to a “triple net” CVS or Walgreen's lease, says Jason Pucci, Kislak's chief operating officer, who also spoke exclusively with GlobeSt.com. “It's very rare for a transaction like this to happen with an apartment complex, but it worked for everyone,” Pucci says.
Vice president Scott Davidovic represented the owner and Scheinerman represented the lessee.
“Kislak was engaged on an exclusive basis to market and sell the property,” says Davidovic. “Given the property's size, Bergen County location and full occupancy, we quickly procured a local investor eager to lease the property on a long-term basis. It's a market that's in high demand and the rents are pretty low. The landlord who owns the property has not significantly raised rents, creating a lot of upside potential.”
The new operator of the property expects to invest substantial amounts in renovations that will justify higher rents. Renovations will include kitchen and bathroom upgrades as units become available.
Constructed in the 1960s, Union Bridge Apartments includes 115 apartments in nine buildings on over three acres with on-site parking. The property is in an excellent rental market and is ideally located in a quiet suburban neighborhood near the Rutherford train station and major highways with easy access to New York City and points throughout northern New Jersey. The buildings are brick with wood siding and have pitched roofs.
“This transaction shows the creative ways in which investors are willing to secure properties in markets, like Rutherford, that have high barriers to entry,” said Scheinerman. “Properties like Union Bridge rarely if ever come to market. As a result, our client was quick to seize the opportunity and secure a long-term lease.”
The owner was represented by Richard Hubschman Jr., Esq. of Hubschman & Roman PC and the lessee was represented by Richard Kahn Esq. of Winne Banta and Steven Russo Esq.
Oritani Bank provided financing. At the time the ground lease was executed, the property was 100% occupied. The property is close to 100% occupied now, says Davidovic.
CORRECTIONS, 8/25/2014: This story has been revised to reflect the following corrections.
Based on information provided to GlobeSt.com, this story originally described the initial payment of $9,980,000 as an aggregate payment on the ground lease. Kislak says it was a payment to initiate the transaction, which will be followed by annual payments on the ground lease, the amounts of which were not disclosed. Based on information provided by Kislak, the story also referred to an option for a 50 year renewal of the ground lease; Kislak now says that is not the case. Finally, one of the lessee's attorney's names was incorrectly provided as John Russo Esq. He is Steven Russo Esq.
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Steve Lubetkin
Steve Lubetkin is the New Jersey and Philadelphia editor for GlobeSt.com. He is currently filling in covering Chicago and Midwest markets until a new permanent editor is named. He previously filled in covering Atlanta. Steve’s journalism background includes print and broadcast reporting for NJ news organizations. His audio and video work for GlobeSt.com has been honored by the Garden State Journalists Association, and he has also been recognized for video by the New Jersey Chapter of the Society of Professional Journalists. He has produced audio podcasts on CRE topics for the NAR Commercial Division and the CCIM Institute. Steve has also served (from August 2017 to March 2018) as national broadcast news correspondent for CEOReport.com, a news website focused on practical advice for senior executives in small- and medium-sized companies. Steve also reports on-camera and covers conferences for NJSpotlight.com, a public policy news coverage website focused on New Jersey government and industry; and for clients of StateBroadcastNews.com, a division of The Lubetkin Media Companies LLC. Steve has been the computer columnist for the Jewish Community Voice of Southern New Jersey, since 1996. Steve is co-author, with Toronto-based podcasting pioneer Donna Papacosta, of the book, The Business of Podcasting: How to Take Your Podcasting Passion from the Personal to the Professional. You can email Steve at [email protected].
