Longtime landlord exits Westchester office market

The forced sale this year by a mortgage lender of a six-building Westchester office portfolio has Long Island-based RXR Realty pulling out of the county’s suburban office market — while investing heavily in downtown residential and retail developments in Yonkers and New Rochelle — after two decades as a prominent office-park owner and manager in the county.

As one longtime commercial office market player leaves the field, two of Westchester’s old guard real estate companies — GHP Office Realty and Robert Martin Co. — have stepped in this year to buy two office buildings on the Route 119 corridor in Tarrytown and Greenburgh. And a northern New Jersey investor has entered the county market with the purchase of two flex and office buildings at Heritage Corporate Park in Elmsford.

Those were among 19 office properties in Westchester and Fairfield counties, Long Island and New Jersey being sold off this year by RXR affiliates and RNY Property Trust, an Australian REIT and the portfolio’s majority owner, as collateral to satisfy debt modification agreements on a $115.5 million senior bank loan and $36 million mezzanine loan with SunTrust Bank. The Westchester properties are being marketed by Cushman & Wakefield’s Metropolitan Area Capital Markets Group in East Rutherford, New Jersey.

The Australian REIT is managed by an RXR affiliate, RNY Australia Management Limited, whose chairman, Scott Rechler, is also chairman and CEO of RXR Realty in Uniondale. Two other founding managing partners at RXR serve as directors of the Australian trust’s management.

Investing solely in commercial office markets in the tristate area where RXR operates, RNY Property Trust has a 75 percent interest in a U.S. registered company, RNY Australia Operating Co. LLC; the remaining 25 percent ownership interest is held by an RXR Realty affiliate.

Directors of the Australian trust last summer told investors that managers of the suburban New York office buildings had “focused on cash management and on attempting to build and maintain occupancy, which has proven difficult due to what the Group’s management perceives as structural shifts in the Trust’s suburban markets.” RXR managers planned to continue limiting base building capital expenditures to essential projects and “selectively use cash in support of leasing efforts that will have a positive impact on efforts to market the properties for sale.”

At 660 White Plains Road in the Tarrytown Corporate Center, Andrew M. Greenspan has seen evidence of that lack of capital investment by the previous owner.

A principal at GHP Office Realty in West Harrison, Greenspan and his GHP partner, James J. Houlihan, in March teamed with RD Management in Manhattan and paid $30 million for the six-story, 280,000-square-foot building distinguished by its pyramidal shape. The deal followed by a few days the partners’ $15 million sale of a Fort Worth shopping center, and GHP and RD Management invested their proceeds from the Texas cash deal in their Tarrytown acquisition.

Built in the late 1980s, the 660 White Plains Road building by the early ’90s “was the premier multitenant building on the west side and possibly in the county,” Greenspan said. Although the building was 85 percent occupied at the time of the sale and has about three dozen tenants, “I don’t believe the demand for the property was particularly strong,” Greenspan said. “Over the last several years, it’s lost its luster. It’s a diamond in the rough that we’re polishing.”

Greenspan said the new owners plan $3.5 million in renovations over a roughly two-year span. “The building will be like new,” he said.

“Every several years, major commercial properties need to start over,” Greenspan said. “Current owners didn’t want to invest in it. Suburban office assets have fallen out of favor. That leaves opportunity for GHP.”

Nearby on Route 119, Robert Martin Co. found opportunity for the potential adaptive reuse of an aged and empty office building with its $5.5 million purchase in early May of 555 White Plains Road, a five-story, approximately 134,000-square-foot structure in the dwindling RNY Property Trust portfolio.

An attorney for Robert Martin Co. recently told Greenburgh town officials that the new owner wants to raze the building — whose only remaining tenant is Tappan Zee Constructors, the new bridge’s design-build consortium of contractors — and build a fitness center or health club on the 4.2-acre property, along with a smaller two-story building that would be used for self-storage or warehouse space. The two buildings together would total 115,000 square feet of space and the redevelopment would include 284 parking spaces.

“Not only is it going to be vacant, it is obsolete,” attorney Mark Weingarten of DelBello Donnellan Weingarten Wise & Wiederkehr in White Plains, said of the building that was constructed in 1971. “If you were going to try to keep this even if you had a tenant, there would be significant dollars that would have to be (invested) to renovate or rebuild that office building, so it just doesn’t have a whole lot of value.”

In April, RNY Property Trust and RXR unloaded 80 Grasslands Road and 100 Grasslands Road, an approximately 88,000-square-foot office building and 67,000-square-foot flex building that comprise Heritage Corporate Park in Elmsford. The multitenant complex has been the headquarters of Amscan Inc. for more than 20 years, according to Cushman & Wakefield brokers. Lewiston Holdings LLC, a North Haledon, New Jersey affiliate of PAG Investments, paid $10.8 million for 80 Grasslands and $5.1 million for 100 Grasslands.

In Stamford in Fairfield County, RNY Property Trust in June sold 225 High Ridge Road to a joint venture of Darien-based Baywater Properties and an investment fund managed by True North Management Group LLC of White Plains. The 244,000-square-foot property sold for $22.5 million and is 81 percent leased, according to CBRE Group Inc., whose Institutional Properties team brokered the Connecticut deal.

At midyear, Cushman & Wakefield brokers are marketing the Australian REIT’s two remaining Westchester office properties, 560 and 580 White Plains Road in the Tarrytown Corporate Center. The Class A buildings will be delivered at about 56 percent occupancy, said Frank DiTommaso, a broker with Cushman & Wakefield’s Capital Markets Group.

Staff writer Aleesia Forni contributed to this report.

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