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REA
July 10, 2019  

Jersey City Offices Could Break Price Record

LeFrak Organization is marketing a waterfront office building in Northern New Jersey that could command a record price for the state.

The 867,000-square-foot Newport Office Center 4, at 545 Washington Boulevard in Jersey City, could attract bids exceeding $400 million, or $462/sf. It’s 96% leased, mostly to J.P. Morgan and Insurance Services Office. The offering is likely to attract interest from core buyers.

At the estimated value, a buyer’s initial annual yield would be about 6%. Cushman & Wakefield is representing LeFrak, a family-run real estate firm in New York.

The record price for a New Jersey office building is $377.5 million, set in 2011 when Bentall Kennedy’s Multi-Employer Property Trust bought the 1.1 million-sf building at 525 Washington Boulevard in Jersey City. CBRE brokered that $349/sf sale for Brookfield Property of New York.

J.P. Morgan and Insurance Services occupy 80% of the space at the listed building under leases that have a weighted average remaining term of some 14 years.

Marketing materials note that J.P. Morgan is committed to Jersey City. The 22-story building houses its corporate and investment banking divisions. The bank also fully occupies the 807,000-sf building at 575 Washington Boulevard, which it bought in 2014 from LeFrak for $315 million, or $390/sf. Eastdil Secured brokered that sale.

Insurance Services has a lease through 2033. Until next May, the firm has an option to lease a now-vacant floor at a below-market rent. LeFrak would provide “income support” to a buyer for that floor until then.

Other tenants include HSBC (until February 2021) and VF Sportswear (until 2025). The building also has some 11,000 sf of street-level retail space and roughly 750 parking spaces. Over the next 14 years, the existing leases will produce some $376 million of contractual revenue.

Despite the high occupancy rate, the sales campaign is highlighting the potential to raise below-market rents as nearer-term leases expire. The average asking rent is $40.13/sf in the surrounding Newport neighborhood. The broader Hudson Waterfront submarket had an average Class-A asking rent of $45.75/sf in the first quarter, up from $44.88/sf a year earlier. A buyer could also seek to generate additional income by re-measuring the building to increase the leasable space to 948,000 sf and by adding amenities that would support higher rents.

The property, which has unobstructed views of the Hudson River and Lower Manhattan, connects to Newport Centre Mall. It’s across from a PATH station that links to Manhattan and Newark, N.J., and is near a ferry station set to open by yearend.

LeFrak, an active developer in Jersey City, recently sold a nearby office property, at 570 Washington Boulevard. New York-based iStar bought that 350,000-sf building in March for $170 million, or $486/sf. Cushman was the broker.