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September 18, 2019  

Harbor Strikes Deal to Buy Jersey City Tower

Harbor Group International has agreed to buy a Jersey City building from LeFrak Organization for roughly $375 million — the second-highest price ever for a New Jersey office property.

The 867,000-square-foot building, at 545 Washington Boulevard, is 96% leased. At the valuation of about $433/sf, Harbor’s initial annual yield will be roughly 6%. Cushman & Wakefield is brokering the sale for LeFrak, a family-run real estate firm in New York.

When the 22-story property was listed over the summer, bids were expected to top $400 million, or $462/sf. But the price fell when LeFrak decided to retain the property’s income-generating parking component, with nearly 750 spaces.

The bulk of the building — 80% — is leased by J.P. Morgan and Insurance Services Office. Their leases have a weighted average remaining term of about 14 years.

J.P. Morgan’s space is used by its corporate and investment-banking divisions. The bank also fully leases the nearby 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’ lease runs through 2033. Until May, the firm has an option to lease a vacant floor at a below-market rent. In marketing materials, LeFrak said it would provide “income support” to a buyer for that floor until then.

The rent roll also includes HSBC (until February 2021) and VF Sportswear (until 2025). There’s also about 11,000 sf of streel-level retail space. All told, existing leases will produce some $376 million of contractual revenue.

Harbor, a Norfolk, Va., investment manager led by Jordan Slone, could look to raise below-market rents on leases that roll over in the next few years. The shop could also 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, in an area known as New Jersey’s “Gold Coast,” offers unobstructed views of Lower Manhattan across the Hudson River. It connects to Newport Centre Mall and is across from a PATH station that links to Manhattan and Newark, N.J. A nearby ferry station is set to open this quarter.

The sale would be LeFrak’s second in Jersey City this year. In March, New York-based iStar bought the 350,000-sf property at 570 Washington Boulevard for $170 million, or $486/sf. Cushman also brokered that sale.

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