Mack-Cali Realty Corp. continues to shed its suburban office buildings as it focuses on properties closer to the New Jersey waterfront.
The Jersey City-based real estate investment trust recently sold a 1.5 million-square-foot office portfolio in Morris County, New Jersey, to Onyx Equities, along with partners Taconic Capital Advisors, Axonic Capital and Machine Investment Group. According to the firm, Onyx and its partners paid $160 million for the 10-building parcel. The sale comes two years after Onyx acquired another Mack-Cali office portfolio in nearby Bergen County.
Mack-Cali has in recent years shifted its strategy to focus on the acquisition of office and multifamily properties on the Hudson County waterfront. In 2019, the firm announced that it would shed its entire suburban office portfolio in order to pay down its corporate debt. The REIT also recently tapped MaryAnne Gilmartin to temporarily serve as CEO amid a larger shake-up of its leadership team.
“Our team’s effort, led by Ricardo Cardoso, has achieved a major milestone for the company with the strategic sale of our Parsippany assets,” said Gilmartin. She said the firm would continue to prune its portfolio and focus on commercial waterfront assets.
Although the Morris County assemblage went into contract before the pandemic, the unusual investing environment, and the question of whether employees will be returning to offices in the near future, impacted the transaction.
John Saraceno, Jr., managing principal for Onyx Equities, said the final purchase price was 10 percent lower than the initial offer, and some assets were left out of the transaction. Real Estate New Jersey reported in December 2019 that Onyx was in contract to buy 2.4 million square feet for $288.5 million.
“In conjunction with Mack-Cali, we worked through some revisions to pricing and staggered the closing,” said Saraceno. “We both recognized the world was different.”
The buildings included in the transaction are all located in Morris County. Nine are in Parsippany: 1, 3, 5 and 7 Sylvan Way; 4, 6 and 8 Campus Drive; 2 Dryden Way and 2 Hilton Court. The final building is 1 Giralda Farms, in Madison.
The properties are 84 percent leased, Saraceno said, and he believes they’re well-positioned to benefit both from tenants already in the suburbs who are looking for office space, as well as those looking for space outside of New York City due to Covid-19.
Saraceno acknowledged that in the office sector, the next two to three years may be “choppy,” but he said there will still be a demand for high-quality productivity space — especially if it allows some workers the flexibility to not commute into New York City.
“Our anecdotal evidence tells us that people enjoy being closer to their house,” Saraceno said. “People have recognized once and for all that they don’t need to go to New York City.”