Corrections or additions?
These articles by Peter J. Mladineo were published in U.S. 1 Newspaper
on July 15, 1998. All rights reserved.
Carnegie Center Sold
By the way buildings have been getting gobbled up lately,
you would expect to see Godzilla’s tyrannosaurian head looming just
over the tops of the elms lining Washington Road. But the most active
building-munchers around here are real estate investment trusts. In
the past few months, REITs, publicly owned companies whose sole aim
is to increase their inventory, have been pretty hungry.
The latest REIT to dine, Boston Properties, has one juicy morsel on
its plate: Carnegie Center. As expected, Boston Properties, the
REIT headed by publisher Mortimer Zuckerman, has purchased a large
portion of the Class A office complex from the Landis Group. The $284
million deal includes 1.37 million square feet — eight buildings
and one of the Brunswick Towers in East Brunswick. The Carnegie Center
buildings, totaling 950,000 square feet, include 101, 104, 105, 202,
210 (Covance), 211 (CUH2A), 212, 214, and 201 (the Carnegie Family
Center), and the 420,000-square-foot Tower Center One at Exit 9 of
the New Jersey Turnpike.
Boston Properties doesn’t own buildings 102 (the Hyatt), 103 (owned
by Mack-Cali), 301 (the Summit Bank headquarters), nor 504, 506, and
508. However, the firm stated that it would begin managing those
three (504, 506, 508) immediately, with the option to acquire them
in the future. In total they comprise 400,000 square feet.
Also Boston Properties does not yet have the titles to the Covance
or Raytheon buildings currently under construction. However, Boston
Properties has said it will acquire these two — comprising 394,000
square feet — when construction is completed this fall.
For Alan Landis, Carnegie Center’s developer who opened the office
park in 1981, the time to sell has never been better. His concern
is getting $137 million in cash and $83 million in stock. And Boston
Properties is assuming $64 million of the Landis Group’s debt. Landis
plans to stay in the business, too — he will join the Boston
board. He told newspapers that he planned to be "busier than
in his new capacity. The 35-person Landis Group will remain intact
at Carnegie 101.
Landis, whose firm has weathered several different economic
turns, is finally being rewarded for its sweat. "The Landis Group
put 20 years into this project," says broker Gerard Fennelly.
"There’s more to it than just buildings."
John Buschman, of Buschman Jackson-Cross, told reporters that, "if
there was an award for hanging on by the skin of your fingernails,
it would go to Alan Landis," he says. "Now he’s being rewarded
for his ability to stick with it."
Experts are estimating that this acquisition is costing Boston
anywhere from $150 to $200 per square foot. Currently, says Fennelly,
the average rent at Carnegie Center is $25 per square foot.
they’re talking about going up to $27 or $28 probably next year,"
says Fennelly. "When there’s no supply it’s very achievable.
Not much new inventory is expected to come on to the market for
12 to 18 months, says Fennelly. "The fourth quarter of 1999 is
when we’ll see the inventory pick up. In the next year you’re going
to have rent growth. It’s going to be significant. And that’s probably
what Boston Properties is banking on."
Carnegie Center will also see construction of a speculative
building scheduled to be built on the southern end of the center.
"That’s something we wouldn’t have considered a few years
Landis was quoted as saying. "But the economy has improved and
the market is great."
However, Fennelly predicts, by the end of 1999 there will be 1.4
vacant square feet in the market, as well as a 10 percent vacancy
rate. "If we build as much as I think we’re going to build there
will be a leveling of rents," he says.
Fennelly has gone on record warning of the dangers of buying real
estate that is priced higher than what rental rates will justify.
"Generally speaking $197 per square foot surpasses replacement
costs and the rents probably don’t cover the price they paid,"
he says. "The REITs can pay more because they’re not borrowing
To Fennelly, this smacks a little of the speculative ’80s. "I’m
cautious on any kind of valuation that isn’t supported by rent,"
he says. "In the 1980s we had tax syndicators who were out trying
to lose money and developers who were trying to lose money. In the
1990s we’re building to make money. In this case they’re paying a
lot for the project based upon the returns that they give to a
It’s a little different than paying up and causing values to go up
but it still sends the same kind of signal."
But for the shorter term, some of Carnegie Center’s tenants who signed
leases early this decade may only be paying roughly $20 per square
foot now. This is bound to create some attrition when their leases
come up for renewal. "The rental rates from existing Carnegie
Center properties are 20 to 30 percent below what the rental rates
will be once tenants renew their lease," says Aubrey Haines of
GMH Realty at Crossroads Corporate Center. "The rates have not
yet caught up with the market. As they do you’ll see an escalation
If some of those tenants experience what Haines calls
"sticker shock," they might choose to relocate from Carnegie
Center. With slim pickings in the Class A market, Haines is trying
to entice them to rent space at Windsor Corporate Park. This new Class
A office center, carved out of the now-vacant Lockheed Martin complex,
has 300,000 square feet. Haines estimates that space there will go
for $22 per square foot. "The only reason we’re charging less
than Carnegie Center is because of our location," Haines explains.
"We’re pricing ourselves as a value alternative at this
But Haines doesn’t see much of a chance that Windsor Corporate Park
rates will drive down Carnegie Center rents, he says. "Most
at Carnegie Center want to stay at Carnegie Center."
— Peter J. Mladineo
Road, East Windsor 08520.
East Windsor’s office renaissance continues with the announcement
that Lavipharm Laboratories, a Greek pharmaceutical firm founded in
1911, is relocating its global research and development office from
Piscataway to the former Mettler-Toledo building on the corner of
Route 571 and the One Mile Road Extension.
Currently, the 50,000-square-foot facility is being retrofitted to
accommodate a staff of 30. Lavipharm focuses on transdermal
and cosmetic products, including nitroglycerine patches for the
of angina attacks, and an anti-acne patch.
Suite 2400, Princeton 08540. Will Mayhall, president/CEO.
fax, 609-987-9320. Home page: http://www.pfs.com.
Princeton Financial Systems has entered the trade order management
system business by buying the Tempo system from Research Park-based
Tower Mountain Software, Inc. Steve LaPierre, Tower’s president, will
be managing director of Trade Order Management Systems for PFS, a
subsidiary of State Street.
Office, 340 Scotch Road, West Trenton 08628. Deborah Johnson,
609-882-2231; fax, 609-882-1992.
This systems management office for Federal Aviation Agency has
to encompass new territory. It formerly did maintenance for
ground equipment for airports from Delaware to northern New Jersey.
Now it is responsible for upstate New York — Utica, Albany,
Lake — up to the borders of Canada — and western Pennsylvania
to the Harrisburg and Wilkes Barre area. The realignment of 1995 has
come to fruition now, and so Deborah Johnson now manages 25 employees
instead of 19. She expanded and moved from the second floor to the
Johnson went to the FAA electronics school in Oklahoma City and came
up through ranks as an electronics technician; she has been supervisor
and manager at Washington National Airport (now Reagan Airport) and
is the manager of this regional office.
08540. 609-514-7300; fax, 609-514-1919.
Earlier this year Lysa Israel and Laura Slomka closed their
events planning business at 29 Emmons Drive. Slomka has her own firm,
Laura J. Slomka Associates Inc., Box 844, New Providence 07974,
fax, 908-665-0520. She is currently working for the Franks for
Committee, to reelect Republican Congressman Bob Franks in District
Israel also has opened her own firm, and she is located in Skillman
Cranbury, Box 313, Jamesburg 08831. Zinera Ann Macys, president.
Jet Messenger, which had bought Macys Courier out, closed this
office and consolidated operations with its office in Edison. The
Jet Messenger number is 732-287-5600.
3 and 4, CN 5257, Princeton 08543-5257. Meg Valnoski, president.
fax, 609-799-4148. Home page: http://www.theradex.com.
For the fourth time the National Cancer Institute has renewed a $9
million five-year contract with Theradex. This contract research
(CRO) expanded earlier this year by adding 3,700 square feet at
Park. It focuses on oncology and has offices in Chicago, Dallas, Salt
Lake City, London, Paris, Tokyo, and Sydney. For NCI it has monitored
more than 20,000 patients in nearly 1,000 protocols at over 135
08540. Joel S. Greenberg, president. 609-924-2020; fax, 609-924-6942.
This business has been moved to a home office from 900 State Road.
Franklin Corner Road, Lawrenceville 08648. Wendell T. Breithaupt,
president and CEO. 609-844-3100; fax, 609-844-0101.
Dan Chila has left CoreStates, where he was senior financial manager
of the retail division, to be senior vice president and chief
officer of Trenton Savings Bank and its parent company Peoples
He reports to COO Lee Bellarmino.
Princeton University, Princeton University Press, and The Silver Shop
in Palmer Square.s
he was a history bibliographer at Princeton’s Firestone Library.
Jeydel, she was president of the New Jersey Symphony Orchestra League.
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