GlobeSt.com EXCLUSIVE: EastRidge Properties Deal Came Back to Reckson

"We were not the highest bidder on this," Campofranco tells GlobeSt.com. "There were other guys that bid higher on this. We stayed at our price and the deal came back to us. Sometimes patience pays off." He reveals that EastRidge officials came back to Reckson to negotiate a possible deal about two weeks ago.

Campofranco also notes that Reckson plans to undertake a significant capital improvement program at the properties. Although the Reckson executive says that it is too early to put a price tag on the necessary improvements to the portfolio, he says, "We are going to have to put serious money into this."

The portfolio, which consists of five suburban office parks in White Plains, Harrison and Purchase, currently has an occupancy rate in the upper 70s. He says that there will have to be some facade improvements to some buildings, lobby upgrades as well as improvements to parking facilities. The upgrades that will be necessary to transform the portfolio into class A suburban office properties apparently had an impact on the sales price. Reckson officials the day of the contract announcement pegged the discount to replacement cost in excess of 35%.

This past October, Reckson acquired 711 Westchester Ave., a 118,000-sf office building from an entity controlled by the Malkin family for $24.8 million or $210 a sf. The property is located inside EastRidge's White Plains Office Park, but was not owned by the General Motors Pension Fund.

Patrick Colwell, senior director with Cushman & Wakefield's Capital Markets Group, says there were three finalists for the EastRidge portfolio out of an original 22 bidders that vied for it. Cushman's Andrew Merin, vice chairman of the firm's Capital Markets Group, and Colwell marketed the portfolio on behalf of AEW Capital Management LP. The portfolio first went on the market this past July.

Colwell confirmed that one of the top bidders for the portfolio other than Reckson was Heritage Realty Services LLC of New York City. Sources say that Heritage in fact submitted a higher bid than Reckson for the properties. Colwell refused comment on those reports. Earlier this year, Heritage reportedly paid nearly $200 a sf for 2 and 4 Gannett Dr. here.

"There were three finalists doing due diligence work and they [Reckson] were the first ones to demonstrate that they will close," Colwell says. The sales agreement between Reckson and the General Motors Pension Fund is expected to close before year's end.