Reckson Buys EAB Plaza for $240M

UNIONDALE, NY-Reckson Associates Realty Corp. has acquired the 1.1-million-sf EAB Plaza from Galaxy LI Associates, a joint venture between the Moinian Group and C&K Properties in conjunction with David Werner for approximately $240 million. The partnership had picked up the site in September 2003 for approximately $200 million. “Our acquisition of EAB Plaza reflects our focus on acquiring class A office properties that offer us the opportunity to to create value to our portfolio,” says Scott Rechler, Reckson’s president and chief executive officer.

Situated on more than 26 acres of land in Nassau County, EAB Plaza features two 15-story glass towers connected by a three-story lower level, plaza and lobby. Built in 1984, the complex includes an ice skating rink, a 60-foot cascading indoor waterfall and a winter garden. Amenities include on-site day care, its own post office, cafeteria, pharmacy, bank, florist and dentist. It was built in 1984 on Nassau County-owned land for roughly $150 million.

EAB tenants include Citibank, Dreyfus, Washington Mutual, Del Laboratories, GMAC and the law firms of Rivkin, Radler; Ruskin Moscou; and Farrell Fritz. The site is approximately 90% leased. Upon contracting to acquire EAB Plaza, Reckson will immediately take over responsibility for all leasing activity at the property. Cushman & Wakefield had been the exclusive agent under the previous ownership. “We believe we are uniquely equipped to increase EAB Plaza’s value by effectively addressing its near-term vacancies, increasing rents and leveraging our scale to generate significant operating expense efficiencies,” Rechler notes.

Reckson is purchasing EAB Plaza at an approximate 20% discount to replacement cost. Reckson expects to generate an initial GAAP net operating income yield of approximately 6.5%. In September 2003, Reckson initiated its investment in the site in the form of a mezzanine loan. Subsequently, Reckson increased its investment which now aggregates approximately $27.6 million. This investment is secured by a pledge of an indirect ownership interest of an entity which owns the ground leasehold estate under EAB Plaza. The mezzanine loan will be repaid upon Reckson’s closing, which is expected in the fourth quarter.

Prior to that closing, Reckson has the option to purchase the adjoining 8.2-acre development site. If Reckson does not exercise this option the company will provide a two-year, $10-million loan to the seller, secured by the development site and will be retained to provide development related consulting services for the site. Both EAB Plaza and the adjoining development site are subject to a long-term ground lease from the County of Nassau having a term, including extensions, in excess of 75-years with current annual ground rent of approximately $0.53 per sf.

In another of this year’s larger transactions, Reckson inked a deal for the 1.4-million-sf tower at One Court Square in Long Island City for $470 million this past May. The 50-story class A tower will remain occupied by its seller, Citibank NA, under a 15-year net lease.