KABR, Capstone purchase Bergen County office building

//July 31, 2009

KABR, Capstone purchase Bergen County office building

//July 31, 2009

Small sale price allows new owners to lower asking rents.KABR Real Estate Investor Partners LLC, a Paramus-based real estate investment fund, and Capstone Realty Group, an Englewood-based commercial real estate owner and operator, announced Friday that they have jointly purchased 611 Route 46 West, a 130,000-square-foot Class B office building in Hasbrouck Heights, in an all-cash deal.

611 Route 46 West — the companies’ first joint venture together — is the second acquisition for KABR and the second loan acquisition for Capstone in the past six weeks, the firms said. In June, KABR purchased 85 Challenger Road, in Ridgefield Park, from AIG, and Capstone bought a nonperforming commercial real estate loan pool from a northern New Jersey commercial bank, according to the companies.

The previous owner, a large real estate entity, did not have sufficient cash flow to service the debt on the building, said Kenneth Pasternak, KABR chairman. The owner and the lender, an insurance company, put the property on the market and sold it at a market-clearing price in what is known as a cooperative short sale, he said.

Many buildings today have vacancies of more than 20 percent, with rents 20 percent to 30 percent lower than those charged two or three years ago, Pasternak said. “A lot of the cash flows in many buildings won’t support the debt service,” he noted.

Pasternak declined to disclose the property’s purchase price, but said it was roughly 50 percent of what the previous owner had paid for the building.

To fill the remainder of 611 Route 46 West — currently 68 percent occupied by a dozen smaller, entrepreneurial tenants — “we’ve lowered the previous asking rent considerably,” to about $17 to $18 a foot from $23 to $24 a foot, Pasternak said. The new owners have hired a brokerage firm to market the building, and have received some preliminary requests from potential tenants, he said.

KABR is also working on other potential deals, Pasternak said: “Right now, we have a handful of opportunities that are in late-stage discussions. We believe we’ll have more acquisitions in the near future.”

In 2005, a joint venture of Praedium Group and Lincoln Property Co. purchased the building for $11.9 million from Hartz Mountain Industries, according to Real Capital Analytics, a commercial real estate market research firm.

E-mail Evelyn Lee at [email protected]