By Al Barbarino
Mack-Cali Realty Corporation is in contract to buy Roseland Properties’ development and management divisions in a deal valued at $134.6 million, the New Jersey-based REIT announced Tuesday.
The company called the purchase a “fundamental step” in the continued diversification of its portfolio, while Roseland said the deal brings “unparalleled opportunities” to expand both companies’ business platforms.
Multi-family residential has become a key component of Mack-Cali’s growth strategy and diversification of its portfolio of roughly 300 office and manufacturing buildings along the northeast corridor, said Mitchell Hersh, the firm’s president and chief executive officer.
“Mack-Cali will become a significant participant in the multi-family residential sector in supply constrained markets which overlay our class A office and office/flex portfolio,” Hersh said.
“Roseland has had a long track record of multi-family value creation and capital growth achievement. This will enhance our opportunities to deploy capital across a strategically positioned portfolio with an integrated platform to address all elements of the real estate development process.”
The price, which will also include certain property interests, is subject to adjustment, with the estimate consisting of $115 million in cash, approximately $4 million of assumed debt at closing, and an additional earn-out of up to $15.6 million in cash over the next three years.
The negotiations for the sale took place over the last three months and Roseland co-founder and partner Carl Goldberg told Real Estate Weekly the deal was a “strategic decision” to diversify and combine leadership and expertise for both organizations — with Roseland pulling the multi-family weight and Mack-Cali the office.
The deal offers “unparalleled opportunities to expand our business platform in a powerful way,” Goldberg said.
During the three-year earn-out period, each of Roseland’s principals, Marshall Tycher, Brad Klatt and Goldberg, will serve as co-presidents of Roseland Management Services, L.P., a newly formed wholly owned subsidiary of Mack-Cali, with Hersh assuming the role of chairman and chief executive.
Roseland, which has amassed a multi-family portfolio of over 40,000 high-end homes since 1992, will be fully owned by Mack-Cali, but it will continue to operate as an independent multifamily residential platform out of is current Short Hills, N.J. offices.
It will be “business as usual,” with “no change whatsoever to the operations of Roseland,” Goldberg said.
All 275 Roseland employees will stay in place, and Roseland property tenants “will see no discernible difference, expect perhaps in the letterhead,” Goldberg said.
In addition to the development and business lines, Mack-Cali signed a “definitive agreement” to acquire Roseland’s real estate development and management businesses; their interests in six operating multi-family properties, totaling 1,769 apartments; and one 212,000 s/f condo-residential property.
Also included are 13 in-process development projects, with nine multi-family properties totaling 2,149 apartments, two garages totaling 1,591 parking spaces and two retail properties totaling approximately 35,400 s/f; and interests in land parcels able to support 5,980 apartments, 736,000 s/f of commercial space, and a 321-key hotel, according to a statement from Mack-Cali.
Leading into the Roseland deal, Mack-Cali announced last December that it would build two luxury apartment towers in Jersey City in partnership with the local Ironstate Development, the firm’s first foray into the housing market in a decade.
“When Mack-Cali announced their Harborside Financial residential project there was a feeling that there was more to come,” said Patrick Kretz, development manager with New Jersey apartment builder Fields Development.
“I think this acquisition speaks to the long term value in residential real estate properties in the northeast, New York Metro area and particularly Jersey City and the New Jersey Gold Coast.”
The majority of the Roseland properties are located in New Jersey, mainly at the flagship Port Imperial development in Weehawken and West New York, and on the Jersey City waterfront.
The transaction will be financed through Mack-Cali’s $600 million unsecured revolving credit facility and it is expected to close early in the fourth quarter of 2012.
FTI Consulting and Eastdil Secured served as advisors on the transaction. Dennis Block of Greenberg Traurig represented Mack-Cali and Stanley Schwartz of Orloff Lowenbach Stifelman & Seigel represented Roseland.
— Additional reporting by Caitlin Abdo