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300,000-SF Logistics Facility to Rise Near JFK Airport

Triangle Equities, L&B Realty Partners and Township Capital Invest in Project Breaking Ground Next Winter
March 7, 2018

The Terminal Logistics Center at 130-24 S. Conduit Ave. will provide vertical logistics to the JFK Air Cargo Market when it delivers in 2020.
Rendering courtesy of Craft Architects.

A joint venture of Triangle Equities, L&B Realty Partners and Township Capital is banking on the New York Metro Area’s growing need for close-in industrial warehouse and fulfillment space.

The group has acquired a three-acre development site located a quarter-mile away from John F. Kennedy International Airport (JFK). It will redevelop what is currently a parking facility at 130-24 S. Conduit Ave., turning it into a 300,000-square-foot, multi-level industrial building called Terminal Logistics Center.

"We’ve wanted to invest in this type of venture for some time because of what we saw happening in New York City," Josh Weingarten, director of capital markets at New York-based Triangle Equities, tells CoStar News. "For years, New York City industrial in the boroughs has been rezoned to residential. The remaining industrial product is very old; it doesn’t have the features a modern logistics occupier wants," he says of lackluster clear ceiling heights, heavy structural capacities to support both loading and unloading and the robotics for warehouse automation, strong power loads and truck ports.

"There is an incredible lack of supply of warehouse/fulfillment space while every year more retail is happening through ecommerce. So it’s this perfect storm," he says.

In a release, Weingarten notes they have "seen a paradigm shift in the retail and industrial sectors, and this facility will offer tenants an ideal opportunity for air-cargo business, third-party logistics and e-commerce distribution firms to enter or expand within this urban market."

HFF arranged $32.1 million in financing for the development, including a $19 million, floating-rate loan with Citizens Bank that will go toward land acquisition and pre-development costs. Proceeds from the $32.1 million financing package will go towards acquisition costs ($24.85 million) and to fund closing and predevelopment costs ($7.25 million) according to HFF. There will be follow-up financing for construction, says Weingarten.

L&B Realty Advisors and Triangle Equities contributed about $10.1 million in joint-venture capital, and Township Capital contributed additional equity, according to sources with knowledge of the deal. Triangle and Township are the general partners in the venture, while L&B holds the limited partner stake.

"We continue to see a shifting demand from high-credit users toward newly-constructed, Class A product. The maturation of the e-commerce market creates a growing need for last-mile distribution centers in the largest land-constrained U.S. markets," Township Capital CEO Matthew Gorelik said. Township Capital has been actively investing in industrial projects in major U.S. markets over the last year, he added.

March Associates will manage the project’s construction, while Craft Architects and GF55 Partners are leading the architectural design. Citing the complexity of permitting, Weingarten says groundbreaking is anticipated between the first and second quarters of 2019. Tenants should be able to start moving in during summer 2020.

Frank Liggio and Eric Throne with Cushman & Wakefield have been retained to market what will be "the most state-of-the-art" asset and the first vertical logistics facility of its kind in the outer boroughs.

Citizens Bank Senior Vice President William Butler said the proposed multi-level industrial asset exemplifies forward-thinking development at an "intricate" location.

Full-sized trailers will be able to dock, load and unload from both the first and second floors, each of which has 26-foot ceiling heights and 50-by-50-foot column spacing, according to a prospectus provided by Cushman & Wakefield.

The first floor spans 90,000 square feet and the second floor will be about 77,000 square feet. Just over 44,000 square feet will be available on the third floor as flex space. There is also a lower basement level with 50,000 square feet of additional warehouse storage and attached garage fitting about 100 parking spots. Both the lower and third-floor levels will have 12-foot ceiling heights.

"Both floors will have loading docks accessed via truck ramps, permitting full-sized trailers to dock, load and unload directly into their floors. The project will deliver new-construction of Class-A industrial space to the JFK market - currently underserved by such space - and will include market leading clear heights, heavy floor loads and large structural column spacing," Triangle Equities said in a release.

Weingarten says his firm’s research has tabulated JFK as a 6 million-square-foot industrial micromarket.

"With this site, we will be able to develop a unique product that has not yet been delivered to the New York City industrial sector. By making this a vertical, multi-level facility, we are able to maximize use of the site, thereby increasing the potential impact this project will have on the growth of air cargo at JFK airport and the New York City economy," said Lester Petracca, president of Triangle Equities.

In 2017, Port Authority of New York and New Jersey (PANYNJ) handled a total container volume of 6.7 million TEUs, says Cushman & Wakefield, making it the second-most active port in the U.S. after Los Angeles. Total container volume jumped year-over-year, with PANYNJ Jersey data showing 6.25 million TEUs in 2016. About 1.4 million tons of air cargo flows through JFK annually, according to PANYNJ.

And activity is expected to be higher for East Coast ports than those on the West Coast in 2018, CoStar Portfolio Strategies forecasts in its most recent Industrial Big Book.

Overall industrial vacancy for the PANYNJ area in 2017 stood tight at 3.8%, Cushman & Wakefield notes. Across the broader New York Metro Area, industrial vacancy is about 4.8%, according to CoStar research.

Nationally, supply is finally keeping pace with demand for logistics warehouses and rents are justifying speculative construction, notes CoStar Portfolio Strategies.

"L&B was attracted to the project due to the strength of the market and location adjacent to JFK Airport," said Bernadette Mussell, vice president of acquisitions for L&B Realty, adding that the investment aligns to the firm’s strategy of targeting quality industrial facilities with above-average return potential.

As the property is situated in one of the City’s Industrial Business Zones, there may be some benefits to the developers through New York City Industrial Development Agency, if job creation requirements are met.

"The location relative to JFK Airport and core strength of the New York market provide a tremendous opportunity for superior risk-adjusted returns," added Gorelik.

Terminal Logistics Center’s modern construction and its close proximity to JFK and the Van Wyck Expressway should appeal to tenants, Cushman & Wakefield’s Eric Throne tells CoStar News, adding that the space can accommodate up to four tenants, "one per floor for air-cargo and logistics." Asking rents will be in the $32 range, he says.

This compares to an average asking rent of $12.65 for the New York Metro Area, tabulated by CoStar research, which adds in its latest quarterly market report that industrial rents for the area are trending upward.

Although warehouse rents in modern, Class A facilities may be higher, in practice they are just a small part of supply chain costs for ecommerce companies, which are saving money by reducing those costs.

"It is a net benefit," Weingarten explains. Possible tenants for the property would include third-party logistics (3PL) firms, business-to-business (B2B) freight-forwarders that ferry cargo through JFK to manufacturers, and businesses that support JFK, according to Weingarten. Examples include caterers responsible for airline food. "We’ve heard from a lot of them that no blocks of class-A space are available for expansion," he says.

HFF's Andrew Scandalios, Rob Hinckley, Rob Rizzi and Tyler Perk worked on the equity placement side of the deal, while Geoff Goldstein worked on the debt placement side.

The property’s existing use as a parking operation also provides income prior to vertical construction, HFF notes.

Hinckley concluded the property is strategically positioned to "capture the insatiable demand for modern, ‘last-mile’ distribution space located in highly populated urban areas."

Diana Bell, New York City Market Reporter  CoStar Group   
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