The new neighbor: Rugby Realty Co. quickly making its presence felt since coming to New Jersey
By Joshua Burd
NJBIZ – February 16, 2015
Rugby Realty Co. made its first foray into New Jersey in late 2013 — and it was something of a deviation from its usual playbook of the past three decades.
That’s because the Lyndhurst office building it acquired was in “fantastic shape,” said Managing Partner Maurice Ades, whose firm specializes in acquiring undervalued properties and repositioning them with key upgrades. The 135,418-square-foot building had been redeveloped only seven years ago, its lobby and glass exterior were still pristine and its common areas had been renovated as recently as the year before.
All it needed now was “a lot of TLC, a lot of attention” and to let its tenants know “that there was a very creative and very involved landlord who was a dealmaker.”
“We felt that all we needed to do in that situation was to go in and be very involved, be on every single tour, visit and meet with every single tenant and broker who would be interested on the property,” Ades said. “And (then) we’d be able to quickly — because the building had such good bones — raise the occupancy.”
It was a fortuitous start here for Rugby Realty — the building has since gone from 80 percent to nearly full occupancy — even if it wasn’t a heavy lift by its usual standards. But the New Rochelle, New York-based firm now plans to draw on all of its expertise in investing and reviving commercial real estate as it makes a major push into New Jersey.
The venture has executed that strategy for 35 years, acquiring roughly 70 buildings in places as far-flung as Pittsburgh, Atlanta and South Florida. And it has stayed busy in the Garden State since the deal in Lyndhurst: In July, Rugby acquired a 300,000-square-foot office building in Secaucus, followed by its purchase in December of the 19-story Three Gateway Center office tower in Newark.
With Rugby’s sights now set on another year of aggressive growth, NJBIZ spoke to Ades recently about the firm’s plans in New Jersey.
NJBIZ: To somebody who’s not familiar with your firm, how would you describe your acquisition strategy in New Jersey when it comes to office properties?
Maurice Ades: It’s always location, location, location. … We look for buildings that are vacant to 60 percent occupied — where we can go in and put our own stamp on the building. If it requires renovations (such as a new lobby, new restrooms or new amenities), we’re happy to do that and put money into properties that have been neglected and raise their level.
And then we’ll be very hands-on and help the tenants understand that we’re going to do everything that we promised to do, whether it’s build out the space, put in a café, put in a fitness center. We’re going to improve the landscaping, improve the lighting, redo the elevator cabs, but just really get very involved. Tenants seem to like that. They like to see a landlord who comes to every tour, who is involved in every discussion, because that means they’re going to have a partner to be with them and make sure that they’re going to be happy in the building that they’re coming to.
NJBIZ: Your firm has executed this strategy so well in other markets, and for more than 30 years — why didn’t you get into New Jersey sooner?
MA: That’s a great question. I think I was very focused on those other markets, and I really wish I did get involved sooner, to be honest with you. That’s actually my best answer.
NJBIZ: How will you translate your success from other markets into New Jersey?
MA: We have 70 buildings in which we’ve done this, including something like 30 of them in the last 36 months. … And we see in New Jersey — especially in these properties that we find that have good proximity to New York — that they’re perfect candidates for this kind of strategy. And New Jersey, I think, is a very good place to do business. We really like the fact that the state’s behind the business community (in ways such as the Grow New Jersey business incentive program). We just feel like the state has tremendous access in terms of the highway system, in terms of the amenities that are all throughout all these cities, and (with) the access to Manhattan … we’re going to have a high degree of success if we follow through on our strategy.
NJBIZ: So, now that you’re here, what are your target submarkets in New Jersey?
MA: I would say all locations with good proximity to Manhattan and that have good access in terms of train service, bus service and access to other amenities. Gateway Center in Newark is the perfect example of that. Literally it is the most prime location in Newark — with access to the train, with access to restaurants, hotels. It’s all there in the Gateway Center, so we are really excited about that one, as an example. We’ve had tremendous activity already. We’ve only owned the building for two months and the response from the business community has been nothing but superb.
NJBIZ: You announced plans to spend $20 million on improvements at Three Gateway as part of your plan to reposition it for new tenants, but you already have Prudential Financial there as a major tenant. How important was that to the deal?
MA: When we do buy a building, we do look at the existing tenancy, even if the building is only, let’s say, 40 to 50 to 60 percent occupied, and we really believe in the quality of our tenants. That was a big attraction for us for Three Gateway. Three Gateway is almost half leased by Prudential, so during our due diligence, we got to know some of the people there and a little bit about that company, and that was a big, big impetus for us investing and buying that building. It wasn’t just the location — it was the tenancy. To have a quality, premier tenant like Prudential, not just in name, but in getting to know the people who work there and who are the decision-makers there, that was a big impetus for us to also buy the building. I can’t say enough about that.
NJBIZ: So, besides that, what is your pitch to prospective tenants?
MA: Our pitch is that we are going to do what we say, we’re going to improve the building and we’re always going to be there. When things come up, we’re very accessible. Each tenant has special needs, whether it’s a special build-out that’s going to require us to spend more money than a landlord would typically spend, whether it’s giving them the ability to expand or all different permutations that come up that a tenant is looking for. And we definitely think out of the box and help them with that.
NJBIZ: Rugby also owns an industrial site in Teterboro — what else should we know about your portfolio strategy?
MA: There’s no question that office is our bread and butter, but we absolutely do it with industrial as well. And also retail. We’re not ground-up developers. We’re more (about) taking existing buildings and making them shine.
NJBIZ: What can you tell us about your future plans for New Jersey? Are you looking to make other acquisitions?
MA: Without a question, we would be disappointed if we didn’t continue to have the same growth as we’ve had in the last year. We’ve bought about 1 million square feet in three different buildings, and I’d like to see us equal that, at the very least, in the next 12 months.
A look at Rugby Realty’s acquisitions in New Jersey:
Cityview Corporate Center (160 Chubb Ave.)
Square feet: 135,418
Acquired: December 2013
Notable: The building, originally constructed in 1979, was taken down to its steel and renovated in 2006.
300 Lighting Way
Square feet: 303,000
Acquired: July 2014
Notable: Rugby acquired the building from Hartz Mountain Industries, which developed the sprawling mixed-use Harmon Meadow complex that surrounds it.
Three Gateway Center
Square feet: 579,000
Acquired: December 2014
Notable: Rugby, which acquired the 19-story tower from Tahl Propp Equities, acquired the building two months after Prudential Financial announced plans to stay there as a tenant, albeit in a smaller space. The insurance giant originally planned to vacate the building as soon as it opened a new tower nearby.