Harford County building gets bid Saks center sought

commercial property market strengthening

April 04, 1997|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

A New York pension fund intends to buy a nearly completed Saks Holdings Inc. distribution center in Harford County this month for $27 million, further validating the region's exploding industrial property market.

Teachers Insurance & Annuity Association's bid to acquire the Saks warehouse comes amid surging interest among institutional real estate owners, such as real estate investment trusts and pension fund consultants, for modern warehouses.

"Institutions like distribution centers because they provide good, stable yields, and they aren't as capital intensive as other investment opportunities, such as retail centers or office towers," said David P. Scheffenacker Jr., president of Preston Partners Inc., whose firm is representing Teachers in the transaction.

"In the case of Saks, Teachers likes them as a tenant and they will receive a good financial return on a building in an excellent location for distribution," he added.

Late last month, pension fund adviser Prentiss Properties topped numerous suitors to acquire a 144,000-square-foot distribution building occupied by discount electronics retailer Best Buy Co., in Dorsey, for $5.5 million.

In addition to sheer numbers of parties, the surging interest is being reflected in rising prices. The Saks project, for instance, will sell for nearly $57 per square foot, well above its cost of construction and recent comparable sales.

Teachers, a pension fund with assets of more than $100 billion, is no stranger to Baltimore. In 1987, it teamed with Rouse Co. to purchase $550 million worth of real estate developed by a subsidiary of McCormick & Co., a majority of which is in the metropolitan area. It declined comment for this article.

Constellation Real Estate Group Inc., a Baltimore Gas and Electric Co. subsidiary that lured the operator of Saks Fifth Avenue stores to Aberdeen with state and county assistance, is selling Saks' 475,000-square-foot building to concentrate on future industrial, retail and office projects.

"We plan to redeploy the money, and we're studying various opportunities that are out there," said Dwight S. Taylor, a Constellation senior vice president.

Constellation invested $26 million to develop the Saks' project. Under a lease through 2012, Saks is expected to pay in excess of $35 million to occupy the building, in the developer's 213-acre Hickory Ridge Industrial Park.

Teachers could reap even further profits as well, since the project is expandable by 235,000 square feet, according to plans filed with the state.

Saks selected Hickory Ridge in October 1995, after the state and county pledged $8.1 million to offset the cost of the project. Saks, which shuttered a facility in Yonkers, N.Y., as part of the plan to hire 450 people to distribute goods and take calls for catalog sales from Aberdeen, projected it would invest more than $5 million in equipment at the new facility.

Pub Date: 4/04/97

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