Elberon Development Group CEO Dave Gibbons (left) and Terry Armstrong, the firm’s vice president of leasing and acquisitions, stand outside Wakefern Food Corp.’s 524,000-square-foot distribution facility at 502 York St. in Elizabeth. Elberon delivered the facility in 2014, earning a Deal of the Year award from NAIOP’s New Jersey chapter. — Photo by Jeffrey Vock for Real Estate NJ
By Joshua Burd
It amounts to only a small slice of history for a 100-year-old company, but there’s no disputing that the last two years have been especially significant for Elberon Development Group.
Since 2015, the firm has grown its portfolio by about 500,000 square feet through acquisitions and new development, while also selling four buildings that were noncore to its collection of port-centric industrial buildings. The company also moved its offices from Cranford back to its original home of Elizabeth — all part of a strategy to refocus on a region that it knows all too well, where the market is surging and where opportunities abound.
“Elizabeth is very well-located and lines up with all the big macro things we believe in,” Elberon CEO Dave Gibbons said, pointing to assets such as the biggest port on the East Coast, one of the nation’s busiest airports, a vast highway network and a skilled labor pool.
“Even if you took the airport and the port away, it would be a great place to own a warehouse,” Gibbons added. “And then we have several tenants or customers who are here because of the port or because of the airport.”
The firm, which spans three generations, has placed a premium on industrial space in Elizabeth and the surrounding region in recent years. Its current headquarters at 633 Division St. is surrounded by buildings it owns in the city — some with joint venture partners — which account for 2.4 million of the 2.5 million square feet in its overall portfolio.
Creating that footprint has meant acquiring six buildings, including the $9 million purchase last fall of a 115,000-square-foot property at 919 Fairmount Ave. Like most of the other recent investments, Elberon saw a value-add opportunity at a building with an expiring lease, with plans to now reposition the property and reintroduce it to the market this year.
“The last five buildings we’ve bought all have some sort of short-term leasing risk associated with them, but it’s a good time to take that risk,” said Gibbons, who also serves as NAIOP’s New Jersey chapter president. “We’re 100 percent leased otherwise, so that’s been part of what has driven this: We’ve done some great leasing with the existing part of the portfolio over the last two years — and that has allowed us to have the time, the cash flow and capital to focus on other acquisitions.”
The other ingredient has been redeploying capital from the sale of other properties, Gibbons said. Since 2015, Elberon has sold four assets that don’t align with its current strategy, including a strip mall in Cranford and a post office in Hillside, which were used in 1031 exchanges to acquire two warehouses in Elizabeth totaling 100,000 square feet.
The strategy is seemingly tailor-made for a company that was founded by Gibbons’ grandfather, David O. Evans, and built its first industrial building in the city in the 1920s. And it comes at a fortuitous time: According to JLL, vacancy in New Jersey’s port submarket is under 4 percent, while average asking rents were $8.16 per square foot through the third quarter.
Elberon has also turned to new construction to capture that demand over the past two years. Most recently, the firm partnered with The Avidan Group LLC to develop two adjacent buildings totaling 220,000 square feet between Fairmount Avenue and Julia Street.
The so-called Elizabeth Logistics Center, which is now fully leased, won a NAIOP New Jersey Deal of the Year award in 2016, in part because of how the site was assembled. Avidan owned part of the property, while Elberon was under contract to buy the other half. By forming a joint venture, the firms created a single ownership and contiguous 17.5 acre parcel, allowing the city to vacate the street and clear the way for the redevelopment.
“(That) allowed us to do things we couldn’t have done if we didn’t do that, so it was a really creative solution that added value to everyone — to Elberon, to Avidan and the city,” said Gibbons, who took over as CEO in 2015. “They got two great ratables out of it that they would not have gotten had we not put all that together.”
The firm will now “continue to look to grow this portfolio responsibly and creatively,” Gibbons said, largely between New Jersey Turnpike Exit 10 and the Meadowlands. That could include additional ground-up development and renovations to create value at existing buildings.
While executives see the $1 million to $15 million range as a sweet spot for Elberon, Gibbons said the firm feels that “almost nothing is too small.”
“I think it’s one thing that makes us different,” he said. “Sometimes we can look and act like an institutional-type buyer for a deal that’s so small that many institutions would not look at it. That’s not the only thing we’re looking for, but very few things would be too small.”
In the meantime, Elberon is also focused on getting the word out. Led by Terry Armstrong, its vice president of leasing and acquisitions, the firm in recent years has revamped its website and marketing efforts to both celebrate its history and detail its recent activity in the market.
“We’re known, but it’s good to be out there,” Armstrong said. “In this day and age, anybody who meets you — the first thing they’re going to do is Google you. … There’s not a lot of these family businesses still remaining in New Jersey with a hundred-year lineage, so we thought the website would tell a good story.”