Page 15 - RE-NJ

SAXUM, PENWOOD EYE OFFICE-TO-
WAREHOUSE PLAN IN PARSIPPANY
Another vacant offi ce building in
Parsippany is set to come down as part
of a joint venture’s plan to construct a
new 128,000-square-foot speculative
warehouse just north of Route 10.
The developers, Saxum Real Estate
and Penwood Real Estate Investment
Management LLC, announced in
late June that they’ve acquired the
10-acre tract at 7 Campus Drive.
They now plan to raze the existing
156,000-square-foot offi ce building,
having received all necessary site
plan and outside agency approvals to
begin construction this summer.
Completion is slated for the fourth
quarter of 2026, they said, noting that
the new building will have 36-foot
clear ceiling heights with advanced
design specifi cations and heavy
power for warehouse and distribution
as well as modern manufacturing and
assembly, allowing it to capitalize
on the market’s increasingly
sophisticated tenant requirements.
“7 Campus Drive’s strategic location,
proximity to high-quality labor and
market-leading building specifi cations
positions
the project
as a quality
headquarters
destination,” said
Steve Feinberg,
Saxum’s director
of investments
for industrial.
Steve Feinberg
“We are very
excited to launch our Penwood
relationship with this closing and
continue our growth together.”
Cushman & Wakefi eld’s David
Bernhaut, Gary Gabriel, Kyle Schmidt,
Ryan Larkin and Seth Zuidema
arranged the sale to the joint venture,
which includes Summit-based Saxum
and the value-added investment
vehicle known as Penwood Select
Industrial Partners VII LP. A post by
Traded NJ identifi ed The Birch Group
as the seller, while listing the sale
price as roughly $16.3 million, in a
deal that comes fi ve years after the
fi rm acquired the building from the
former Mack-Cali Realty Corp.
“The entire Penwood team is
thrilled to close our fi rst partnership
deal with Saxum,” said Andrew
MacDonald, senior vice president
for acquisitions with West Hartford,
Connecticut-based Penwood. “We
look forward to transforming this site
into a sought-after logistics facility.”
In a news release, the fi rms noted
that tenants will be minutes from
interstates 287 and 80, providing
strong connectivity to 11.1 million
consumers within a one-hour drive,
and within 30 miles of New York City,
Newark Liberty International Airport
and Port Newark-Elizabeth. They
added that the project has a 30-year
payment in lieu of taxes agreement
with Parsippany to provide long-term
economic benefi ts to the property and
future tenants.
M I N I M I Z I N G T H E
R I S K O F R O O F
M O N E T I Z A T I O N
By Stephen A. Kisker and Amy Howlett
If you own a building, you have a roof. If you
have a roof, chances are you have considered
ways to monetize it, and if you have not, you
should. Common methods of roof monetization
include leases for solar development and
wireless communication equipment.
While at best rooftop leases can be easy money,
at worst they can interfere with building
tenant operations and undermine the main
source of revenue from your building – rent
from tenants within the building.
To avoid the so-called “tail wagging the dog,”
rooftop owners can avail themselves of certain
strategies in structuring rooftop lease deals
to minimize risk. This article touches upon a
few strategies, including reserve areas and
relocation and recapture rights.
As an initial matter, the rooftop solar projects
referenced in this article refer to community
solar programs or other methods by which
the energy is sold to offsite, third-party
customers, as opposed to using the energy
for the building upon which it sits. Rooftop
solar projects providing energy to the building
on which it sits is a separate topic that comes
with its own set of guidelines and guardrails
to be discussed in a future article.
Reserve Areas
Many building owners, eager to maximize
rent, allow the rooftop premises to include
the entire roof, or more than is necessary.
The more panels a solar developer can install,
the more energy they can produce to sell
to customers, and the more rent they are
therefore willing to pay. In rooftop leases for
other types of equipment, rooftop tenants
may initially look to lease the entire roof,
even though the equipment only requires a
small footprint.
By agreeing to lease the entire roof, owners
fail to recognize they may need portions of
the roof to install future rooftop equipment
™ 13
Rendering courtesy: Saxum Real Estate
A project by Saxum Real Estate and Penwood Real Estate Investment Management
LLC calls for bringing a new 128,000-square-foot speculative warehouse to the site of a
vacant offi ce building at 7 Campus Drive in Parsippany.
servicing its main source of income, the
building tenants. In addition, many states
and municipalities require buildings to reduce
carbon emissions and rooftop solar feeding
the building may be an avenue to explore.
This is where the reserve area can save the
day. The reserve area is a portion of the roof,
not included in the leased premises to the
rooftop tenant, reserved for use by the
building owner and building tenants. Typical
reserve areas are 10-20% of the roof area.
In a rooftop lease for smaller equipment such
as a communication antenna, the building
owner should consider limiting the rooftop
area leased to the smallest footprint needed
for the actual equipment.
Relocation Rights
It is hard to predict where future rooftop
equipment will need to be located so we also
recommend allowing the reserve area to
be relocated.
A typical relocation provision allows a certain
percentage of the leased premises to be
relocated to the reserve area. Language
should be added specifying which party pays
for such relocation and any lost revenue
resulting from downtime during the relocation
process. Generally, building owners are allotted
an outage budget that allows them a certain
amount of downtime before being charged
lost revenue by rooftop tenants in connection
with relocation and more generally for repairs
and maintenance to the roof.
Recapture Rights
In addition to or in lieu of reserve areas and
relocation rights, building owners can include
a recapture right in rooftop leases. A recapture
right allows the building owner to recapture
a certain percentage of the rooftop premises
in the event such space is needed by a
building tenant.
A recapture right will initially allow the owner
to receive more rent from the rooftop project
and then only reduce rent in the event additional
space on the roof is actually needed. The
recapture right will almost certainly come
with a termination payment for the portion of
the premises recaptured.
Building owners should monetize their roof;
however, they must be careful to protect
the greater asset, the building tenants. The
rooftop project just needs to be structured
properly. For more information about rooftop
leases and other protections building owners
will want to include in rooftop leases, please
reach out to the authors.
Stephen A. Kisker, a Member in the
firm’s Real Estate Group, and Chair of
its Renewable Energy & Sustainability
Team, advises on all facets of commercial
and residential real estate acquisition,
development, financing, redevelopment,
management and disposition. He can
be reached at [email protected]
or (973) 530-2074.
Amy Howlett is an Associate with the
firm’s Real Estate Group and its Renewable
Energy & Sustainability Team. She can
be reached at [email protected]
or (973) 530-2327.
Prior results do not guarantee a similar outcome.
CHIESA SHAHINIAN & GIANTOMASI PC
csglaw.com