Feb 11, 2020

Machemer, Crow Holdings moving quickly to fill Northeast industrial pipeline

Real Estate New Jersey (January 31, 2020 - Joshua Burd)

Clark Machemer has been full of surprises for much of the last two years, starting with his move to Crow Holdings Industrial in 2018 after nearly two decades with Rockefeller Group.

Then came the size of the company’s first New Jersey project — an eye-catching 925,000 square feet — and a location that was relatively unknown among many industry players. Located on Veronica Avenue in Franklin Township, the site is a mere eight miles from Exit 9 of the New Jersey Turnpike, in an area that is anything but an established submarket.

“If you look at everyone’s market report, Exit 9 isn’t there,” said Machemer, a senior managing director with Crow Holdings Industrial, who leads the Dallas-based firm’s Northeast market. Yet the project’s location was validated less than six months after breaking ground, when the developer announced a full-building lease with LG Electronics USA.

“We were really excited to get that opportunity going early on,” he said.

With a tenant in hand and the project nearing completion, Machemer is keenly focused on what comes next for CHI’s Northeast expansion strategy. The firm has a pipeline in the region amounting to more than 7 million square feet, with the potential to deliver much-needed warehouse and logistics space to a vastly undersupplied market.

That pipeline comprises sites that are under control and in the entitlement phase, Machemer said. As of late last year, that included parcels in northern, central and southern New Jersey and Philadelphia, while the firm was also “making a hard look” into New York City.

“I feel we’re in the right submarkets and now we can start to add in other product,” Machemer said, noting that the firm also plans to seek other opportunities in Pennsylvania, outside Philadelphia, an area that he knows well. “And we’re trying to find sites that people have overlooked or aren’t looking at for whatever reason.”

Crow Holdings at Veronica Ave., Crow Holdings Industrial’s 925,000-square-foot distribution center in Franklin Township, is slated for completion in early 2020. — Photo by Aaron Houston for Real Estate NJ

It was a year ago that CHI closed on its parcel in Franklin, located at 50 Veronica Ave., acquiring the property from Efrem Gerszberg of 2020 Acquisitions. As Machemer would come to find out, having a deep network of friends and contacts in the industry would serve him well in his efforts to launch the firm’s Northeast expansion. Look no further than Andy Merin of Cushman & Wakefield, a well-known and veteran broker in New Jersey, who connected Machemer with the seller of what was an under-the-radar property.

“You’ve got to be in front of people,” said Machemer, a past president of NAIOP’s New Jersey chapter. “And people said, ‘OK, what can we do to get Clark and Crow going?’

“I was really interested to see, with the friendships and relationships, what they were really based on … And there were a number of folks that really helped me out and boosted me up to try to get things going in this market, and I’m really appreciative of that.”

Machemer has relied on those same relationships in sourcing other sites in the firm’s pipeline, although he could not yet identify those locations. Generally speaking, CHI has acquired the sites via off-market transactions as opposed to large offerings that can trigger fierce bidding wars.

It certainly doesn’t hurt to begin with a splash, as the developer did with the project known as Crow Holdings at Veronica Ave. After breaking ground last June, the firm announced in December that it had attracted LG to the soon-to-be-completed building, landing a high-profile tenant at its first project in the region.

Stan Danzig

“While industrial demand is at near-record levels, supply is currently lagging because of the challenges developers face in procuring suitable land,” Stan Danzig, a vice chairman with Cushman & Wakefield, said in the firm’s announcement of the transaction. “Crow’s impressive ability to identify this well-situated property and move quickly on acquisition and development will bring nearly 1 million square feet of much-needed industrial space to Central Jersey. We canvassed the market broadly and spoke with dozens of interested occupiers, before ultimately locking in a seven-year lease with LG.”

Danzig and Associate Kimberly Bach represented CHI and its partner at the site, the Carlyle Group, while C&W Executive Managing Director James Frank and Vice Chairman Jules J. Nissim represented LG.

Machemer also cited the importance of being able to deliver the 925,000-square-foot, tilt-up distribution center in less than a year, thanks in large part to its contractor, Alston Construction Co.

“Some of that is due to the condensed timeframe and delivery that we’re able to achieve,” he said. “If we had done a normal 12- to 18-month construction period, I don’t think we would’ve been in position to be doing the leasing that we are now.”

CHI is now close to presenting at least two additional development sites to the market, Machemer said, with hopes of breaking ground in the first or second quarter. He noted that, going forward, “we want to be playing in all sizes of the market … (from) 200,000-square-footers up to the big ones.”

The firm has the capital to do all of the above, although Machemer knows that CHI has to be both competitive and flexible when it comes to acquiring sites. That’s not to mention being willing to assume entitlement risk or take on sites that are environmentally challenged, which is increasingly common in a state in which land is scarce and rents are rising.

He believes the firm, which is affiliated with the iconic Crow family, is in a position to do that, with its own financial strength and its deep roster of capital partners.

“A lot of developers are married up with one capital source as their primary capital source,” Machemer said. “We have a variety of capital sources that we partner with, in addition to potentially even having our own balance sheet-type of transaction. So that gives us a lot of flexibility.”

Crow Holdings at Veronica Ave., Crow Holdings Industrial’s 925,000-square-foot distribution center in Franklin Township, is slated for completion in early 2020. — Photo by Aaron Houston for Real Estate NJ

This overview is designed to introduce Crow Holdings and its various operating companies. Crow Holdings Capital is a U.S. SEC registered investment adviser and is the manager to the Crow Holdings Capital Funds. Maple Capital Management, L.L.C. is a U.S. SEC registered investment adviser and is the manager of the Crow Holdings Industrial Build-to-Hold Fund. Crow Holdings Capital, Trammell Crow Residential, Crow Holdings Industrial and Crow Holdings Office are operated separately and independently from one another with separate senior leadership and investment committees. SEC registration does not imply a certain level of skill or training.