By: David Winzelberg November 22, 2016
Less than two years after receiving tax breaks from the Islip Industrial Development Agency to purchase a Central Islip warehouse, the Brooklyn-based manufacturer has sold the property for a $4 million profit.
In Dec. 2014, Reiko Wireless, a maker and distributor of cell phone accessories, received economic incentives from the Islip IDA and discounted power from PSEG Long Island to assist in its $5.5 million purchase of a 136,720-square-foot warehouse on 12.3 acres at 350 Eastview Drive. The company pledged to bring at least 90 employees to its new digs and add 30 more in the next three years, as well as spend an additional $2 million on renovations and equipment.
But Reiko never moved into the building. Instead, the company ended up buying a 59,000-square-foot building at 55 Mall Drive in Commack for $8.1 million in Dec. 2015 and just sold the Central Islip property for $9.5 million to Manhattan-based L&J Restaurant Equipment. The deal closed at the end of September.
When Reiko failed to live up to its agreement, the IDA terminated it and recaptured the only benefit that the company received on the deal, the $35,000 mortgage recording tax exemption. L&J didn’t qualify for benefits, according to the IDA.
Reiko executives didn’t respond to a request for comment.
Though Reiko only owned the building for less than two years, the company was able to realize a big profit because of the tightening industrial real estate market here, attributed to strong demand and dwindling supply.
Industrial vacancies on Long Island reached a historic low of 6.5 percent in the third quarter, according to a report from Cushman & Wakefield. There was 230,000 square feet of positive absorption of industrial space in the third quarter, which puts the Island on track for its highest industrial occupancy gains in the last five years. Indeed, the central Suffolk County submarket, where the Central Islip warehouse is located, posted the most notable decline in vacancy since the second quarter, dropping from 6.9 percent to just 6 percent.
Built in 1970, the long-vacant site had served as a warehouse and distribution facility for the state’s Office of General Services. It was last used to store U.S. Department of Agriculture surplus food and distribute it to regional school districts, before the agency relocated that operation to Edgewood eight years ago.
First offered at auction in 2008 with a minimum bid of $9.5 million, the OGS site received no bids for the Central Islip complex. A year later, the property was auctioned with a minimum bid of $7.5 million, but there were still no takers.
In October 2010, the state lowered the minimum bid to $4.9 million and auctioned the building to Inter-County Bakers for $5.7 million. The company was ready to sell its two buildings in Lindenhurst and move to Central Islip, but the OGS property required rezoning to accommodate Inter-County Bakers’ needs – and objections from residents at the nearby Courthouse Commons housing project managed to kill the deal.
In 2013, Inter-County ended up buying the 108,000-square-foot former Quality King building on Long Island Avenue in Deer Park instead.
After the Inter-County debacle, Newmark Grubb Knight Frank broker Ralph Perna began cooking up a deal with Whitsons Culinary Group, which was going to invest nearly $15 million in renovations and bring 350 employees to the OGS property in 2012. But after Islip rezoned the site and offered incentives, Whitsons pulled out a few months later, deciding the cost of the building’s reboot was prohibitive, and Perna eventually sold it to Reiko.
Meanwhile, the property’s new buyer, L&J, needed to find new space. The company recently moved out of its 80,000-square-foot space at 80 Evergreen Ave. in Brooklyn to allow for the landlord’s planned conversion to office space, according to Neil Dolgin of Kalmon Dolgin Affiliates. In addition to acquiring the Central Islip warehouse, L&J also leased 30,000 square feet at 380 Morgan Ave. in Brooklyn.
Dolgin said industrial buildings in Brooklyn and Queens are selling for two to three times per square foot more than buildings on Long Island.
“People moving out from Brooklyn and Queens are able to buy it on Long Island for 50 cents on the dollar because of the high prices they are getting in the boroughs,” Dolgin said.
KDA’s Linda Wong represented L&J in its Brooklyn lease and Central Islip purchase. Reiko’s holding company April Holdings LLC was represented by David Rotter of Metro Realty Services in the Central Islip sale.