The ongoing demolition of the former CA headquarters in Islandia is clearing the way for the next chapter of the sprawling 72-acre property.
The work to raze the 800,000-square-foot office complex, which began earlier this month, is the first step in the industrial redevelopment planned for the site. The project aims to bring a total of 980,000 square feet of high-ceiling, modern warehousing and distribution space in eight buildings. It is one of the largest speculative industrial developments underway on Long Island.
The massive three-building office complex at 1 CA Plaza, which had been the workplace for about 3,500 CA employees in its heyday, changed owners in Oct. 2021, when two private equity firms partnered with a New Jersey landlord and a Long Island developer to acquire the property.
Axonic Capital, Taconic Capital Advisors, Onyx Equities and Paul Amoruso of Jericho-based Oxford and Simpson purchased the $165.6 million commercial mortgage-backed securities (CMBS) note on the Islandia property that former principal owner Jay Johnson had secured. After paying $24.1 million for note, the new group took ownership after negotiating with the borrower on a mutually agreed upon “friendly” foreclosure.
The CMBS loan was originated when Johnson’s real estate entity, Islandia Operators Holdings LLC, purchased the property from Computer Associates for $204.3 million in a 2006 sale/leaseback deal.
CA signed a 15-year lease with an option to renew for up to another 35 years. But the company began moving a lot of its personnel to Manhattan and other locations and retained some back-office staff at the Islandia site. In 2018, Broadcom acquired CA for $18.9 billion, which created some workforce redundancy and further reduced CA’s presence in Islandia. After CA left, it subleased some of the Islandia office space to other tenants to offset some of its $1.26 million monthly rent on the property, but the once bustling became completely vacant by the summer of 2021.
One of the principals in the new ownership group has a history with the former corporate office campus. As a young real estate broker in 1989, Amoruso sold the original Islandia site for $34.65 million to a joint venture between Computer Associates and Manhattan-based Related Companies, which developed CA’s headquarters in 1991.
The Islandia project is the most recent example of Long Island office properties being redeveloped for other uses, especially industrial. The office market has struggled since the pandemic, as many companies have been reconsidering the size of their office footprints in light of the continuing hybrid work environment. The overall Long Island office vacancy rate climbed to 14.4 percent in Q4 2023, up 60 basis points from the previous quarter, while last quarter’s overall vacancy rate for industrial properties was 4.3 percent, according to a report from Cushman & Wakefield.
The Islandia project will be built in phases with the first two buildings expected to take around 12 months to complete once construction begins.
However, given the difficult financing and construction cost environment, the envisioned redevelopment of the site will be dependent upon IDA assistance, including a beneficial payment-in-lieu-of-taxes agreement. Besides the site and construction challenges, developers say IDA assistance will be necessary to attract high-quality end users who will require a competitive cost structure and financial stability in order to make a long-term commitment to the facility.
Image and article originally from libn.com. Read the original article here.