Jersey City: An Appetite for Development State's Second Largest City in Midst of Building Boom
By Anthony Birritteri, Editor-in-Chief
When the lease was up on their lower Manhattan office headquarters in October 2004, the principals at Abner, Herrman & Brock, Inc. (AHB) Asset Management didn't consider moving to Jersey City. According to Kevin E. Strauss, managing director, everyone had the old image of Jersey City on their minds - a run-down metropolis in decline. When a broker showed them what actually existed, Strauss and his partners were in awe. "We didn't understand the scope of what was here. This has really become Wall Street West," he enthuses. Almost two years later, AHB is expanding its client base in New Jersey as well as in New York. What's even better is that clients now don't mind visiting the firm's 5,000 square feet of Class A space at Harborside Financial Center 5 on the waterfront, as opposed to visiting their old Manhattan office.
A rendering of LeFrak Organization's Newport development, where the company now plans three new residential towers and a 49-room Westin Newport hotel.
"With improvements in technology, it's no longer vital to be located near the stock exchange or near the Wall Street community," says Strauss, who adds that for one-half to one-third the cost of office space in New York City, AHB also had the opportunity to customize its new space from scratch in Jersey City.
Strauss' comments reflect the views of many businesses that are leaving Manhattan to take advantage of what Jersey City has to offer: less expensive and newer commercial office space; a skilled workforce that is consistently being developed by the area schools such as St. Peter's College, New Jersey City University and Hudson County Community College; quick and convenient access to Manhattan via four PATH stations, the Holland Tunnel, four ferry routes provided by NY Waterway and one provided by New York Water Taxi; access through the region via the Hudson-Bergen Light Rail Transit System; and a flourishing cultural community with art studios, restaurants and various ethnic groups. In fact, walking the streets of Jersey City on any given day, more than 50 languages can be heard at one point or another.
Not only businesses are flocking to the city - people are as well. The city's population of more than 240,000 increased by 5 percent between 1990 and 2000, a great feat considering the population decline of many urban cities throughout the country.
The attraction of Jersey City to groups of new immigrants, young professionals and empty nesters has caught the eye of residential developers who are in the midst of a building boom throughout the 14.9 square-mile region. There are currently 8,000 residential units under construction in the city, 15,000 more are in stages of approval and another 50,000 to 65,000 are predicted to be built within the next 25 years.
"We have an appetite for development," says Robert Cotter, planning director for the city. "We have reached critical mass, and all of a sudden it's here. Things are snowballing.
"We had a big city once upon a time. We shrank, but now we are re-growing ourselves," he says confidently.
"The secret is out," says Jersey City Mayor Jerramiah T. Healy. "The city was overlooked for a long time; now people are flocking here to live and invest. If you went down to the Hudson River waterfront 25 years ago, there was nothing but abandoned, rotting piers, warehouses and railroad tracks. Go down there now and it's an entirely different place."
According to Healy, redevelopment is running throughout the city: from its northern border with Hoboken to its southern border with Bayonne and east to the Hackensack River and Newark Bay.
One of the main developers providing the spark that led to Jersey City's renaissance as a commercial center for financial institutions is the LeFrak Organization, which, along with Melvin Simon & Associates, began transforming a stretch of abandoned waterfront property back in 1986 into the famed Newport Development, the $2.5-billion mixed-use community where more than 16 million square feet has been built, including: the eight-building, 5.5 million square-foot Newport Office Center; the 1.2 million square-foot Newport Center Mall (which has recently undergone $17 million in renovations); an additional 600,000 square feet of outdoor retail space; nine high-rise rental apartment buildings, comprised of 3,479 units; two condominium buildings with 659 units; the Newport Marina & Yacht Club that services more than 285 boats and yachts; the 187-room Courtyard by Marriott Hotel; the Newport Town Square, a gathering place where a variety of free events are held; and a 1.5-mile stre! tch of the Hudson River Waterfront Walkway.
Looking back these past 20 years, Richard LeFrak, chairman and president of the LeFrak Organization recalls, "In the beginning, it was rough sledding. Nobody was convinced we were going to transform the waterfront. I consider all of the initial residents as pioneers. They were living in the middle of a construction site in a neighborhood that hadn't been developed. We were asking them for some faith."
Asked what initially attracted the company to the site, LeFrak responds, "It was a mile of waterfront facing Manhattan where you had the ability to create a neighborhood from scratch."
Now, LeFrak, along with Melvin Simon & Associates, is planning the next phase of Newport development.
Early in June, the chairman broke ground for the 429-room Westin Newport - Jersey City and announced plans for three residential towers that will add 688 rental apartments and 220 more condominium units to the Newport community. The residential units will include: The Eclipse, a waterfront residential tower adjacent to the 14th Street pier that will consist of 325 apartments and stand 460 feet high; The Shore Club Condominium at Newport North Towers, which will be a 28-story condominium residence, with 229 units (it is the sister project of the Shore Club Condominiums, which is scheduled to be completed by the end of the year, but is already 100 percent sold); and The Aqua, a 330-foot-high, 31-story apartment building with 363 units located on River Drive.
The new Westin Hotel, to be completed by the summer of 2008, will be operated by Starwood Hotels & Resorts Worldwide, and will include a conference center, a 10,000 square-foot ballroom, banquet facilities, pool and fitness center and a 5,000 square-foot restaurant.
According to LeFrak, nine million square feet of space can still be accommodated at Newport. "The site, now as planned, will consist of 16 more high-rise buildings." Though he has not announced any new office space construction, LeFrak says the company is working on a plan for an additional 1 million square feet of office space.
LeFrak says the tenants in his Jersey City office buildings are the "cream of the financial world." Most are New York-based firms that have moved technical operations, back office administrative services and trading operations to Jersey City. Tenants include JP Morgan Chase Bank, Knight Securities, UBS, U.S. Trust Co., Brown Brothers Harriman, Union Bank of Switzerland, HSBC Bank USA and ABN Amro.
Office buildings at Newport include: the 14-story, 472,093 square-foot Newport Financial Center at 111 Pavonia; the 36-story, one million square-foot Newport Tower at 525 Washington Boulevard; the 547,795 square-foot, 14-story Paine Webber Building at 499 Washington Boulevard; the 22-story, 860,835 square-foot Insurance Services Office (ISO) Building at 545 Washington Boulevard; the 21-story, 780,000 square-foot 575 Washington Boulevard and, across the street, the 10-story, 345,000 square-foot 570 Boulevard; the 32-story, 1.1 million square-foot UBS Building at 480 Washington Boulevard; and the six-story, 90,000 square-foot 100 Pavonia Avenue.
Able to support 4 million square feet of new development is another famed waterfront commercial property, Harborside Financial Center, which traces its roots back to the 1970s, and is now owned by Mack-Cali, the Cranford-based real estate investment trust (REIT). The company bought the Harborside complex in 1996 and has since developed a number of buildings.
Today, according to Mack-Cali President and CEO Mitchell E. "Mitch" Hersh, "The waterfront again has gained a whole new level of viability and credibility in serving the needs of corporate America and the global economy."
The company owns and services 4.3 million square feet of space in Jersey City. "We can develop another component roughly equal to that," Hersh says. Harborside Plazas 1, 2 and 3, totaling some 1.9 million square feet of space, were in existence when Mack-Cali purchased the property. Since then, it has developed additional buildings, including Harborside Financial Plaza 10, consisting of 577,575 square feet for Charles Schwab Company. The building was eventually sold to iStar Financial, but Mack-Cali continues to manage the facility. Mack-Cali also built Plaza 4a, consisting of 207,670 square feet, and Plaza 5, which is 977,225 square feet.
In February, Citco Fund Services announced it was leaving Manhattan and moving as many as 300 employees to Plaza 10 by the end of the year. The 70,000 square feet it is moving into is controlled by American Financial Realty Trust, a Pennsylvania-based REIT.
Now, Mack-Cali has plans for: Harborside Plaza 4, which will consist of one million square feet; Plaza 6, at 600,000 square feet; Plaza 7, at 1.8 million square feet; and Plazas 8 and 9 for a combined 1.1 million square feet, which may be sold to condominium developers. According to Hersh, "We feel there is continued need to supplement housing along the waterfront, which creates a tremendous sense of community.
" Hersh is currently in discussions with several New York-based companies that could be the future tenants of the planned office buildings. "We are discussing several pre-lease commitments on several of these towers. Depending on how they evolve into lease commitments would influence our decision to build. It is not our intention to build any spec buildings of any substance."
Hersh says lease rates for new commercial developments are about half of what one would find in midtown Manhattan. "These are 21st Century buildings," he says of the Harborside locations. "The older buildings in midtown offer little flexibility for restacking, with limitations on floor plate sizes."
Last year, Mack-Cali purchased the 1.25 million square-foot 101 Hudson Street, the second tallest office building in the state next to the 42-story, 1.43 million square-foot Goldman Sachs Building at 30 Hudson Street. "101 Hudson is a trophy building," says Hersh. "We bought it for $263 per square foot, while new development costs somewhere in the $375 per-square-foot range. It was a magnificent value-creator for Mack-Cali."
Current tenants at the 10-year-old building include Merrill Lynch and PriceWaterhouseCoopers (PWC). This past February, PWC leased an additional 12,000 square feet at the location, bringing its total presence at the building to 33,230 square feet. The accounting and consulting firm was represented in the deal by Newmark Knight Frank.
Other transactions at Mack-Cali properties within the year included: Sumitomo Mitsui Banking Corporation for 40,470 square feet, Fred Alger & Co., Inc. for 37,785 square feet and Deutsche Bank extending its lease for 90,000 square feet at Harborside Financial Center Plaza 1; and National Fire Union Insurance Company expanding its space at 101 Hudson Street by 38,507 square feet for a total of 317,799 square feet.
In the summer of 2002, Mack-Cali opened, in conjunction with the Hyatt Corporation, the 350-guestroom Hyatt Regency Jersey City, which offers 20,000 square feet of meeting space. The hotel, according to Andrew Davidson, general manager, is running at a 92 percent occupancy rate.
"Approximately 250,000 guests pass through the hotel each year. I don't know if I want anymore demand than what I've already got," Davidson says. The hotel picked up a Four-Star, Four Diamond award last year. "There is nothing on the shoreline here that has this kind of recognition," says Davidson.
"Primarily, we've been a business hotel, with Goldman Sachs being one of our best customers. We are picking up a ton of domestic business from around the country that first want to be in New York, but find our prices more competitive," he says. With the announcement of new hotels under development in Jersey City, Davidson says that competition will be good for everyone.
Atop the Palisades Ridge, in the heart of Jersey City, evolution on a grand scale is taking place at the former site of the Jersey City Medical Center. New York-based developer Metrovest Equities, Inc. is investing $350 million to transform the classic art deco landmark property into a 14-acre, 10-building luxury residential community known as The Beacon. It is the largest historical redevelopment project in New Jersey and one of the most ambitious ever undertaken in the United States.
The hospital was built between 1928 and 1941 under the direction of famed Jersey City Mayor Frank "I am the Law" Hague, who served from May 15, 1917 until his retirement on June 17, 1947. His vision was to provide the city's poor with free health care while keeping them loyal to his Democratic political machine. He kept an office within Murdoch Hall at the hospital and named the maternity hospital after his mother, Margaret.
The hospital, too large to maintain over the decades, began closing down in sections. It closed down altogether with the opening of the new $217-million, 420-bed Jersey City Medical Center - Wilzig Hospital (named after Ziggi Wilzig, holocaust survivor and founder of the former Trust Company Bank of Jersey City).
The Beacon's first two buildings, now under construction and scheduled to be ready by next year, are already 75 percent sold out. The Rialto is a 22-story tower with 164 residences ranging from 700 square feet to 3,200 square feet in studios, lofts and one- to two-bedroom layouts. The 21-story The Capitol will offer 151 residences ranging in size from 600 square feet to 3,100 square feet. Prices at The Beacon start at $300,000 for a 750 square-foot, one-bedroom unit. A two-bedroom unit at 1,400 square feet is in the mid-$700,000 range. Rooftop duplexes are expected to sell for more than $2 million.
Metrovest is investing $110 million in renovating the first two buildings. Eventually, the site will become a miniature city of 1,100 condos, apartments, retail shops and restaurants. The company has been active in Jersey City redevelopment and rehabilitation for some time, producing more than 1,600 residential units and close to 2 million square feet of commercial and retail space.
According to President George Filopoulus, the attraction to The Beacon project is "the ability to offer first-class product minutes from Manhattan at a fraction of the cost." He says the condos, sitting 90 feet above the city, will offer stunning panoramic views of the New York and Jersey City skylines and the rest of the state.
Metrovest is also planning Grand Plaza, a 26-acre site southeast of The Beacon. An underutilized site with industrial buildings, plus a vacant lot, the company plans a mixed-use development consisting of a 150,000 square-foot shopping center and 230 townhouse units.
In what is considered Jersey City's first high-rise condo development in the last 10 to 15 years, KOR Companies, at press time, is expected to announce the grand opening of Montgomery Greene, a $52-million, 20-story luxury condominium also in the heart of the city at the corners of Montgomery and Green streets, between the financial district and Paulus Hook.
According to Harry Kantor, president and CEO of KOR Companies, 80 units at the 113-unit complex have been sold. Studios start at 500 square feet, while one-bedroom units range from 900 to 1,000 square feet, two-bedrooms from 1,200 to 1,400 and three-bedrooms, 1,900. There are eight penthouse units. The condos are selling for $700 per square foot.
Amenities at the location include a 2,600 square-foot roof terrace, a 123-vehicle parking garage, a state-of-the-art gym and loading dock facilities. There is also approximately 4,000 square feet of ground-floor retail space.
KOR is also involved in the "Grand Development District" adjacent to the Marina at Liberty Harbor, where it is planning two 35-story towers containing 500 units.
Similar to The Beacon project, in that a former hospital site is being turned into condominiums, Exeter Properties, a long-time Jersey City developer, is busy transforming the former St. Francis Hospital complex into a 225-unit residence. According to Eric Silverman, a principal of the firm, a new building will be constructed while an existing hospital building will be renovated. "We will be removing the skin of the building and recessing the 8th and 10th floors. A new street will be created between the two buildings. The two sites will consist of approximately 350,000 square feet with 40,000 square feet of commercial space.
Exeter is investing $100 million into the hospital property. "The zoning has been changed and a redevelopment plan has been adopted," says Silverman. He says the condos will sell from between $300,000 to $1 million. The estimated completion date for the project is three years.
In 2002, Exeter began renovating an area on Grove Street, across from City Hall, where the Majestic Theater once stood. This $20-million project included the restoration of four landmark buildings and the construction of a new seven-story condominium totaling 140,000 square feet, complete with underground parking.
Located within the four renovated landmark buildings are The Bar Majestic and The Merchant Bar & Restaurant, as well as Tia's Place, a clothing and home goods store, and a florist. "We look for creative entrepreneurs who can add something to the community," says Silverman.
Adjacent to the Majestic and City Hall lies a corner property where Exeter is planning Majestic II, where it will build 85 apartments.
In the Hamilton Park section of town near St. Francis Hospital, Exeter has renovated the Park Foundry building into 32 rental lofts. This $8-million project, completed in 1999, includes 10,000 square feet of commercial space.
Directly across from Park Foundry, the company is now building the first new loft building in the state. Known as The Schroeder Lofts, the $30-million project will consist of 60 one-, two- and three-bedroom apartments, all with high ceilings.
Among the biggest news in the city was the announcement of Trump Plaza: Jersey City, the $415-million condominium project that would include the two tallest residential towers in the state. Located at Washington and Bay streets, it will definitely consist of a 531,500 square-foot, 55-story tower with 445 condominium homes, and, at press-time, may consist of a 481,283 square-foot, 50-story tower with 417 homes. The towers will rise from a 328,658 square-foot, seven-story base, housing a garage with 696 parking spaces and 23,000 square feet of retail space. The studios, one-, two- and three-bedroom residential units will range in size from 750 to 2,224 square feet.
Partners in the project include Donald Trump and Metro Homes founder Dean Geibel and partner Paul Fried. The two-acre parcel was originally acquired by Panepinto Properties of Jersey City, which, along with Applied Development Company of Hoboken, initiated the two-tower concept and design. They remain partners in the project.
A project that is following the "new urbanism" design, Cotter, the city's planning director, proudly points to Liberty Harbor North Redevelopment, an 86-acre site across from Liberty State Park that is knitted into the fabric of the city's street grid pattern. "Currently, 1,000 residential units are being constructed. When fully completed, it will consist of 6,000," Cotter says.
The principal developers of the project are Peter Mocco and Jeff Zak, but according to Cotter, other developers are building in the area. These include: Metro Homes, which is building a 20-story tower; Shenkman & Kuschner, which is building 330 luxury apartments at Liberty Harbor I and 500 at Liberty Harbor II; Roseland Properties; and Applied Development Company.
The 86-acre mixed-use development will also have: 775,000 square-feet for retail; 175,000 square-feet for school facilities; 1.1 million square-feet for a hotel; and 4.6 million square-feet for offices.
Developers have also been busy on Jersey City's other waterfront - the west side of town facing Newark Bay. "Honeywell is cleaning up chromium at a site along Route 440. That opens up a whole new opportunity for development," Cotter says. He specifically mentions the Bayside Redevelopment Plan, the proposal to redevelop the 75-acre area between Communipaw, Bergen and Stevens avenues and Newark Bay. Laid out two to three years ago, the plan calls for 15,000 to 20,000 residential units and a couple million square feet of office and retail space.
"We want Route 440 on the west side to emerge from being a back highway to being a waterfront boulevard," says Barbara A. Netchert, director of the Jersey City Office of Housing, Economic Development and Commerce. "The industrial chromium sites are finally coming around to be remediated and will be ready for development in the next several years."
Boston-based Cathartes has built The Residences at Westside Station, a 52-unit residential development that includes retail space. Approximately 800-plus units are planned at Westside Station, according to the company. Townhomes range from 1,394 square feet to 1,465 square feet, lofts from 760 square feet to 1,360 square feet and studios from 975 square feet. Directly across from the Light Rail, Westside Station, it is 10 minutes from downtown Jersey City and 20 minutes from Manhattan.
There is a plethora of other residential projects completed and under development throughout the city. What follows is a brief description of some of these projects.
K. Hovnanian and Equity Residential are paying Secaucus-based Hartz Mountain Industries $70 million for a 1.7 acre parcel of land where they will build two 48-story residential towers at 77 Hudson Street. The two 500-foot towers, according to planning documents, would total 925,000 square feet and have 901 units. There would be a parking garage for 896 vehicles and 20,000 square feet of retail space.
K. Hovnanian at Paulus Hook is a 68-home condominium complex that offers one- two- and three-bedroom homes ranging in size from 600 square feet to more than 1,500 square feet, with prices starting at $600,000.
New York-based The Athena Group and GoldenTree InSite Partners are building 'A' Jersey City, a $110-million luxury condominium project near the Hudson River waterfront at 389 Washington Boulevard. Expected to be completed by the fall of 2007, the 33-story tower will offer 250 condominium units with views of Manhattan, 10,500 square feet of retail space and a 238-space parking garage.
At Porte Liberte along the Hudson River, Applied Development Company is developing a resort style community with 155 residences featuring one- two- and three-bedroom homes, ranging from $425,000 to $1 million. One-, two- and three- and four-bedroom duplex designs are also available. These two-story homes sit atop a 15-story building rising above the waterfront. One special feature is the on-site marina with available, individual boat slips.
To be ready for occupancy by June 2007 is SK Properties' Grove Point Condominiums, an 11-story building with 67 residential units at 102 Christopher Columbus Drive. Ranging in size from 750 to 1,289 square feet in one- and two-bedroom designs, residences will start at $495,000.
Recently opened, Pinnacle Companies is selling Mandalay on the Hudson, a 26-story tower featuring 269 condominium units being offered in the mid-$300,000 range for one- to three-bedroom homes.
Zanco, Inc. has opened Essex Commons, a new luxury apartment building in the Paulus Hook section of the city. The seven-story, 90,000 square-foot residential building with 70 units, from low-rise homes to one-, two- and three-bedrooms apartments, offers views of the Statue of Liberty and Ellis Island. Jarmel Kizel provided full architecture and engineering services for the project.
D6 Development, LLC is renovating 50 Journal Square, better known as the Arcade Building, from an office complex to a luxury condominium building with six 1,500 square-foot units and a 2,500 square-foot penthouse. Land entitlement work, as well as architectural and engineering design for the 12,000 square-foot, eight-story building were supplied by Jarmel Kizel.
With all of this planned construction, and with 65,000 more units estimated in the next 25 years, one wonders if there will be glut of residential units. Exeter's Silverman says the bigger question is how many apartment buildings can the New York City region absorb?
"Just to look at Jersey City is a mistake. This is a sub-market of Manhattan," he says. "The nice thing is that this time around the infrastructure and critical mass are starting to develop here . . . The more apartments the better."
According to Metrovest's Filopoulus, "Quality projects will benefit from the brisk commercial leasing market in Jersey City. Thousands of new employees are moving in as the city continues to attract major corporations relocating and expanding from Manhattan. This translates into a lot of potential purchasers."
KOR Companies' Kantor says there are a lot of high-rise buildings coming on-line, but "builders have a terrific sense of denial that the economic climate will go south. Not acknowledging the projects already in motion, I would quite frankly question the timing of (any new) projects. He advises developers to take a long-term approach in building.
When asked about an increase in traffic due to the possible influx of people moving into these buildings, Cotter says that traffic is a function of the availability of mass transit. "Jersey City's modal split is somewhere around 70 percent (70 percent of residents use mass transit to get to work). It's close to Manhattan's split of 80 percent," he says.
"The light rail system got here just in time. It's the lowest subsidized trolley system in the country. In terms of parking ratios, we park about one car for every five employees. That makes us an extremely green town," he says.
As a place to further attract businesses, Mayor Healy states there will never be a payroll tax in the city as long as he is in office. "I want the investment community to know that," he says. "In my opinion, it is a disincentive to investment. I think it would cause firms to start looking around for greener pastures outside the city." According to a resource guide developed by the city's economic development corporation, there are also no city sales, capital stock, city income, personal property, unincorporated business or commercial leased taxes in the city.
At press-time, Healy has asked for two legislative initiatives that he thinks will provide the city with annual renewable sources of income. One is a hotel tax, which the city currently is not allowed to impose. The second is a realty transfer fee, perhaps $1 for every thousand dollars of a property's sale price, that would go directly to the city.
He says the city still has its problems, most notably crime and public education (the public school system has been under state control for 16 years). Yet, things are turning around.
"When I was running for office 10 years ago, I went through a lot of neighborhoods people would never consider walking through. Now, I notice that the housing stock has improved. People are taking better care of their properties. I have noticed there isn't a vacant lot or abandoned building in the city. You couldn't even give away these things 10 years ago. Growth and development has moved north, south, east, west . . . all over. The old saying goes 'a rising tide lifts all boats.' That's certainly true of Jersey City."
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