JERSEY CITY, NJ - At a time when the troubled economy and credit crunch have halted many condominium and apartment developments in New Jersey, a real estate partnership is forging ahead on a large-scale residential project in the state's second-largest city. In spite of the turbulent economic climate, the developers are banking on the resiliency of the Hudson waterfront residential market and a turnaround in the economy.
Last month, Roseland Property Co., based in Millburn's Short Hills section, along with Jersey City's Garden State Development and Secaucus-based Hartz Mountain Industries, broke ground on The Monaco, a $210 million residential and retail project at Washington Boulevard and Thomas Gangemi Drive, in the city's downtown area. Upon completion in 2011, the development will comprise 524 apartments and nearly 12,000 square feet of retail space in two-story high-rise buildings.
Monaco's construction is an anomaly in the current recession, said Carlos Hernandez, president of New Jersey City University in Jersey City. "It's coming on board at a time when all indicators are saying things are going to get worse before they get better," he said.
A tough lending environment has hindered a significant amount of new construction, both in Jersey City and beyond, said Carl Goldberg, a principal of Roseland, which will oversee the construction and leasing of Monaco. Garden State Development and Hartz, which jointly own the property with Roseland, primarily have financial roles in the project. "There are many, many jobs that are not able to be started, because it's very difficult, very challenging, to put together the combination of equity and debt to allow these projects to go forward," he said.
Roseland and its partners put up a significant amount of equity for Monaco, and needed four to six months to line up the consortium of seven lenders that are providing financing, Goldberg said. In fact, Monaco could be one of the last multifamily projects to start construction in the city for the foreseeable future, said Jack Hampton, KPMG professor of business at St. Peter's College in Jersey City. "If financing is not in place now, there will be no such construction projects going up in Jersey City in the next 18 months," he said.
But Jersey City Mayor Jeremiah Healy said "we still have a lot of projects going forth," including a Hilton hotel by Watchung-based Tramz Hotels Group, which is expected to break ground by this summer. But Tarrunumn Murad, Tramz chief executive, said the company is holding off development of the condominium portion of its project in Liberty Harbor North, citing the weak residential market and poor economy. Currently, eight condominium and apartment projects totaling some 3,400 units are under construction in the city, according to Cushman and Wakefield.
Demolition for another project, One Journal Square, will begin this year, but no construction timetable has been put forth, according to a spokeswoman for Harwood Properties, one of the developers working on the project. Still, "we're not where we were a year and a half ago," Healy said, declining to discuss whether specific projects have been shelved.
Demand for new residential projects is likely to soften in Jersey City as a result of the economy, particularly because of layoffs in the financial sector, said Jose Cruz, executive director in the East Rutherford office of commercial real estate brokerage firm Cushman and Wakefield. "If people lose their jobs, they're likely to double up on housing, move back home, move to cheaper locations," he said. "There will be short-term hiccups, no doubt."
Nonetheless, Roseland and its partners are moving forward with Monaco, driven in part by the overall strength of the Hudson waterfront market, which includes Jersey City, Hoboken, Edgewater and Weehawken. Roseland owns and manages more than 4,000 luxury apartments along the river, of which more than 98 percent is leased, he said.
Occupancy rates for multifamily properties on the Hudson waterfront currently remain above 95 percent, "despite what's going on in the larger economy," Cruz said. Any decline in this rental market would be slight, an occupancy rate of below 90 percent would be unlikely, and short-lived, he added. "The market over the years has shown the resiliency to bounce back."
Goldberg is hopeful the economy will rebound by the time Monaco is completed. "The economy, when this building is finished and ready to be rented, will likely be significantly different than it is today," he said. In spite of economic uncertainties, given the location and timing of the project, "the upside probably exceeds the downside" with Monaco, said Hampton, of St. Peter's College. "I think it's a good gamble."
Source: NJbiz.com