NJPAC hi-rise finally breaks ground. What took so long?

By Steve Strunsky | NJ Advance Media for NJ.com
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on November 26, 2016

NEWARK — During a groundbreaking ceremony last week for a 22-story apartment tower across the street from the New Jersey Performing Arts Center, Newark Mayor Ras Baraka said the building would "turn this area completely around." Former Gov. Thomas H. Kean called the project, "a building block to bring back the greatest city in the state."

Known as One Theater Square, the tower helps fulfill a requirement by the state that housing be developed in the area surrounding NJPAC, which was completed in 1997 at a cost of $187 million -- most of it taxpayer funds -- and justified in part as a redevelopment project for the state's economically-struggling largest city.

NJPAC is now in its 20th season, and eight years have passed since a Philadelphia firm was named to develop the One Theater Square site. So, why did such a critical project lay dormant for so long, even as other hi-rise apartments sprouted one after another in Jersey City, only a few miles east?

There are several reasons, according to NJPAC officials, development experts and others: the onset of a global recession just as a developer was named; depressed local economic conditions and a violent history that had discouraged large-scale residential development since the early 1960's; and regional employment trends and real estate market forces that made Jersey City a much safer bet for real estate investors.      

"Nobody wanted it to take as long as it took," said John Schreiber, who took over leadership of NJPAC, as well as the One Theater Square project, from the arts center's founding president and CEO, Lawrence Goldman

But Schreiber, who became NJPAC's CEO five years ago, was confident that work on One Theater Square would continue uninterrupted, and that the project would be completed, as projected, in the summer or fall of 2018.

Plans for the building were unveiled in 2005, initially calling for a 28-story tower, which then grew to 44 stories, before settling back down to half that number.

Dranoff Properties, a Philadelphia-based developer whose projects include a hi-rise near the Kimmel Center for the Performing Arts, was named developer of the Theater Square site in 2008 through a competitive bidding process. Then the Great Recession hit. 

And so, the 1.2-acre site remained a parking lot for another eight years. This even as Newark's rival for the title of New Jersey's greatest city, Jersey City, shook off the recession and began a whole new residential building boom.

But Jersey City had something to offer during the post-recession years that Newark did not, said Kevin Riordan, executive director of the Center for Real Estate at the Rutgers Business School in Newark. Along with its easy commute to Manhattan via PATH train, New York Waterway ferries, and the Holland Tunnel, one of the main factors driving Jersey City's latest residential building boom, said Riordan, has been its strong job growth.

In a new urban era when people want to live near where they work, the demand for housing in Jersey City was met first by its existing housing stock, then by newly built high-rise apartments.

"Jobs, and in particular well-paying jobs, were clustered around Jersey City," Riordan said. "Jersey City and Hoboken always had attractive brownstones. The next level of development was to create vertical, or high-rise."

As the Hudson waterfront built out, forcing up land values, construction costs and rents, development began to spread west, particularly to areas with PATH access, including Jersey City's Journal Square neighborhood, Harrison, and finally Newark.

"(The) cost of creating those high rises and the cost of living in those high rises has gone up, so development has been pushed out west," Riordan said.

Along with market forces, Theater Square is also getting some help from the state and local governments, including $33 million in Urban Transit Hub tax credits from the state Economic Development Authority, and an $11 million loan from the city. 

The building will include mostly 1- and 2-bedroom apartments, as well as studios and 3-bedroom units, ranging in size from 585 to 1,700 square feet. Rents are expected to start at $1,250 for a studio, $2,000 for 1-bedroom, $3,150 for a 2-bedroom and $4,500 for a 3-bedroom. The project will include 26 affordable units. 

Dranoff CEO Carl Dranoff attributed the delayed start to the complexity of the project, and its location in a largely untested market. 

"Public/private partnerships like One Theater Square are complicated jigsaw puzzles to assemble, and if you lose a single piece the deal begins to unravel," Dranoff said in a statement.

"Time is the enemy -- the longer it takes to get to closing, the more chance for potholes along the way. Newark was considered a new frontier in urban development when we were selected by NJPAC as redeveloper in 2008. When the great recession continued through 2012, we realized the project needed to be re-scoped and reimagined. While this occurred our financing commitments and our costs had to be realigned and resynchronized."

"Finally," Dranoff added, "in 2016 we were able to close the financing and begin construction."   

Just around the corner from the Theater Square site, at the City Bean Cafe on Park Place, workers from the neighborhood welcomed word of the new building as they ordered breakfast on a recent weekday. 

"I'm glad to see the city coming up," said Rita Keith, who works in marketing at   WBGO, the jazz radio station just up the block.

With few residents in the area at this point, City Bean is closed on Sunday. But the clerk behind the counter, Robert Guerrido, said he could imagine expanded hours and possibly more jobs at the cafe, once One Theater Square is occupied.

"It's not going to be me working on Sunday," Guerrido said. "So, maybe my boss will hire some more people."

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