MAREJ’s 3rd Annual N.J. Apt./M-F Summit
Experts Address Industry Trends at MAREJ-hosted N.J. Apartment/Multifamily Summit
Panel Discussions Include New and Emerging Trends and the Future of Residential Development
ISELIN, N.J., Oct. 7, 2016 – The Mid-Atlantic Real Estate Journal’s (MAREJ) 3rd Annual New Jersey Apartment/Multifamily Summit recently brought together more than 100 of the region’s top commercial real estate professionals, along with five panels of industry leaders, to examine current trends and what the future holds for New Jersey’s apartment market. The morning event took place at the APA Hotel in Iselin.
Multifamily Investment: Where is the Action and What’s Next?
A panel entitled, “New Jersey Multifamily and Investment Update & Opportunities,” was moderated by Brian Whitmer, senior director of Cushman & Wakefield of N.J. Panelists including Elie Rieder, founder and CEO of Castle Lanterra Properties (CLP); Timothy Touhey, team leader of Investors Bank; Mark A. DeLillo, founder and managing partner of BlueGate Partners; and Nathan Franco, vice-president of acquisitions and development for HAP Investment Developers.
Hudson County, particularly Jersey City, has led the state in multi-family construction in recent years. The proximity to New York City and exceptional transportation infrastructure makes it a viable alternative to renters who no longer want to pay high Manhattan rents. Even so, panelists agreed there is growing interest among investors in communities to the south and west. Harrison and Montclair were offered as examples of communities with potential for growth and greater value play as compared to Jersey City. Philadelphia is reportedly attracting interest from local and international investors alike, with foreign investment increasing as Europe experiences negative/zero interest rates.
Invariably, the best projects in the best locations will continue to attract developers, investors and renters. One community experiencing a surge in multi-family investment activity is Bayonne, an “up and coming area” according to Rieder, whose firm specializes in identifying investment opportunities in multi-family properties. He points to CLP’s recent acquisition of Alexan CityView (renamed Harbor Pointe), a 544-unit apartment complex on the Bayonne waterfront.
“We purchase properties that we believe have intrinsic value, and then identify opportunities to add value through repositioning and recapitalization, said Rieder. “At Harbor Pointe, we are not only drawing new residents from those who have been priced out of lower Manhattan, but also from Hoboken and Jersey City, where rents have climbed dramatically in the last several years. We feel that Class-A luxury properties in Bayonne, particularly those on the waterfront such as Harbor Pointe, will be able to capitalize on this flight to value.
To meet this growing demand, we’ve added and upgraded amenities at the property, such as adding a new fleet of shuttle buses (with free WiFi) to transport residents to and from Jersey City where they can connect to the PATH train and light rail system. We’ve made extensive upgrades to the pool area to give it more of a resort feel, and we intend on undertaking a major renovation project to upgrade the already impressive 90,000-square-foot clubhouse, resident lounge, and fitness center. Ferry service to lower Manhattan from the peninsula in which Harbor Pointe is situated is also in the planning stages. We are working closely with the City of Bayonne to promote its continued growth, and are excited to be at the forefront of this expansion.”
Other investment trends discussed included the slowdown in acquisition activity, the uptick in refinancing existing properties and “age 55 and over” communities gaining momentum in the multi-family landscape.
Development Trends: Public Private Partnerships and a Newark Renaissance?
In a panel called “Building a Successful Project from Start to Finish: Development Trends,” moderator Timothy R. Larson, leader of Citrin Cooperman’s international tax practice, led a panel of experts including Barry Poskanzer, partner, Poskanzer Skott Architects; Carmelo G. Garcia, executive vice-president and chief real estate officer of Newark CEDC; and James Caulfield, partner at Fields Development Group.
Panelists agree that Newark is undergoing a tremendous renaissance due in part to its tremendous infrastructure and proximity to Newark Liberty International Airport. This infrastructure caters to millennial renters, many of whom are slow to move towards home ownership in favor of apartment housing situated in walkable communities near public transportation. In addition to Panasonic and Prudential headquarters, Newark also is home to several institutes of higher education, and many of these schools’ graduates are choosing to remain in the city after graduation. The panel predicts that as cities become more walkable, demand for rental housing will increase.
Importantly, panelists said Newark officials are committed to seeing the city grow and propel it in a healthier direction. New development projects here also will create construction jobs and bolster the city’s tax base.
Panelists concurred that the relationship between developer and city administration is paramount, as is understanding how the process differs in small cities and suburbs versus larger cities. “It’s a very different planning process,” said Poskanzer, explaining that larger cities have planning departments while smaller towns don’t. He also explained that new developers and offshore investors in particular experience “cultural differences,” not understanding that planning is often “a quiet back and forth,” while institutional and foreign investors are very “by the books.” Underscoring the importance of public/private partnerships to the success of a project he added, “by the time a project gets to us, it means everything.”
Apartment development upticks impact suburbia as well: As millennials start having families, they often move from urban to more suburban locales. “Cities such as Jersey City are still going strong but newer developments also are becoming increasingly common in the suburbs,” said Poskanzer, citing suburban bedroom communities in Bergen County as just one example where this trend is occurring. “In these communities, multifamily housing provides an option for older native residents who are ready to downsize, but wish to remain in the area. As a result, this makes single-family housing stock available for growing millennial families,” said Poskanzer.
While several northern New Jersey towns offer rail access to New York City, Poskanzer also advises that parking and higher density housing go hand in hand. “It’s a mistake to think that because of mass transit access, only one car per family is needed. Outside of commuting, family members still need a car for travel to shopping destinations and a range of other activities. In cities where space limitations exist, garaged parking offers a viable yet expensive alternative.”
Panelists also discussed affordable housing (AH) in the multifamily sector, citing AH as a housing need that has grown exponentially in the last five years and is likely to continue. Panelists said more AH stock has been built in the past two years than in the last decade and this trend will continue. To that end, developers need to become more familiar with AH and the obligations required when building these units.
Other panels at the 3rd Annual New Jersey Apartment/Multifamily Summit included “Capital’s Comeback: The Evolution of Apartment Financing,” “Apartment Market Overview,” and Affordable Housing Market – State of the Industry.”