Steven Pozycki is Jersey to the core. So is the firm he founded, SJP Properties, long based in Parsippany, New Jersey. So it surprised some industry insiders when the executives moved a few years ago into 11 Times Square, a Manhattan office building they own.
Yet the shift wasn’t as dramatic as it sounds. Although the C-Suite moved to New York City to keep an eye on its expanding list of projects there, the vast majority of the employees remained in the Parsippany headquarters. And the development focus remains in the Garden State. “We certainly haven’t forgotten about New Jersey,” said Pozycki, SJP’s chairman and CEO.
When Pozycki founded the company 35 years ago, there were dozens of major independent developers in New Jersey. Today, there are only a handful of active developers focused on the state, with SJP among the biggest.
SJP is multi-focused, with office, residential and retail properties scattered throughout the state’s desirable destinations. Each sector faces its own challenges in New Jersey, a state that Pozycki knows like the back of his hand. He grew up in Perth Amboy and went to college at Monmouth University.
The state’s office market has long faced headwinds, with AT&T and Lucent picking up stakes years ago and the downsizing of the pharmaceutical industry, a big-time employer in the state. The influx of some financial companies, especially into office towers in Jersey City, has helped mitigate these market forces.
On the residential front, trendy communities like Hoboken and Edgewater line the Gold Coast, the shoreline directly opposite Manhattan. But developing new residential properties can be a logistical nightmare in this state, which has 565 municipalities, each with its own zoning rules. What’s more, some of the roads and bridges are crumbling beneath the weight of congestion and underinvestment, while many of its train stations are overdue for a facelift. To top it off, New Jersey’s property taxes are the highest in the nation, according to the Tax Foundation.
Despite these handicaps, SJP executives remain committed to building in this state. “We have found the New Jersey market offering plenty of opportunity. We know it, and that mitigates risk,” Pozycki said. “Jumping into new cities is incredibly risky.”
A modern approach
SJP’s most visible New Jersey project is The Modern, a 47-story luxury apartment project hugging the George Washington Bridge in Fort Lee. The tower, easily the biggest in Bergen County, opened in 2014 and is now 90 percent occupied.
Many of The Modern’s residents have relocated from Manhattan because the tower offers rentals at roughly half the rate of apartments in the city. No doubt it helps that The Modern provides free shuttle bus service into Manhattan and features floor-to-ceiling windows with views of the Hudson River and the New York skyline. “People recognize that you don’t have to own because of the increased flexibility, mobility and liquidity associated with renting,” said Allen Goldman, president of SJP’s residential business.
SJP and its partners recently broke ground on a second tower on the property that will have 450 luxury rental apartments. The combined project is expected to cost $500 million to build. The Modern’s amenities, which include a heated infinity pool, a spa, a screening room, a yoga studio and a golf simulator, have drawn comparisons with a resort or a cruise ship. And the tower certainly stands out when viewed from across the river in Manhattan. “It’s almost become a landmark,” Goldman said.
Farther down the Jersey shoreline, SJP has built a large mixed-use complex in Hoboken. When the Waterfront Corporate Center III opened in 2014, it was the final piece of the firm’s 1.5-million-square-foot project. SJP said “every inch of retail” has been leased, with tenants in the 75,000 square feet of ground-floor retail including Del Frisco’s Grille and a Greek bakery set to open this summer. Office tenants include e-commerce startup Jet.com, which leases 80,000 square feet for its corporate headquarters.
The activity at the development is a sign of how robust the demand is for real estate in Hoboken, a vibrant city that has become a major transportation hub for commuters, with a PATH train station, a ferry terminal and a phalanx of New Jersey Transit buses. “The waterfront is probably in hotter demand than it’s ever been,” said Enrique Alonso, SJP’s senior vice president and Pozycki’s son-in-law.
Farther inland, SJP recently put the finishing touches on a new 750,000-square-foot, built-to-suit headquarters for Prudential in downtown Newark. A second office tower has also been approved for the Prudential site, which would bring it to 1.5 million square feet.
The project has helped spur a retail revival in downtown Newark, where national retailers like Nike and Whole Foods opened their first stores and Starbucks opened its first coffee shop since leaving the downtown business district in 2008.
SJP also built downtown Newark’s Two Riverfront Plaza, which serves as the North American headquarters of Panasonic. “Newark has great infrastructure and incredible mass transit,” Pozycki said, noting that the city’s Penn Station is the 15th busiest train station in the national Amtrak System and also serves New Jersey Transit trains, PATH trains and buses.
SJP recently received approval for a 10-story, 300,000-square-foot office development in the Metropark office park in Iselin, New Jersey. The complex, already home to corporate tenants like Ernst & Young and Cisco Systems, is connected to the Metropark train station. The developer is seeking a tenant for this site and will start construction once one is secured.
Executives believe that the state’s transit grid will provide a road map to development in New Jersey. Yet they are concerned about the willingness of state officials to upgrade and maintain the mass transit system. “My sense is the migration will follow the transportation,” Pozycki said.
The developer has been active in Manhattan for a decade. SJP built residential condos at 45 Park Avenue in 2007 and at 247 West 46th Street in 2008. It is currently raising a 55-story condo building at 200 Amsterdam Avenue that will become the tallest building on the Upper West Side.
“New products with amenities that old buildings don’t have, in neighborhoods that are supply-constrained, will be able to weather a storm,” Pozycki said.
The company’s biggest commitment to New York City to date is 11 Times Square. This $950 million skyscraper was built entirely on spec, meaning that SPJ didn’t have a major tenant lined up.
Looming above the bustling Port Authority Bus Terminal, the 40-story office tower was a ghost town when it opened in 2010, with the recession making it difficult to lure major tenants. “With hindsight, the timing of the delivery of 11 Times Square into the teeth of the global financial crisis was unfortunate,” said Kevin Smith, head of Americas for Prudential’s PGIM Real Estate, an investor in the project.
Ultimately, Smith said, the “desirability of the location and the quality of the building were vindicated” as tenants began signing up for leases once the office market in Manhattan recovered.
The law firm Proskauer Rose signed the first lease in 2010 and Microsoft followed suit in 2013. Other tenants — including e-Marketer, Bank of America and Answers.com — quickly followed. The building is 90 percent occupied now.
Smith said that Prudential’s real estate fund, which is a frequent investor in SJP projects, is focused nationally on “urban areas that provide a 24-hour live/work/play environment.” In New Jersey, Smith said that is
especially true around the Gold Coast.
SJP executives pride themselves on being highly selective, preferring to build what they see as slam-dunk projects in supply-constrained markets. “We have not always been the first party into a community,” said Jeff Schotz, the firm’s executive vice president. “But we are always ready once we are there.”
That attitude has prompted them to seek out financiers with a long-term perspective, rather than those looking to make a quick buck. They prefer to partner with reliably patient insurance companies like Prudential and Northwest Mutual to fund projects. Those two insurers, for example, invested in the original Modern tower as well as the one going up now.
“They’re long-term owners,” Pozycki said of insurers. “They’re not looking for that giant return, get in and get out, which is often in our market very unrealistic.”
Clarification: A previous version of this article stated that SJP’s 55-story condo building at 200 Amsterdam Avenue would not be an ultra-luxury building, and that prices would be in the relatively modest $2,000-a-foot range. TRD was unable to confirm the projected sellout of the 200 Amsterdam project on a price-per-square-foot basis.