Chris ChristieIf Chris Christie’s rise to political prominence on the national stage was swift and unexpected, his ascent as a real estate force has been even more so. A litigator by trade, the 48-year-old New Jersey governor arrived in Trenton last year with few official real estate ties to speak of, save for the Mendham Township home he owns with wife Mary Pat, a bond broker at Cantor Fitzgerald, and a longtime friendship with Hampshire Real Estate Companies founder Jon Hanson.
But less than two years later, Christie’s almost devout fiscal conservatism has catapulted him — perhaps accidentally — into one of the most powerful real estate roles the state has seen in decades.
Taking the reins early on the state’s most high-stakes projects, Christie killed a long-planned $9.8 billion commuter tunnel to New York City, seized control of Atlantic City’s ailing casino district, and passed landmark legislation to cap further growth on the highest property taxes in the nation. It remains to be seen how history will treat his now notoriously aggressive leadership style, but there’s no question that real estate will remember him, for better or worse.
This month, The Real Deal takes a look at some of the biggest real estate projects to snag the Governor’s attention thus far.
Property taxes
Christie positioned himself as a leader on property tax reform when he struck a deal with state Democrats to cut the cap on annual property tax growth from 4 percent to 2 percent in New Jersey, long notorious for having the highest property taxes in the country. The legislation, which allows local governments to exceed the limit with voter approval, took effect at the start of this year, though several towns are already planning referendums on larger increases in an attempt to avoid service cuts.
While critics have characterized the cap as arbitrary and uncreative, Christie is certainly part of a trend: New York Governor Andrew Cuomo is currently having a similar debate in Albany over a proposed 2 percent cap, and other states have also brought the issue to the table in recent months.
“What Christie’s doing could be influencing many governors across the country,” said Jared Grasso, executive director of the New Jersey Association of Realtors. “They could be looking at Christie as the testing [case] for reform on property taxes.”
Hudson River rail tunnel
Christie may have tackled property taxes right out of the gate, but it was the moment he canceled the $9.8 billion Access to the Region’s Core commuter tunnel (known as ARC) that cemented his reputation as a cost-cutting crusader and rendered him an instant real estate celebrity on both sides of the Hudson River.
The project, which would have doubled the rail capacity between New York City and New Jersey, had already been allocated $3 billion in federal financing, but Christie famously forfeited that when he decided that the potential cost overruns were too much for the state to shoulder. The move sent waves through the region: Transportation lobbyists were furious that Christie would dare turn away federal dollars, and decried the loss of billions of dollars worth of potential property value boosts, while others praised his bold pragmatism and fueled rumors about his presidential aspirations.
It didn’t take long before several competing proposals were spawned from ARC’s ruins. New York City quickly cobbled together a plan for a No. 7 subway line extension to Secaucus that received rave reviews from the real estate industry (at the time, Real Estate Board of New York president Steven Spinola called it “a terrific, simple idea”). And Amtrak accelerated a proposal that was already in the works for a $13.5 billion “Gateway” project, which calls for an expanded Penn Station and two new high-speed rail tunnels along NJ Transit’s Northeast corridor.
In public statements, Christie seemed to take the alternate proposals as validation that the state’s transit goals could be achieved more efficiently than they would have been through ARC, while keeping the Garden State relatively off the hook financially. But it remains unclear where the money for either the No. 7 or the Amtrak tunnels would come from — and that $3 billion that Christie gave up may not be transferable.
“There is, in Washington, a lot of concern and consternation that this $3 billion was rebuffed,” said Vishaan Chakrabarti, director of Columbia University’s real estate development program and a former executive at the Related Companies. “Getting it back may be difficult.”
Atlantic City
Just six months into his tenure, Christie announced a state takeover of Atlantic City’s casino district, citing declining revenues in the gaming and tourism industries there, as well as mounting job losses, as outlined by a special commission he had created after taking office. It wasn’t a popular move, particularly for a Republican, and it meant the state would seize control of everything from infrastructure improvements to marketing to public safety for a newly created tourism district in Atlantic City.
Meanwhile, Christie inserted himself into efforts to restart construction on Morgan Stanley’s $2.5 billion Revel casino project, which had been stalled since 2009, and which he saw as vital to the renewal of Atlantic City. Christie was said to have personally lobbied executives at the bank to continue to search for additional financing — ultimately secured thanks in part to $261 million in tax incentives from the state. The 53-story project is now slated for completion in 2012.
“The governor was very active in having dialogue with the investors who put up the capital dollars so that the project could restart,” said Jon Hanson, founder of the Hampshire Real Estate Companies and the head of that special commission. “Hopefully that project jump-starts more projects in Atlantic City.”
But skepticism abounds. Voters opposed the state takeover of Atlantic City 43 percent to 29 percent in a February Fairleigh Dickinson University poll, and, as Bloomberg News reported last month, some gaming experts worry that a flashy new Revel project could actually wind up taking business away from the city’s other, already ailing casinos. Chakrabarti warned that the governor should be taking a more holistic view of the city, rather than focusing on the tourism district exclusively.
“You can build more casinos — even higher-end casinos — but until the casinos stop turning their backs on the city and start making it a place that’s amenable for families, Atlantic City is always going to have a bad reputation,” he said. “It’s not that [Christie’s plan] is too casino-heavy; it’s too urban-planning light.”
Hanson said he still expects some “tweaking” of the tourism district map before plans are officially filed April 19.
Affordable housing
The governor enraged housing advocates last year when he proposed doing away with the state’s Council on Affordable Housing, created in 1985 to help enforce a series of state Supreme Court decisions on providing housing for low- and moderate-income families in towns throughout New Jersey. Christie railed against what he calls COAH’s “unworkable” and “unfunded” mandates on development, and has said municipalities should be allowed to decide for themselves how many affordable housing units they need. Under his post-COAH proposal, developers would be required to either include some affordable units in their projects or contribute to a fund for affordable housing elsewhere.
“The development of affordable housing can and should move forward, but without arbitrary mandates on municipalities,” said Kevin Roberts, a Christie spokesperson. “COAH’s conflicting messages and edicts to municipalities and buildings have made it a costly planning nightmare and a source of litigation.”
Critics say Christie’s proposed alternative would discourage mixed-income communities and create sprawl, favoring low- and moderate-income building far away from transit and job hubs. And as Chakrabarti puts it, “if you’ve got a situation where workers and firefighters have to spend two to three times the amount they’re commuting because they can’t afford to live in the community, that ultimately is a problem for the economy.”
Bayonne Bridge
Christie emerged as a hero for industrial real estate types in Northern and Central New Jersey in September, when he wrangled $1 billion in funding from the Port Authority of New York & New Jersey to up the height of the Bayonne Bridge. It had been well known for years that unless its clearance height was raised, the iconic structure would block new, larger container ships from entering the ports of Newark and Elizabeth come 2014, when the Panama Canal expansion is completed.
With hundreds of thousands of jobs depending on the ports’ accessibility, Christie threw the Bayonne Bridge issue on the table when it came time for him to approve a Port Authority financing agreement for Larry Silverstein’s planned towers at the World Trade Center. According to news reports, Christie had threatened to block the Silverstein deal if the agency didn’t agree to finance the bridge project, and, in what appears to be a pattern in his still-nascent political career, the young governor got his way.
The agreement “will significantly benefit commercial real estate property owners in and around the port of New York and New Jersey,” said Michael McGuinness, the executive director of the New Jersey chapter of commercial real estate trade organization NAIOP. “That land will remain valuable, and [we] will be able to locate new companies and new jobs [in the area] that are related to port traffic.”
Meadowlands
Between the stalled, $2 billion eyesore unfortunately dubbed Xanadu, the money-losing Meadowlands Racetrack and the Izod-Prudential Center battle for the Nets basketball team, Christie inherited a veritable mess in East Rutherford when he took office. But 15 months later, it appears that there’s an exit strategy.
A rescue deal for the lender-controlled Xanadu project is now in the stages of finalization, with Mall of America owner Triple Five having signed on to complete the stalled sports and retail complex in a still-hazy agreement that will likely involve around $180 million in low-interest bonds provided by the Christie administration. It’s the second bailout attempt for the checkered complex, which analysts say would require another $500 million to complete.
Hanson, a close advisor to the governor whose commission had recommended that the state provide financial incentives to help complete the project, wouldn’t disclose details of the deal, but characterized Christie as “intimately involved” in the negotiations. He expects construction to restart this summer and wrap up by the fall of 2013, at which point he hopes that success will be a “catalyst for other projects in the Meadowlands area.”
Meanwhile, Christie’s threat to shutter the adjacent Meadowlands Racetrack mobilized Newmark Knight Frank chairman and New York horse racing mogul Jeff Gural, who felt it was in his own best interest as a harness track and breeding farm owner to keep the 35-year-old property operating. Gural has since signed an agreement to lease the property from the state for $1 per year and expects to invest between $90 million and $100 million — raised through capital partnership and loans — in an attempt to return it to profitability within five years.
“I was extremely impressed with how knowledgeable [Christie] was about the deal,” Gural said. “Usually with politicians you get the feeling they’re talking in generalities. … He knew the deal cold.”
Christie is considering a similar deal for the Izod Center, which has lost both major tenants — the Devils and the Nets — in recent years. Under a deal negotiated by the Hanson commission, the Nets agreed last February to pay $4 million to the struggling New Jersey Sports and Exposition Authority, which currently operates Izod and the Meadowlands Racetrack, to break their lease and move to Newark’s Prudential Center. As part of the agreement, the two venues agreed not to compete, with Izod hosting concerts and family events, and Prudential focusing on sports. The intent was to ultimately transition Izod into a privately run operation. So far, though, a Gural-style hero has yet to emerge to take the arena off the state’s hands. Hanson said that although he is optimistic that Xanadu’s reignition will “complement the operations of the Izod Center,” the state is still looking for a private-sector partner to operate the venue.