Sunday Summary: Hip, Hip Hooray for New Jersey!

As far as real estate farragos go, it would be difficult to think of a bigger mess than the 3.5 million-square-foot American Dream mall in the Meadowlands complex in New Jersey.

The costs were dizzying. ($5 billion.) The construction was endless. (It broke ground in 2004 but didn’t see its first customers until September 2019.) And the timing couldn’t have been worse. (You’ll note that six months later everything in the world would be closed thanks to COVID-19.) Owners backed out and new ones were recruited. There have been defaults, and lawsuits, and even hurricanes.

And yet … is the project finally out of the woods?

Not to jinx anything, but we saw some encouraging signals coming out of North Jersey.

“The mall is finally finding its footing, where it appears to be starting to resonate with the broader trade area as a unique and interesting destination to visit,” said Thomas Dobrowski of Newmark. “It’s now on the radar throughout the New York and New Jersey area, and it’s becoming a true destination for the consumer, mainly driven by its unique features.”

The first and second quarters of 2024 saw a 30 percent year-over-year increase in revenue. And in 2023 the mall saw a 31 percent uptick in sales from 2022. That sounds like pretty decent progress. (To give you some idea of the figures we’re talking about, in 2023 the mall saw $553 million in revenue.)

As far as real estate stories go, the roller coaster that is American Dream is, in the words of Hoya Capital’s David Auerbach, a future case study for Harvard Business School and worth spending some time examining in our deep dive here. (Maybe there are pointers for other flailing malls.) And, hey, Black Friday is in five days. Now you know someone to give your money to whose name is not Jeff Bezos.

Things are looking up in a lot of Northern New Jersey, and not just at American Dream. Many developers figured out a long time ago that New Jersey is an answer to New York City’s housing shortage that actually pencils out.

Per a report from Berkadia, an estimated 17,975 housing units will hit the North Jersey market this year, whereas 20,979 units are slated to be released in New York City.

“We finished several big buildings, and we’ve been absorbing very well,” said Diego Hodara of Titanium Realty Group. “So the value is there for the renters, based on location, the quality and the type of product we are delivering to them, and in the price. So there is a good value for renters that are in need of housing because New York City has done a terrible job related to that.”

Even Jersey office has been showing decent signs.

Bank of America (BAC) signed one of the biggest office leases in Jersey City ever back in January when it took 547,962 square feet at Newport Tower at 525 Washington Boulevard — but others have signed on in a big way. J.P. Morgan Chase has 550,000 square feet at 545 Washington Boulevard, and Fidelity Investments recently signed a renewal for 185,000 square feet at 499 Washington Boulevard.

Over in Hoboken, Unilever recently signed a lease at 700 Sylvan Avenue, and Samsung took 321,207 square feet in Englewood Cliffs.

And the Bank of America deal could be the start of something more.

“This market has been notorious in terms of its ebbs and flows,” said Peter Bronsnick of Cushman & Wakefield. “When it starts to heat up, it typically takes one big deal for the story to unfold. So the market was stuck. We had considerable vacancy on the waterfront, somewhere in the 25 percent range, and we hadn’t seen any large transactions as we waited out what was happening post-COVID. The Bank of America deal set the market in the right direction, and now you’re starting to see other pieces fall into place.”

Big developers and owners like what they see.

“If you look at the overall New York area, there’s very little new construction coming,” said Hines’ Sarah Hawkins in this week’s Commercial Observer. Her firm recently acquired two apartment complexes, the Lenox and the Quinn, with a combined 408 units. “And we expect, over the long term, we’re going to continue to see robust rent growth [in New Jersey]. And the suburban New York City markets are areas that we want to own more residential. At the location that we bought, you can be in New York City within 10 minutes. So it is incredibly accessible to New York City, but at a fraction of the price.”

Green giant

On the New York side of the Hudson River, SL Green (SLG) had a pretty, pretty good week.

First up, they received a three-year, $742.8 million extension on 1515 Broadway, the 54-story office tower in Times Square that they’ve proposed to be the future New York outpost of Caesars Palace.

“This extension provides SL Green and our partners with the time and flexibility needed for our pursuit of Caesars Palace Times Square, bringing world-class entertainment to its most logical location in the heart of Times Square, the world’s greatest entertainment district,” said SL Green’s Brett Herschenfeld.

And the green giant’s most exciting project, One Vanderbilt, also got a huge boost: The Tokyo-based Mori Building Company purchased an 11 percent stake in the 73-story tower, which appraised the value of the building at … (wait for it) $4.7 billion!

If SL Green were in a casino, most pit bosses would throw them out if they suddenly had those kinds of winnings.

It’s not entirely shocking that values are bouncing back.

At CO’s ninth annual Fall Finance CRE Forum on Nov. 20, KKR’s Joel Kraut said that the roughly $20 billion in the U.S. pipeline today was a healthy sign.

“It’s going to be a multi-speed recovery,” said Traut. “We are certainly seeing signs of growth with lots of opportunity, but there’s more to go.” (If we needed any more proof of that last warning, we were as surprised as anybody that the famed Helmsley Building saw its value cut by 40 percent last week. Ouch.)

But the heavy hitters are scoring loans, like Witkoff and PPG, which just got a $273 million construction loan for a luxury condo and hotel in Hallandale Beach, Fla.

The heavy hitters are buying property, too, like Savanna, which just shelled out $255 million to buy 799 Broadway from Cannon Hill and Columbia Property Trust.

Players like Adam Neumann are back as well, buying a three-building office complex in Aventura for $116.2 million.

And industrial is still hot given that Longpoint Partners just ponied up $331.3 million for a 26-building, last-mile industrial portfolio from Blackstone.

All of which should whet one’s appetite for the inevitable Thanksgiving food coma we’re all gearing up for.

Happy holidays — see you next week!