Good Deals on the Waterfront
Restaurant Opportunities abound as Jersey City's Newport mega-development hits critical mass
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Where will you find "the greatest collection of restaurants, accessible by multiple modalities, anywhere on the Hudson River waterfront... the East Coast equivalent of the restaurant collection at Marina Del Rey in California?" When the plans of The Lefrak Organization and Paul Fetscher come to full fruition, you will find this phenomenon in Jersey City, New Jersey, directly across the Hudson River from the famous twin towers of the World Trade Center in New York City, a few years from now. And if the past is any indication of the future, their plans will ripen on schedule. Fetscher, president of Great American Brokerage Inc. (212-557-7272) in Manhattan, has been working the restaurant industry for 35 years, the past 18 of those since he founded Great American. |
And Jersey City? Listening to Fetscher, you begin to understand that this once-grimy New York City stepsister has a lot more to offer than Gasoline Alley and the fumes from the New Jersey Turnpike and the Holland Tunnel. For one thing, it has Newport, billed as the largest multi-use planned community in America, 400 acres of urban waterfront that is 40 percent developed and has reached, according to Fetscher, "critical mass, now it’s time to build restaurants."
Critical mass may be an understatement. The New Jersey Business and Industry Association reports in its monthly magazine that Jersey City is becoming "Wall Street West" and "Silicon Valley East," and that it accounted for 91 percent of the job growth among the state’s top six cities from 1992 to 1994.
To attempt to describe Newport in detail feels a lot like being a flea trying to describe an elephant, one hair at a time by the time the flea has finished his story, you still don’t know what he’s looking at. The development is gigantic, by any standard. It is billed as the largest multi-use planned community in the nation, and it may well be. It was master-planned by The Ehrenkrantz Group and Eckstut, internationally acclaimed for major developments like Battery Park City, Baltimore’s Inner Harbor East, and Cleveland’s Tower City.
A $10 Billion Investment
Newport will be a $10 billion capital investment by the time it is completed, containing 4.3 million square feet of office space; 17,000 office workers; 32,000 residents in 9,000 living units; a 1.2 million-quare-foot mall; 600,000 square feet of big box retail; 15 movie screens; a 776-slip marina; 20,000 parking spaces; 1,200 hotel rooms and a "light rail" station on a line connecting Bayonne to Fort Lee. Newport Centre Mall is currently 957,000 square feet with another 247,000 square feet to be added.
| A fifth department store anchor is
rumored to be lined up for the majority of that space. Currently serving as the mall
anchors are Sears, JC Penney, Filene’s and Stern’s. In the adjacent neighborhood
is another 200 acres of mixed-use development, including 2,000 new residential units, over
200,000 square feet of big box retail, a 200-unit hotel and more development to come. Newport Centre Mall is unusual, in that it is open, and staffed by security patrols, 24 hours a day, even when the stores are all closed. The mall otherwise would have become a barrier between the residents of Jersey City and their transportation center the PATH (Port Authority Trans Hudson) station. Instead, it’s an asset. "We became the safe conduit for the neighborhood," Fetscher said. "It’s the only mall I know of that is so integrated with the community that it’s always open." Indeed, a resident of a nearby apartment complex who works as a stockbroker in New York City brags that he can walk to work in the rain and never get wet, except for the first few hundred feet from his building to the mall parking garage. |
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"The reception for Newport Office Center III, currently under construction, has been so strong that planning already is underway for Newport Office Center IV, 750,000 square feet on the north side of Newport Office Center," says Fetscher. "America’s Towers (apartments) are halfway up on the next major high rise, which is the third tower. You can get a waterfront, one bedroom apartment here for less than $1,900." Median incomes in the two most recently opened residential towers (there are nine in all) are $124,000 and $129,000. Future plans include more high-rise apartments and Mediterranean-style townhomes along finger piers extending out into the Hudson. |
Incentives to Do Business
Newport also comes with significant economic incentives for its business tenants, including currently a 15-year property tax rate fixed at $2 per square foot; Urban Enterprise Zone concessions which cut the sales tax to three percent, exempts building materials, supplies and services from sales tax, and grants other tax benefits; no occupancy tax on commercial space; reduced personal and corporate taxes, and reduced utility costs.
It is six minutes to Manhattan by PATH train from Newport, and trains run every three minutes at rush hour. A new ferry service shuttles 30,000 people back and forth to Manhattan. The sprawling complex also includes a 15,000-square-foot health club, three supermarkets totaling over 260,000 square feet, two child care centers, a helipad, and a piece of the statewide "Greenbelt" park system designed to create walkable green areas along rivers and waterfronts. Adding to the charm is a windsurfing and sailing school operating out of Newport Marina.
Newport’s primary trade area encompasses 492,950 people with an average household income of $50,997. Ethnically, 63.61 percent are white, 17.53 percent black, 8.94 percent Asian or Pacific Island, and 9.92 percent other races. The median household income is $37,118, though the two newest Towers of America in Newport are occupied by tenants with median household incomes of more than $125,000.
Opportunities Abound
Restaurant opportunities abound in Newport. Fetscher has identified nine locations that can support a variety of food establishments, and the array of restaurant types that the community will need includes breakfast, lunch, dinner and late night fares and venues that are family style, casual, seafood, prepared foods to go, European style bistros, sidewalk cafes, European grand style cafes, and elegant restaurants. Some of the sites available offer spectacular views of the waterfront and the Manhattan skyline. The sites Fetscher has available include:
One and a half acres of land ideal for a 20,000 square foot neighborhood center, including commercial, retail and restaurant uses, at the corner of Jersey Avenue and 18th Street, across from an Exxon station.
A pad on the Food Mart International (a 138,000-square-foot multi-cultural supermarket) site which could accommodate up to 6,000 square feet for restaurant use.
The ground floor of Newport Financial Center (14 stories, 500,000 square feet, leased entirely to Recruit USA), with a Starbucks in place, contains space for a 5,000-square-foot "white tablecloth" restaurant, 150 seats with a waterfront view, and a bar.
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Newport Office Center III (14 stories, 526,000 square feet), is under construction and due to open in late 1999. The building will have access by covered walkway to the light rail line. The ground floor availabilities include four food service spaces: 2,250 square feet (ethnic good prepared foods); 2,700 square feet (possible liquor license); 4,800 square feet (casual theme restaurant with liquor license); and 7,875 square feet (family style restaurant). All four spaces would have access to outdoor seating overlooking Washington Boulevard, with a view of the New York skyline and the Hudson River. |
Just under an acre on 6th Street, across from Newport Centre Mall and surrounded by The Wiz, Shop Rite, BJ’s Club and Pep Boys, which can accommodate up to 15,000 square feet and would be conducive to a 24-hour diner, additional retail or other restaurant application.
The "crown jewel" of Fetscher’s restaurant sites is an existing 8,840-square-foot post-World War II-era brick building at the end of a pier with water on three sides, overlooking the marina, with a clear view of the New York City skyline. With its oversized windows, period brick architecture and 30-foot ceilings, the site also lends itself to valet parking service. It currently is operating as a restaurant with liquor license and enjoys a seasonal 1,000-square-foot outdoor dining patio overlooking the marina. Fetscher estimates the site could do $6 million to $10 million annually with the right operator and notes that the building could be expanded or replaced if necessary.
Fetscher is one of two leasing agents for Newport, co-developed by the Simon Property Group of Indianapolis, Indiana (317-263-7148), which did Newport Centre Mall, and The Lefrak Organization, (718-459-9021) of Queens, New York, best known for its planned urban community in Queens called Lefrak City. The other agent is Warren Newcorn of Newcorn Realty Co. LLC., also in New York City.
The Origins of Newport
Newport is the brainchild of Samuel J. LeFrak, 80, chairman of the Lefrak Organization, whose company owns an estimated 90,000 apartments in New York and who is reported to be worth $1.5 billion personally. LeFrak had looked for years at the rotting piers and rusting railheads from Manhattan, where he was building Battery Park City, and confided in his son, Richard, president of the company, that one of his dreams was to rebuild Jersey City’s waterfront and create a skyline to match the one across the river.
Meanwhile, Herb Glimcher of Glimcher Realty Trust, Columbus, Ohio (614-621-9000) had also seen the opportunity in Jersey City’s waterfront, but what Glimcher saw was a shopping mall. The banks turned him down. Lefrak had a vision for Jersey City a new port (Newport) on the Hudson River a bookend to balance Battery Park City and likely surpass it. In 1983, the LeFraks toured the site for the first time, and Sam LeFrak’s Newport dream began taking shape. Glimcher had teamed up with Simon Property Group to develop the mall, and Newport was born, officially, in 1986. Since 1986, more than $1 billion has been invested and more than 11 million square feet of new construction has been completed.
Encompassed by the Lefrak Organization are: the Lefrak Oil and Gas Organization (LOGO), an energy exploration firm; and the Lefrak Entertainment Company, which develops and produces records, Broadway plays, musicals, TV shows and movies, as well as publishing books and music. LeFrak is a major benefactor and trustee of the Guggenheim Museum in Manhattan, and owns a large collection of paintings and sculpture, including primitive, classical, impressionist, post-impressionist and contemporary art. He also is an advisory director of the Metropolitan Opera, a member of the boards of trustees of the Queens College Foundation and the Dana-Farber Cancer Institute/Harvard Medical School, and a founder of the Albert Einstein School of Medicine.
What Does Newport Have?
Fetscher is one of many people helping to realize LeFrak’s dream. Formerly a civil engineer by training, and a teacher by passion, Fetscher waxes professorial when he begins to tell you what Newport has. He ticks off the critical questions and provides the answers that a restaurant developer must ask about a location (if there were a blackboard nearby, you get the feeling he would be writing on it, passionately):
"Who lives here? There are 8,500 people east of Washington Boulevard," which runs through the center of Newport. That number is destined to become 32,000 when Newport is completed, he notes.
"Who works here? There are 8,000 office workers, and ultimate plans call for 17,000," plus, he notes, there are 15,000 more in the Jersey City Financial Center a few blocks south."
"Who shops here?" He mentions the Newport Centre Mall, 957,000 square feet which is generating sales well in excess of $500 per square foot. That puts it somewhere north of $500 million annual gross, and there is room to expand the mall by another 250,000 square feet, bringing it to 1.2 million square feet.
"Who plays here?" Fetscher ticks off the things people can do in Newport, from boating and tennis, jogging, windsurfing, sightseeing to movies and other activities.
"Who’s passing through? There are more people leaving and arriving than at any other spot along the Hudson River," which separates New Jersey from New York City. Access to the Big Apple can be had by train for a dollar, by car through the Holland Tunnel, by water taxi, or by private boat if you have one. And the light rail line, a sort of overgrown trolley, will carry commuters and shoppers to and from various points between Bayonne to the south and Fort Lee to the north. One of the light rail stops is in Newport. Due to begin operations in early 2000, the light rail systems is projected to carry 100,000 riders per day by 2010.
More than $1 billion has been spent on the infrastructure for Newport, which includes the community’s own electric power substation with dual underground uninterruptible feeds, plus new roads, bridges, sewers, storm drains, water supply, gas lines and telecommunications systems featuring on-site fiber optic and communications provided by Newport Telecommunications, and a cable television network, Liberty Cable. The PATH station, renamed Pavonia-Newport, was given a $25 million expansion package and boasts express trains to the World Trade Center (nine minutes from Newport) and Penn Station (14 minutes from Newport) in Manhattan, as well as to Hoboken train and ferry terminals and Newark’s central business district. Nine bus lines also stop in Newport and, for motorists there is access via the Holland Tunnel, Pulaski Skyway, New Jersey Turnpike exit 14C, US Routes 1 and 9, and Interstate 78. Newark International Airport is 13 miles away.
100,000 Visits a Day
"We expect to have 100,000 customer visits a day when it (Newport) is done, and we’re willing to bet that the vast majority of those 100,000 people have stomachs. Whether it’s breakfast, lunch, dinner or late night, we’re going to have something for them... we’re going to have something special for them. I want people to decide to come here because it’s a great place to be, and then select where they feel like eating today."
Fetscher starts counting his restaurant years in 1963, when he worked frying burgers at Carol’s Hamburgers in Long Island, and "making french fries from scratch... A burger, shake and fries was 47 cents. We would rejoice at $100 sales in an hour (for the restaurant)." Then, by 1968 he owned his own restaurant. He worked as a civil engineer on projects from stopping ground water leaks into the New York subway system, to building a coffer dam for a cooling basin to one of the nation’s early nuclear power stations in South Carolina. But then he discovered the world of commercial real estate, placing Fotomat kiosks in shopping center parking lots. From the Fotomat job, he learned that he could make more as a broker than as the company rep.
So he took a job with Newmark & Co., where he worked one desk away from Peter Glazier (Michael Jordan Restaurants, Monkey Bar), and worked part-time in a bowling alley to make ends meet. Glazier drove an ambulance on weekends, he said. Such was the enchantment with real estate. During the 1970s, Fetscher said, he was top retail producer nationwide for Cushman and Wakefield "Not that I was that good," he adds. "They were that bad."
Fetscher is no stranger to big developments. One of his early mentors was George Morton Levy, the owner of Roosevelt Raceway in Westbury, Long Island, and the man who got parimutuel betting legalized in New York. In 1973, he and Levy began talking about developing Merrick Avenue in Westbury, redeveloping a horse jogging track into a "restaurant row." Today, it is home to the nation’s highest-grossing TGI Friday’s and such eateries as Bertucci’s, Sprats, Fudrucker’s, Rainforest Cafe, Cheesecake Factory, Bertolini’s, Brooklyn Diner, Chili’s, Romano’s Macaroni Grill and Cozy Mel’s and soon to arrive Bronx’s BBQ. Retailers on the site include Pergament Home Center, now being converted to a Microcity, ("the Home Depot of the computer business," says Fetscher), Fortunoff’s (one of the highest per-square-foot grossing specialty department stores in the nation), Target (the first on Long Island) and Home Depot Expo. Roosevelt Raceway closed in 1988, opening up the entire site to commercial enterprise. Half of the 700-acre development is still awaiting development.
Commercial real estate appears to be a business of bricks, mortar and money, but Fetscher is always ready to remind a listener that it’s really a business of people. Money doesn’t flow, and bricks and mortar don’t go up, unless people get together and make solid deals in which all parties win. He is fond of a one-line philosophy he gained from Rich Melman, Chicago’s top restaurateur, and which is difficult to forget:
"You can’t make a good deal with bad people, and you can’t make a bad deal with good people."
So far, Newport looks like the product of many good deals between Sam LeFrak and others, among them Paul Fetscher, who says he is looking for good restaurant operators with whom to make more good deals.