A rendering of Pointe Grande Plaza, a new 55,000-square-foot retail center now under construction in Elizabeth. — Courtesy Jacobs Enterprises
By Joshua Burd
A new grocery-anchored shopping center is rising in Elizabeth, filling a void in an inner-city neighborhood whose residents have had to cross a highway in order to reach a supermarket.
But the demand for such a project was never the issue. According to lead developer George Jacobs, the true challenge was making the numbers work for the $17 million project.
“The problem is the costs were crazy, the rents were low and this was a classic project in need of public assistance,” said Jacobs, president of Clifton-based Jacobs Enterprises. “So we ended up going to the city and the state.”
The result was an undeniable hodgepodge of private and public financing sources, including the debut of a new state loan program. But it turned out to be the formula that the developers were looking for: Construction is now well underway at the 55,000-square-foot complex at East Grand and Division streets in the city, with retailers slated to open their doors by early next year.
Not to mention that space is filling up fast. The landlord and brokerage team have already leased 80 percent of the property, including the 25,000-square-foot building that will house a sorely needed new Foodtown store, and they’re in discussions with other users that could push the complex close to full occupancy.
“It’s answering a need,” Jacobs said when asked about the success of the project. “It’s a food desert.”
The project, which broke ground late last year, is redeveloping the former site an NJ Transit bus maintenance facility. After the garage was taken out of service, the city acquired the four-acre site several years ago and embarked on a $2 million environmental cleanup.
The result was a parcel that was ideal for new retail development in a decidedly under-retailed section of Elizabeth. But Jacobs, whose firm was brought into the project by longtime supermarket real estate executive Robert Volosin, said it was clear that some type of public-private partnership would be necessary.
As it turns out, that meant a half-dozen funding sources. Along with $4 million in equity and an $8.7 million loan from Valley National Bank, the project is relying on a $1.4 million grant from city and a $2 million loan from the nonprofit Elizabeth Development Co.
After those sources had been compiled, the project in January 2015 was awarded $4.8 million under the state’s Economic Redevelopment and Growth grant program, which reimburses construction costs through taxes derived from the project. Additionally, the developers were the first recipients under the Economic Development Authority’s Real Estate Impact Fund Program, resulting in a $1.27 million loan that helped close another financing gap.
“It was certainly complicated,” said William O’Dea, deputy executive director of the Elizabeth Development Co. “In urban, inner city neighborhoods, retail does not get the same type of rents that suburban highway sites get, so we had to make sure that the economics of the project worked.”
He added that the ERG grant, in particular, “gave a comfort level to the developer and the amount of equity that they needed to put into the deal to make it work.” But without any of the different financing pieces, he said, the builders could have looked at their options elsewhere.
“I think that we see a lot of projects that see three or four funding sources,” O’Dea said. “And, certainly, it’s not only getting all of the loans in place with the equity, but it’s also ensuring that there’s enough return on investment for the developer to want to go forward with the project.”
According to the EDA, the project is expected to create about 90 new full-time jobs. Virtually all of the tenants have committed to taking part in a city-based program focused on hiring locally and job training.
Pierson Commercial, based in Englishtown, is serving as the retail broker for the project. The other tenants who have committed to space include Dollar General, Popeye’s, Subway, Cricket Wireless and Sonics Suds Laundry.
That tenant roster could grow in the coming months, thanks to the allure of new development that is filling a major need.
“There’s unmet demand in this market … and you have the advantages of a supermarket-anchored center,” said Ryan Starkman, leasing agent with Pierson Commercial. “Obviously you have those daily needs — people have to go shopping several times a week. It has the parking, it’s easily accessible and convenient, and there are not a lot of new supermarket-anchored centers that are being developed, especially in northern New Jersey.
“So the leasing velocity has been very successful.”
But Jacobs said none of the new retail offerings would be possible without the support and buy-in of those who helped compile what was “a very complicated capital stack.” He pointed to several local officials in Elizabeth, including Mayor Chris Bollwage, Fifth Ward Councilman William Gallman Jr., Business Administrator Bridget Anderson and Eduardo Rodriguez, the city’s director of planning and community development.
“The whole city has gotten involved,” Jacobs said. “You’d never build a 55,000-square-foot shopping center for $17 million without the public because you’d never get the rent to support it. It would not have happened without all of this.”
