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 Photo by Aaron Houston for Real Estate NJ
In the meantime, Genova Burns’ real estate team is poised to expand with the help of several key growth areas. They include the rush to build new film and television production studio space, Counsel Avi Kelin said, citing a reported two-year backlog for stage time in the industry.
That was evident in 2022 from headlines about major studio projects
in Newark, Bayonne, Carteret and Fort Monmouth, where Netflix is slated to invest more than $900 million. Kelin, who worked on the 112,400-square- foot, purpose-built Cinelease Studios in Jersey City’s Caven Point section, said the rush to build new facilities is primed to continue.
“It’s already here, but I think it’s going to be more prominent in the next couple years as we see the infrastructure needed for the film industry try to catch up,” he said. “And I think the nice part about that industry is that the economic benefits really flow through to the mom-and- pop stores, so if you’re a caterer near the studio, you can keep yourself busy and support your family for a year just on catering a TV show.”
The team is also banking on the rise of the recreational cannabis market, which became legal in New Jersey
in February 2021, with the market officially launching last April. John Suwatson, counsel with the firm, said there is an uptick in buyers seeking properties for either cannabis retail space or production facilities. And while there is still a conflict between state and federal law over whether marijuana is a controlled substance, they’re now finding a clearer path to completing those deals.
“Title companies would say, ‘We’re not going to deal with this, just because of the risk of the federal and state conflict, and we don’t want to be involved in that,’” Suwatson said. “But you’re seeing title companies coming around.”
The same is becoming true for lenders, he added.
“We’ve been hearing that more New Jersey-centric banks and lenders
are willing to go into that space,” he said. “So you’re seeing the hurdles coming down and people being more accepting of cannabis.” RE
22 JANUARY 2023
  From left: The Genova Burns LLC commercial real estate team includes William F. Harrison, John Suwatson, Eugene T. Paolino, Jeffrey R. Rich, Jennifer Mazawey, Gerard D. Pizzillo, Matthew Kertz and Avi D. Kelin
or five-year terms that are now up
for renewals or extensions. Those borrowers are now subject to higher interest rates and may have less income on their properties, especially in the case of office buildings, “so
a lot of the existing debt service coverage ratios that are currently in place are going to be out of
“That’s going to open up the door
for a lot of loan modification work, potentially,” Rich said. “If property owners can’t put additional equity
in to right-size the loan for those compliance requirements, they may end up having to sell the asset at a distress sale. You may end up looking
at a bankruptcy scenario, depending on what the income flow is at the property.
“So there are a lot of challenges that are on the horizon that lenders are going to have to deal with, as well as the property owners.”
Industrial leasing activity is still robust, but the economy is creating additional tension between owners and occupiers. Matthew Kurtz, a Genova Burns partner and leasing specialist, said landlords “are trying to push increasingly restrictive terms in their leases because they’ve been bit by issues in the past, especially when tenants tried to get out of
their leases in COVID or (because of) property being left in a certain condition.” Tenants, on the other hand, are pushing back, especially in the case of aging buildings that have deferred maintenance or environmental concerns.
“A lot of these old warehouses are
in poor condition and, in a lot of industrial leases where you’ve seen the landlords say, ‘Take it or leave it,’ the tenants are increasingly saying, ‘No, we need assurances relating to whether the roof is watertight, whether the structure of the foundation is sound,’” Kurtz said. “I think it’s a question of leverage and I think it’s also a question of sophistication. Tenants, at least
the ones that are coming to us, are starting to be aware that these issues are out there and seeing what we can do about them.”
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