Harborside Plaza 2 in Jersey City. — Courtesy: Mack-Cali Realty Corp.
By Joshua Burd
Mack-Cali Realty Corp. plans to spend upwards of $75 million on the “transformation and reimagination” of its Harborside office complex in Jersey City, the company said Monday, part of a sweeping effort to upgrade key commercial assets across its portfolio.
In a presentation to investors and analysts, executives with the company said the plan will revolve largely around creating a high-end retail and dining experience within the Harborside 1, 2 and 3 complex along the Hudson River. Among other objectives, the work will result in an open layout with easy access to the waterfront and improved connectivity between buildings.
“This is something we’ve spent a great deal of time on and we believe we’ve gotten a great response from tenants about what we can do,” said Michael DeMarco, president of Mack-Cali.
He said he expects that work to begin early next year and be completed in 2018, noting that another priority is to modernize Harborside 1 to become “the finest building on the waterfront.” As such, the real estate investment trust plans to reskin the eight-story building and create floor-to-ceiling glass walls on the east-facing side.
The company expects to fund the improvements through improved cash flow and proceeds from asset sales, DeMarco said, as it continues efforts to both reduce its expenses and prune its vast portfolio of suburban office space. After being hit hard by the recession, the REIT has been focused on exiting fringe markets and doubling down on others — such as Jersey City, Metropark and Parsippany — where it has larger footprints and can invest in new amenities.
The plan comes during what has been a strong year of leasing along the Hudson waterfront for Mack-Cali. The company has inked several high-profile deals in recent months, such as a nearly 80,000-square-foot commitment by Omnicom, a global advertising firm that will move hundreds of employees from Manhattan to Harborside Plaza 2.
The landlord’s waterfront portfolio was projected to be 94 percent leased through the end of this month, but Mack-Cali is also facing several large lease expirations in the year ahead in both Harborside 1 and 5, DeMarco said. Still, he said the pending vacancies present an opportunity to obtain higher rents as demand picks up and space tightens in the submarket.
DeMarco also noted the company’s increased role and visibility in the area, following its decision to move its headquarters from Edison to Jersey City.
“We know how to create the Harborside complex,” DeMarco said. “We now live here. We spend every day going to work here and looking at how to improve it. … I think living over the store, which is how we termed it, really has some significant benefits.”
Other plans for the complex could also include building a new tower within the Harborside footprint, DeMarco said. The company is also looking at ways to improve ferry service from Jersey City and improve connectivity to the West Side of Manhattan.
The Mack-Cali president offered the new details during a call with investors and analysts, in which it provided an update on a strategic plan unveiled a year ago. The company did so after installing a new leadership team, with DeMarco serving as president and Mitchell Rudin serving as CEO.
Its other goals include targeting an increased leased percentage of its office portfolio to 90 percent by year-end 2016 and to 93 percent in 2017. The REIT also aims to have its Roseland subsidiary continue to build out and monetize its land holdings while examining repurposing opportunities of Mack-Cali office holdings.
“Our evolving office portfolio is continuing to attract substantial tenant interest — especially in our core Hudson Waterfront holdings where our office and multi-family holdings continue to propel growth,” Rudin said in a prepared statement. “We are committed to implementing operating initiatives that deliver real results and strengthen our balance sheet.”
