With a mix of seasoned and up-and-coming executives, SJP Properties is keeping its pipeline full in New Jersey with third-party development and joint ventures. Top row, from left: Jeff Schotz, executive vice president of leasing and marketing, and Steven J. Pozycki, founder and CEO. Bottom row, from left: Peter Bronsnick, senior vice president; Cindy Schottanes, project engineer; and Andrew Natale, senior vice president, interior construction. — Photo by Jeffrey Vock for Real Estate NJ
By Joshua Burd
As someone who doesn’t mince his words, Mike DeMarco could not have been any clearer.
When it came to redeveloping the Harborside complex in Jersey City, DeMarco said it made little sense for Mack-Cali Realty Corp. to assemble an in-house team, “because it isn’t like I’m going to be developing every year.” So he turned to SJP Properties, a fellow heavyweight in New Jersey commercial real estate that would traditionally be seen as a competitor.
DeMarco doesn’t see it that way.
“They’re the best shop in the state as far as talent, with the best reputation, best process, best design, best results,” said DeMarco, Mack-Cali’s CEO. “First-in-class across the board.”
The partnership has translated into two very important assignments: SJP is an equity partner in the plan to build a technologically advanced, 1.2 million-square-foot office building known as Harborside Tower. The firm is also serving as Mack-Cali’s development manager for the $75 million overhaul of the existing Harborside office complex, which calls for renovating buildings 1, 2 and 3 and creating a new pedestrian retail promenade along the Hudson River.
And according to SJP, there’s plenty more where that came from.
With an in-house, full-service construction team — an asset that is increasingly rare among developers — SJP is being both aggressive and creative in keeping its pipeline full in New Jersey, executives say. That means everything from third-party development work to joint ventures and acquisitions that could pave the way for new projects.
“We’ve had the competition sort of embrace us in the ability to execute work for them,” said Steven J. Pozycki, the firm’s founder, chairman and CEO. “So I think the difference between us and certainly a lot of the firms in New Jersey is that we have the capability. We’re an investor in real estate, but we’re at the core an executioner of development.
“Big, small, anything we do — everybody is passionate about being able to execute at an incredibly high level.”
While declining to provide specific details, citing confidentiality with potential clients or partners, SJP Executive Vice President Jeff Schotz said the firm has engaged “six out of the 10 larger, more active developers or investors in New Jersey” over the past year. Typically, the proposals involve third-party projects and partnerships at sites in which SJP currently has no ownership interest, but can bring the expertise to complete the project.
Schotz said the projects range from lab and office development to mixed-use and residential, with potential locations in Hudson, Essex, Morris and Middlesex counties. Pozycki added that the proposals include both build-to-suits and repositioning existing properties.
It’s no surprise for a firm that has completed some of the state’s largest, most high-profile developments since the downturn and over more than 30 years in business. SJP has developed three of the six largest office projects completed in New Jersey since 2012, in a time when new office construction has been minimal.
The projects have included build-to-suits for Prudential Financial and Panasonic Corp. of North America in Newark, along with the third phase of its Waterfront Corporate Center in Hoboken. For Prudential, SJP acted as a third-party developer for a $444 million, 740,000-square-foot tower that opened in 2015 and has helped revitalize the surrounding blocks.
“We’re probably best known for the real estate that we’ve developed on our own account, but we have been involved with some very significant third-party work over the years,” said Schotz, who oversees leasing and marketing for the firm. “So this is not new to us. Perhaps we’re re-emphasizing the effort to do more of it, but … I think it goes with the talent and the people that we have here (and) we think it’s natural for us to be able to get into that area.”
The Harborside projects are the developer’s latest foray into urban, transit-oriented submarkets. After announcing plans for the 1.2 million-square- foot Harborside Tower in fall 2016, Mack-Cali and SJP revealed details of the project last November, touting it as the most technologically advanced office building in New Jersey. For instance, the 40-story tower is slated to have a web-based service request system that will allow tenants to communicate with management, while using direct digital technology for monitoring, controlling and streamlining all building systems.
After agreeing to partner with SJP on the new building, Mack-Cali went on to tap the firm as its project development manager for repositioning Harborside buildings 1, 2 and 3. Both firms felt it would improve their ability to market the new tower across the street.
They are now in negotiations with several would-be anchor tenants who could allow them to begin construction at the new building, which would sit at Hudson Street and Christopher Columbus Drive. Pozycki projected the anchor tenant would need to be in the 300,000- to 500,000-square-foot range, but said that such a deal would also depend on the credit and the growth trajectory of the company.
In the meantime, SJP and Mack-Cali have been polishing their concept and drawings for Harborside Tower, which was designed by the architecture firm FXFOWLE.
“It’s kind of a luxury because we can take that pad and study it and spend time trying to perfect every aspect of it, which is something that we’re passionate about,” Pozycki said. “We’re also talking to tenants in the marketplace pretty broadly.”
The renovations at Harborside 1, 2 and 3 could begin as soon as this month, with plans calling for new floor-to-ceiling glass windows facing the east, restaurants with outdoor seating and a bustling pedestrian promenade along the water. The effort, which could take around 12 to 18 months, will also result in revamped lobbies and adjoining internal passageways to the Harborside atrium to create pedestrian routes.
In managing the project for Mack-Cali, SJP is able to oversee every aspect of the sweeping renovations and navigate the presence of existing tenants. Pozycki believes that allows his firm to offer additional value beyond a project manager that specializes in tenant interiors or a contractor that is limited to core and shell work.
“If you are a project manager advising a company on construction … if you go through that process and you’re not prepared, you’ll learn a lot. You’ll have over lumps all over your head from that experience,” Pozycki said. “And we think, because of the amount of development we’ve done in the region, that we can think it through and work with a tenant or a Mack-Cali to understand exactly what they want and then be able to execute at a very high level.
“So we’re combining two different (disciplines). People break it clean down the middle and we’ve seen it cause nothing but chaos in the marketplace.”
SJP is touting that dual approach as it markets those services to both occupiers and fellow real estate companies. And while it has long been known as a ground-up developer, the firm has quietly built a platform of interior fit-outs and renovations for tenants within its portfolio.
Andrew Natale, who oversees the service line for SJP, said the firm has completed some 1.2 million square feet of interior construction work valued at more than $150 million since he joined in 2014. That includes 900,000 square feet just at SJP’s three Waterfront Corporate Center buildings in Hoboken.
It’s a service that “the market is seeing a real need for,” Natale said. And he and his fellow SJP executives feel that offering the service allows the firm to have greater control from the earliest phases of a development, which in turn helps to reduce delays and cost overruns.
“We know what the tenants are looking for down to the day they occupy and, frankly, post-occupancy,” said Natale, SJP’s senior vice president for interior construction. “So we know what the tenants need within their own build-outs and we leverage that knowledge when our teams talk in planning a new building.”
The firm is growing its pipeline as it completes several other high-profile developments. In Fort Lee, SJP is close to finishing the second phase of its lavish residential development known as The Modern. It expects to begin leasing this spring, following the success of the first 47-story, 450-unit tower at the foot of the George Washington Bridge, which it built in partnership with Prudential Real Estate Investors and Northwestern Mutual Life Insurance Co.
In Manhattan, SJP and Mitsui Fudosan America have received approvals to build a 51-story, 112-unit apartment building on the Upper West Side. And it’s nearing full occupancy at 11 Times Square, a speculative, 1.1 million-square-foot tower at 42nd Street and 8th Avenue, which opened in 2010 in the throes of the financial crisis but has since attracted marquee tenants such as Microsoft and Proskauer Rose LLP.
The 40-story tower is a source of pride for Pozycki, who says it’s “as technologically as advanced as can be” thanks to features such as a sustainable design and independent cooling systems on each floor. He also said it “performs like a five-star hotel” when it comes to solving problems and offering services for its tenants, starting with the attendants who are stationed at long, concierge-style counters in the lobby.
“We like to start it as soon as the tenants or the guests get here,” Pozycki said. “And then as far as continuing that service for anything they need to make their company function better that we can help with, we’re there for them.”
The idea is to create a more efficient environment for tenants to focus on their business — in a time when fewer companies have in-house facilities managers — while also ensuring that the building remains current and adaptable as the workforce changes. Schotz said tenants in Jersey City can expect nothing less when Harborside Tower opens its doors.
“I think that’s a driving tool for Steve,” Schotz said, pointing to the opportunity to “not just live on our success,” but to improve with each project. “It’s going to be the same thing with Harborside Tower. It’s going to be the smartest building New Jersey has ever seen, because we learn from each of our previous buildings to make the next one better.”