Signs of Life in the Housing Market

The New York Times
By ANTOINETTE MARTIN
Published: March 27, 2009

THERE are cranes in motion at several large residential sites in New Jersey, despite something close to paralysis in the housing and mortgage markets.


RISING STEEL The developer David Barry, right, and his partner, Jonathan Kushner, at the 225 Grand rental tower in Jersey City.

Steel is rising in Jersey City and Morristown and Weehawken, for example. But at the Esperanza of Asbury Park, work was halted with the construction just above ground level, while at the failed Centuria project in Fort Lee, the land is up for sale again. And it appears that steel hasn?t even been ordered yet for other towers and complexes around northern New Jersey that were originally proposed to be opening by 2010.

?Nine out of 10 lenders? have stopped making construction loans for projects with 100 or more units, according to the developer David Barry, the president of the Applied Companies in Hoboken. ?But that leaves some that are lending money.?

?A larger company, with a history,? like his, or the Roseland Property Company, another residential builder that has several projects under construction now, ?can secure financing and begin work, and will be poised to take advantage of the next market cycle, at the start of it,? Mr. Barry said.

His company?s development arm, called Ironstate, began work last fall on a 15-story rental tower in Jersey City, even as Wall Street, 10 minutes away by PATH train, had begun imploding. That structure has risen six floors at this point, and Ironstate is set to break ground on another one this spring, at its Shipyard complex in Hoboken.

The Jersey City tower, called 225 Grand, for its address on Grand Street one block north of a light rail station, will have 348 apartments, an enclosed parking garage and ground-floor retailing. It is being built in partnership with SK Properties, which has constructed two other large complexes in Jersey City in recent years.

The housing analyst Jeffrey G. Otteau raised an alarm last year about potential overbuilding of multifamily housing units in Hudson County, where tens of thousands of units were approved during the boom years ? and where the market for condominiums has declined from the strongest to one of the weaker markets in the state in the past year.

In addition, new rules issued by Fannie Mae make it likely that few banks would be willing to issue mortgages to buyers of units in new condominiums. But rentals are different, Mr. Barry said. ?Rental buildings are the strongest space in all of real estate right now,? he said.

?It is true that rents are softening a bit, even in Hudson County,? he added, ?but for the most part, they have been holding up fairly well.?

?We believe strongly in the fundamental health of the region,? said Mr. Barry, whose father, Joseph, founded his company almost 40 years ago, and who currently runs the business with his brother, Michael.

?Everyone thinks the world is literally coming to an end,? Mr. Barry added. ?We try to remain conscious of the cycle and are poised to take advantage when the next one begins.?

Debra Tantleff, a vice president of Roseland, sounded the same forward-looking note. Her company is building a condo tower and a rental tower in Morristown and also broke ground in December on Monaco Towers, twin 50-story rental buildings in Jersey City.

?It is a challenge bringing new buildings into a market like this, when the cycle is on the downside,? Ms. Tantleff said, ?but we are creating units at various price points that will be in place at the moment of the next uptick.?

Both she and Mr. Barry said they expected some improvement in the economy and the housing market within the next six to 18 months.

Roseland?s Monaco Towers was originally planned as condos, but switched to rentals after the market soured last year. Ms. Tantleff said a group of seven banks, led by PNC, is financing the construction. Jersey City officials pressed hard to get the project going, awarding it property tax abatements, and the lenders ?were convinced that we have a valuable asset to bring to the market.?

Meanwhile, several other high-profile projects planned for Jersey City are proceeding with less alacrity.

Construction of a second tower at the Trump Plaza condominiums has been postponed, without a date for construction being set, according to the developer.

There has also been no move to start work on 111 First, the mixed-use tower planned for the Powerhouse Arts District, although the design by the Dutch architect Rem Koolhaas was announced with much fanfare in February 2007.

And Provost Square, another massive complex planned for the Arts District by Toll Brothers, is awaiting the outcome of a lawsuit filed by a local arts group, which says its scale violates the redevelopment plan for the area. ?Even if we started today, we wouldn?t be bringing a product online until 2011,? said Benjamin D. Jogodnik, a vice president at Toll?s City Living division.

?That?s not a bad thing,? he added. ?Now is the time to be planning and preparing for when the cycle changes.?

In Morristown, Roseland is putting up the 40 Park condominium building ? where more than half of the 73 units have been sold ? and also a 130-unit rental building called the Metropolitan directly across a courtyard from it, at the same time. The construction crane sits in the courtyard, and moves back and forth between the buildings as the floors go up, Ms. Tantleff said.

The company, a partner with Woodmont Properties on the overall redevelopment of downtown Morristown, is also about to finish work on a parking garage that will be part of its Transit Village project adjacent to the Morristown train station. As soon as the garage is complete in August, work will begin on the Highlands at Morristown Station, another rental building, planned to be more modestly priced than the Metropolitan.

?It?s challenging to have so many significant projects in one place at one time when the economy is so stressed,? Ms. Tantleff said. ?On the other hand, we?re proud that we have been able to keep people working with construction jobs during a time when not that much else is going on.?