I met recently with Bob Lieb and Michael Seeve, managing partners of Mountain Development Corp. in Woodland Park. Bob was one of the original founders of the Wolff Samson law firm and a few years ago, Michael was president of NAIOP. I have known both for 25 years and find their knowledge of New Jersey real estate to be extremely valuable. Given this fact, I did a Q&A session with both Bob and Michael, which I am summarizing below.
Gene: Will Tax Reform, as initially presented by the Trump White House with its 15% corporate tax rate, be a big benefit to the real estate industry?
Bob & Michael: “Yes”, but still to be determined is the impact of zero deductibility of state income taxes by NJ taxpayers both corporate and individual. Repatriation of cash with only a 15% tax hit will certainly generate a cash surplus from which investors in real estate will use their creativity to generate future income from invested capital.
Gene: E-Commerce, a name that has meant growth for warehouses along the Route 95 corridor and renovation of old smaller warehouses. (1) Are we at the saturation point, and (2) are the malls in trouble from the ease at which consumers can now order product?
Bob & Michael: (1) NJ has a great infrastructure and there is still opportunity to build/and or renovate warehouses. As long as buildings continue to have truck parking, proper racking, access, etc., and enhance the “last mile” concept of delivery, E-Commerce and Jersey should be in sync for years to come. (2) Most of the loss of stores in malls have been discounted, vis-à-vis, E-Commerce. People still like to walk around malls and pick out something to buy. New Jersey Malls particularly on weekends are still packed with cars and people. This does not negate that smaller malls which were poorly managed can be purchased at a big discount.
Gene: When I retired from Cytec eight years ago; I left frustrated with the bureaucracy of the State of New Jersey, particularly in the DEP. Do you guys see improvement in the various departments affecting real estate?
Bob & Michael: Certainly the LSRP system has accelerated the cleanup of relatively small sites and the State has become sensitive to companies’ needs for the bigger site cleanups. Overall, the pace has been picked up by the State to work with companies with real estate issues.
Gene: There is great frustration over the years seeing cities like Newark, Paterson and Passaic, et a, l languish in blight rather than be the examples of commercialism. EDA has pumped in millions to get something started toward workable solutions.
Bob & Michael: Unfortunately, as long as there is lack of honest, creative and competent local officials who use their status for political and financial gain, commercial and real estate ventures will continue to take a “back seat”. EDA monies have been put forth in grants, credits, etc., over the years to no avail, because of the human element as mentioned above. On the other hand, the Kushner Family has started a real estate development in Jersey City in Journal Square. It also helps to have a very competent mayor who has capitalized on the “Wall Street West” establishment for decades to bring forth Jersey City as a viable competitor for certain sections of office buildings in New York City.
Gene: I see where foreign investors, particularly Korean, are moving into the real estate market of New Jersey. Do you guys see that as well?
Bob & Michael: Yes, indeed, and that money put into the real estate market should be of great benefit down the road to the real estate market of New Jersey.
Gene: I’m assuming —- Murphy will be the next Governor of New Jersey. Given that fact, does Murphy’s arrival in November augu r well for the real estate market in New Jersey.
Bob & Michael: In theory, yes, but given the State’s financial hurdles such as the large amount of unfunded pension liabilities that beleaguer the State budget, it is unclear how much pressure the unions will exert on Murphy’s administration to place more funds into the pension coffers, which might negate any solid contribution to cities as mentioned prior that otherwise could have been spent in real estate investment and growth opportunities.
Gene: I saw the recent published write up regarding Cytec’s old home on Garret Mountain in Woodland Park upon which Morgan Development so ably served as owners and landlord. Like any 40-year old plus building that is showing its age, Morgan is redeveloping the innards with new features conducive to the ergonomic, health, welfare, comfort and technology desires of the tenant of today. Do you see more of this happening in geographical areas like Woodland Park?
Bob & Michael: No doubt about it. Owners/landlords of these types of buildings need to stay competitive to the new modern structures that have the qualities mentioned above. And there should be a balance of new and renovated structures like Met Life and Transamerica which have created new life in Morris County.
Gene: Lastly, there has been great development of class apartment buildings around a transit hub in cities like Montclair, Denville, Maplewood, just to name a few. Is this development which services “snowbirds”, divorcees, and upward moving “early thirty something” coming close to saturation?
Bob & Michael: The amount of apartments built in the last ten years is getting to that point, but, depending on the geography, there is still a little more to go. Banks, however, are starting to bear down on the developers who could be in an arena of overdevelopment and who may be overleveraged.