After years of sitting in the shadow of its well-known sister building, the second piece of Jersey City's Trump Plaza complex is only months away from breaking ground.
And the project is more than just a new addition to the Gold Coast skyline.
The planned 50-story apartment building, which would rise alongside a tower built eight years ago, is the first waterfront development site to get a tax break under the city's revamped abatement system. The program was overhauled last year by Mayor Steven Fulop to steer development to inner-city neighborhoods such as Journal Square.
That means tax abatements for waterfront residential projects are nowhere near as long or lucrative as in years past, when they were used to build the thriving hub that exists there today.
But if the new Trump Plaza tower is any indication, that's not likely to keep developers away from the Hudson River — and it's affirmation for critics who said the need for big tax breaks on the waterfront had long passed.
"The views of Lower Manhattan are still there," said Gene Paolino, an attorney with Genova Burns Giantomasi Webster, on whether interest in the area is still strong. He represented KABR Group and Kushner Cos. in securing the five-year tax abatement for the new Trump Plaza tower in early April.
The joint venture is now slated to break ground in June on the 447-unit project, also known as 65 Bay Street, after acquiring the development rights in 2011.
More importantly, though, industry experts said the waterfront and downtown will continue to make economic sense — even as builders begin to explore other parts of the city.
"The numbers still work because the rents are strong and getting stronger," said Adam Altman, managing member of KABR, whose firm is based in Ridgefield Park.
"The rents have grown robustly over the last five years, and we see continued growth and strength in the waterfront."
Altman also noted Jersey City is "not just becoming a bedroom community for New York City" — the area is becoming a destination for living and working all on its own.
At the end of 2013, average rents for Hudson County apartments were $2,650, according to the real estate research firm Reis Inc. That's well above the North Jersey average of $1,568, and the rate has grown almost every quarter since bottoming out in 2009.
On Jersey City's waterfront — roughly east of Grove Street — it's a market that was born from blighted rail yards and industrial buildings. Those sites have been transformed into residential high-rises and office towers, thanks largely to tax breaks that the city had dangled to developers since the 1980s.
As of last week, a city spokeswoman said there were 127 abatements on its books.
The exemptions, many of which have lasted for 20 years, often set payments in lieu of property taxes for the term of the agreement and removed school, state and county taxes from a developer's bill. Proponents say they've been needed to help builders defray the high costs of urban construction projects.
But Jersey City could have scaled back its waterfront tax breaks 10 years ago, said Bill O'Dea, a longtime Hudson County freeholder and former city councilman, though he acknowledged the ensuing downturn would have complicated matters.
"Once you create a market — and that market is so hot — you should be able to reduce the term and generosity of tax abatements," said O'Dea, who is the deputy executive director of the Elizabeth Development Co. and also advises Fulop on development.
That market's strength was one key reason Fulop revamped Jersey City's abatement system last summer, less than two months after being sworn in as mayor. He also sought to make the system more criteria-based and less subjective, all with an eye toward spurring projects in the city's lower-income sections.
The result was a six-tiered system based on geography and income levels. The maximum exemption for a waterfront project is five years, escalating annually until it reaches its full level of taxation; a developer can enhance the incentive through actions such as building a preschool or using local labor and vendors during construction.
"The recognition is that the area is in a place where they no longer need the same sort of incentives that they needed 10 years ago," Fulop said.
"And I think that's the goal of this thing — we're trying to put more people on a level playing field."
Meantime, projects in neighborhoods such as Bergen-Lafayette and Journal Square can qualify for abatements of up to 20 and 30 years, respectively.
Fulop noted that in the waterfront and downtown area — or the first tier in the new abatement program — the developer of a residential high-rise can get the same incentives as "somebody … who has a two-family brownstone."
That hasn't discouraged firms such as KABR and Kushner, and the city still has other waterfront projects in its pipeline.
Last fall, China Construction America Inc. spent $70 million to acquire 99 Hudson, a riverfront development site that can support hundreds of residential units.
"That, to me, is indicative of continued interest," said Paolino, the attorney for KABR and Kushner. "And that's what I hear from my colleagues, as well."
And Fulop pointed to other waterfront projects that were developed and opened recently without tax abatements — even before last year's policy change. That includes the Fields Development Group's new 131-unit building in the city's Paulus Hook section, plus a new 19-story tower built by the LeFrak Group in its Newport community.
O'Dea also noted that a basic five-year exemption still serves a purpose around the waterfront.
"All (it) does is give a comfort level to a developer to get through a lease-up period," he said, "because obviously if they're coming out of the ground with a 300-unit building, it may take two years — sometimes a lot less — to fully lease up that project."
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By the numbers:
65 Bay Street, aka the second Trump Plaza tower
square feet of retail space
400 to 500
estimated full-time construction jobs
bicycle parking spaces
new parking spaces
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