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Mill Creek setting sights on growth in New Jersey Morristown project is first step for national multifamily player

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Russell Tepper, Mill Creek's senior managing director: We want to grow our portfolio.
Russell Tepper, Mill Creek's senior managing director: We want to grow our portfolio. - ()

In developing Morristown's newest luxury apartment building, Mill Creek Residential seems to have left nothing to the imagination.

The 248-unit building on Prospect Street has a sleek lounge with two billiard tables, iPad docking stations and a bar that can be stocked for tenant functions. Its 24-hour fitness center — while certainly a staple in new rental buildings — is adjoined by a yoga studio and spin room.

There's also the on-site pet spa.

So there's no doubt Mill Creek is making a splash in Morristown with the project it opened in December, Modera 44. And with good reason: It's the Dallas-based firm's first project in New Jersey since it spun off of Trammell Crow Residential in 2010 — and the start of what it says is an aggressive push to expand its footprint in the region.

“When I joined Mill Creek in March, the No. 1 goal … was to grow the portfolio,” said Russell Tepper, senior managing director of its Northeast region. “And we have tirelessly worked toward that end, and no one should be surprised if, over the course of the next year or 18 months, the number of communities that Mill Creek announces grows dramatically.”

Tepper said the firm currently has about 1,000 units under construction in the region, including Long Island, representing more than $250 million worth of construction activity. He expects that pipeline to double through next year, including several projects in New Jersey.

Mill Creek, one of the largest multifamily builders in the country, has those plans as the Garden State continues to see a surge in apartment construction. And experts say the fundamentals are there to support continued demand at least over the next few years.

“This cycle certainly has longer to run,” Jeffrey G. Otteau, president of Otteau Valuation Group in East Brunswick, said of the demand for rentals. That's due largely to the high cost of homeownership, the slow pace of the state's economic recovery and the growing preference for apartments among millennials and even empty-nester baby boomers.

Through September, the most recent month available, local officials had issued permits for 8,638 multifamily units in 2014, less than 100 shy of the total for all of 2013, according to the state Department of Community Affairs. That's also more than all of 2012.

“We're definitely seeing an acceleration,” Otteau said. “Some of those projects have been delivered recently, some of them are just getting ready to break ground.”

Mill Creek is hoping to stand out from the crowd in part by finding the right locations and adapting its projects to its host communities. Take one of its other projects, in Jersey City's Powerhouse Arts District, where the firm is redeveloping a 110-year-old brick warehouse as 366 loft-style apartments with high ceilings and exposed ductwork.

“It's really going to be a unique building, because what it's not is a high-rise glass tower or a high-rise concrete tower,” Tepper said. “It is an eight-story rehabilitation of an old industrial building in Jersey City, which is precisely what has always been intended to be redeveloped (there).”

Tepper expects such rehabilitation and redevelopment projects to make up a growing part of Mill Creek's pipeline in the region, considering that “It's very difficult to be able to assemble land in urban settings or in communities that have evolved over time.”

He pointed to two other projects in northern New Jersey: In both cases, the firm is seeking multifamily entitlements for sites previously zoned for traditional commercial uses.

One project would involve tearing down an existing vacant retail building, while the other calls for building on land previously approved for a midrise office building, he said, though he could not discuss other details of the projects because they're still in the early stages of development.

And it took a dose of creativity and patience to build Modera 44 in Morristown. The property sits on eight parcels that had to be assembled, including one that was long considered to be underused when it housed the town's public works garage.

But that work has given way to an upscale, amenity-rich property in one of the state's most desirable markets for development. The four-story building is about 30 percent leased as Mill Creek continues to deliver the units in phases, with the final phases expected to be completed and leased by this spring.

And with rents starting at around $2,000 for a one-bedroom, Tepper said Modera 44 has attracted the type of tenants Mill Creek had expected: young professionals and married couples, millennials, empty-nesters and other renters-by-choice.

That means very few school-age children, a dynamic that Tepper touts as being consistent with other Mill Creek projects. So between its tenant pool and its amenities, his team isn't hesitating to use the property as its newest case study for investors and elected officials from prospective host communities.

It's perhaps one way in which Mill Creek connects with local officials, despite being a national builder that has spent its early years focused on the West Coast and Southeast. Another is by staffing its 14 regional offices with local industry veterans such as Tepper, who spent 20 years with Cranbury-based Matrix Development Group.

“We've lived in these communities most, if not all, of our lives,” he said, “and we've built relationships with mayors and council people that go well beyond a particular Mill Creek community.”

E-mail to: joshb@njbiz.com
On Twitter: @joshburdnj


Next stop: Jersey City

Building on the site’s industrial heritage, Mill Creek is transforming the former Butler Bros. warehouse in Jersey City into a high-end rental property known as Modera Lofts.

And serving as a critical learning experience.

“We’re seeing more and more development of existing buildings as being sort of the wave of what gets done in urban settings,” Russell Tepper said. “So developing Modera Lofts has provided an opportunity for us to become experts in rehabilitation of old buildings, and we expect to do much more of that in the coming years.”

Mill Creek and Rockwood Capital acquired the eight-story Warren Street property in April for more than $38 million. The 366-unit project will be ready for occupancy this fall.

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