Big construction loans are rare these days, but a recently closed $515 million financing in Jersey City, NJ, shows there’s still capital available for the right deals, even in the capital markets. the most volatile.
Kushner Companies’ long-awaited residential project at 1 Journal Square spans 2 million square feet, making it the company’s largest residential development to date as well as Jersey City’s largest to date. Its two 52-story glass towers contain 1,723 rental units and offer views of the Hudson River and the Statue of Liberty, while a 12-story, 40,000-square-foot retail podium sits at the base of towers.
The project took eight years to mature. The developer finally opened on June 16, with Jersey City Mayor Steve Fulop announcing via Twitter that Target would be the commercial tenant of 1 Journal Square, adding, “It’s been a complicated project for sure, but we’re finally the.”
The construction financing closed on groundbreaking day and is split into two tranches of debt: AIG provided a senior loan of $385 million, while Related Credit Funds took the mezzanine spot of $130 million. of dollars.
“Lenders want multifamily, and they want [credit tenant leases] because you don’t want potential business risk,” Kushner CEO Laurent Morali told Commercial Observer. “And that’s exactly what we offer them here.”
In a period of prolonged uncertainty, lenders have indeed turned to developments with seemingly crisis- and recession-proof plans. So it’s not hard to see why a multi-family project with top-notch amenities and a branded retail tenant occupying its base ticks a lot of boxes.
“[Multifamily] is the asset class where people are most comfortable providing capital. This has been proven time and time again, and so the lenders are very confident that there will be an exit for them,” Morali said. During the Great Financial Crisis of 2008 and COVID-19, multifamily was the only asset class built by Kushner Companies, he said.
As such, the senior and mezz tranches have been the subject of fierce competition within the lending community, Morali said.
With borrower-lender relationships more critical than ever, there was also a certain familiarity in the financiers’ corner. Kushner Companies has completed more than $500 million in financing with AIG in the past two years alone, including financing the construction of its residential towers at 2000 Biscayne in Miami last November. Additionally, AIG and Related have extensive experience with Jersey City financings.
Amid some of the most tumultuous markets in recent history, horror stories of lenders changing deal terms at the very last minute or forgoing deals altogether have begun to surface. But that wasn’t the case at 1 Journal Square, Morali said.
“These two lenders were extremely reputable,” he said. “They didn’t change anything – neither the product nor the rate.”
Cash is king, and the deal also includes plenty of equity, with the balance of the project’s estimated $1 billion cost being covered by Kushner Companies plus two family offices Morali declined to name.
The beginnings of 1 Journal Square go back several years, with a few twists and turns along the way.
Kushner Companies first acquired the then-vacant site in 2014 with partner KABR Group, entering into a redevelopment agreement with the Jersey City Redevelopment Agency. Another partner in the deal at the time was WeWork, which planned to build a
WeLive coliving tower on site – so a market rate tower and a WeLive tower. Kushner Companies ended up buying out the two partners out of court within five years, Morali said.
At the time, WeWork was still researching what the WeLive apartments would look like. “They came to us and said, ‘Listen, we’re slowing you down, take us out,'” Morali said. “So we bought them back at cost.”
Eventually, 1 Journal Square would also end up in a Qualified Opportunity Zone, although Kushner never took advantage of this designation.
The project was also at the center of a public row following a lawsuit filed by Kushner Companies in 2018, which alleged that Mayor Fulop was trying to derail its progress due to the connection between former company director Jared Kushner and then-President Donald Trump (Kushner is the son-in-law). The lawsuit was settled in October 2020, with Fulop stating that “the great city team and the Kushner Companies were able to put aside their differences and work together to find common ground.”
Now 1 Journal Square is off to the races, and the project is one of many notable additions to Jersey City. Last June, it was announced that the Center Pompidou, one of France’s best-known arts institutions, had chosen Jersey City – a site just off 1 Journal Square, to be precise – as the location for its first avant- North American post.
“We’re going to be surrounded by art,” Morali said. “We’ll have the museum on one side, and on the other Loew’s Theater – where Frank Sinatra started his career, and it’s being renovated. The mayor has announced that they’re going to spend $95 million to Renovate it. Then a seven minute walk away you have Mana Contemporary. So it really is a hub.
Its transit-friendly location across from the Journal Square PATH station in Manhattan is a big plus. The development team hopes it will also benefit from sky-high Manhattan rents, attracting tenants from across the Hudson River instead.
“Our apartments will be 50% more affordable [than Manhattan equivalents]”, Morali said. “And with connectivity and transportation, they will be able to attract the entire New York metro area. We’ve been investing in Jersey City for 13 years and it’s always been about access and convenience. easy transportation.That’s essentially 50% of the cost of living in Manhattan for the same product fully equipped.
The amenities package is one thing that will set 1 Journal Square apart from its competitive set, Kushner President Nicole Kushner Meyer said. “We offer a quality of life and service to our residents in all our projects. So for us, it started with creating a really tough and beautiful 40,000 square foot set of equipment. We envisioned a lifestyle here that currently doesn’t exist in the Jersey City market, and we really prioritize those amenity spaces for our residents to enjoy. (Disclosure: Meyer is married to Joseph Meyer, president of Observer Media, owner of Commercial Observer.)
Plans for these amenities have evolved with the changing needs and preferences of residents during the pandemic.
“We’ve been able to expand our equipment offering and now we have podcast rooms, conference rooms, libraries and we even have studios that include a den so people can have a bit of work space, so there’s a different quality of life aspect that we’ve introduced,” Meyer said.
“We saw the potential of the site from 2014 and the [goal] for us, it’s really about making this incredible project the jewel in Jersey City’s crown and revitalizing the area,” she added. “For us as developers, we feel very lucky to have the opportunity to impact and transform the neighborhood.”
AIG did not return a request for comment. Related declined to comment.