A sequence of transformative real estate moves in Newark — which could eventually result in a new headquarters for Horizon Blue Cross Blue Shield of New Jersey and a new market-rate multi-family complex with 20% affordable housing on the waterfront to replace the existing buildings for Horizon and NJ Transit — is underway, BINJE has learned.
To be sure, the project — which has been under discussion for more than eight months and with a budget expected to exceed $500 million — still has a way to go.
As a prospective Aspire transformative grant applicant, the project is only in the first phase of soliciting interest. Edison Properties has issued a Letter of Intent to site the Horizon headquarters at a proposed spot at the southeast corner of Market and Mulberry Streets on an exclusive and limited basis that is subject to a bidding process.
Horizon may also consider other sites.
JLL’s team, which is being coordinated by Ron Simoncini and includes senior leaders Dan Loughlin and Tim Greiner, is guiding the effort on behalf of NJ Transit and Edison. Gil Medina is leading the CBRE team advising Horizon.
The multi-step, multi-year project includes construction of a modern 250,000 square-foot office building for Horizon and a multi-family project of at least 350 units with modern amenities at Penn Plaza East.
The project came about when two key facts about NJ Transit’s former home become apparent:
- The NJ Transit building at Penn Plaza East, which became vacant after the agency completed its move to Gateway earlier this year, could not be renovated for modern office or residential use in a cost-effective manner;
- The NJ Transit building could not be demolished and rebuilt at an appropriate scale without including the building of its neighbor, Horizon, in the redevelopment plan.
The financing for the projects also has multiple steps, Simoncini said.
The brokers expect the project will be eligible for Aspire Transformative tax credit award status from the N.J. Economic Development Authority. Simoncini said the team is exploring additional financing options, including issuing bonds to facilitate the monetization of the tax credit award.
To get to the multiple finish lines — potential ribbon-cuttings of the Horizon headquarters and the multi-family project along the waterfront — there are a domino series of plays that need to be made, including:
- A developer will need to be selected to construct the Horizon headquarters building, a project that is expected to take more than two years to complete;
- When the new office building is complete, Horizon will need to move its operations to the facility from its current office at Penn Plaza East, less than a mile away;
- Once Horizon moves, its current office building at Penn Plaza East — as well as the building that previously housed NJ Transit — will need to be razed, taking 1.1 million square feet of office space out of the market. The NJ Transit building has been all but empty since NJ Transit completed its move into Gateway earlier this year;
- The 4-acre lot that currently contains both buildings on Penn Plaza East will then need to be redeveloped into the multi-family project.
Once these steps are complete, the city will benefit in three ways:
- It will have a new modern office complex that retains one of its most esteemed corporate citizens;
- It will have a new modern multi-family complex on perhaps the most compelling waterfront site in the city;
- It will have reduced the square footage of office in town, improving the marketability of what remains.
Simoncini, who has been carefully guiding the project on behalf of NJ Transit for nearly a year, explained how the opportunity to lease one building — the vacated NJ Transit headquarters — turned into such a transformational moment for the city.
“NJ Transit issued a request for proposals at a time when it had moved out of the building and was in a position to offer it,” he said. “JLL constructed a two-part program in which the first part was an analysis of value. We found no tenant could afford the renovations needed to bring the building up to standard and so it would need to be redeveloped as residential. At that time, we created the strategy to utilize the Aspire grant.”
Those were just the first steps, Simoncini said.
“We recognized that there were practical difficulties in selling the NJ Transit building for redevelopment without adding the Horizon property, which was mostly vacant and struggling to find a volume of additional sublet tenants,” he said.
“And we knew Horizon would need a place to go, which led us to Edison, which has been an agent of redevelopment in Newark for decades. With Edison on board, we began collaborating with Gil Medina and his team at CBRE, and he socialized the strategy within Horizon, his long-time client.
“That’s how it all came together.”
Medina, an executive vice president at CBRE, described it this way.
“Horizon and NJ Transit have been neighbors for 30 years,” he said. “It is very gratifying to be part of a coordinated effort that results in both organizations remaining in Newark while advancing the City’s redevelopment aspirations.
“As technology continues to improve how Horizon serves its members, the company’s new headquarters will allow it to operate more efficiently and in a smaller footprint, while offering its employees and guests a modern, collaborative environment in the heart of Newark.”
A number of developers seemingly would have the ability — and the interest — in bidding for the combined projects.
A group led by Horizon is expected to review proposals from developers and pick a winner. That developer would then concurrently seek planning-related approvals from Newark and apply for an Aspire award.
The two projects have the support of Newark and Essex County officials. And there’s no indication that the incoming Sherrill administration would have an issue.
Newark Mayor Ras Baraka applauded the announcement.
“Penn Plaza East’s multi-faceted, future-facing redevelopment will be a crowning jewel in Newark’s continuing ascent toward next-level vibrancy and prosperity,” he said. “By continuing to call Newark home and redoubling their commitment to our community, Horizon and NJ TRANSIT serve as national models of corporate social responsibility. Their investment will create new spaces for living, working and recreation, enliven our downtown, enhance our riverfront, and attract residents eager to benefit from the most extensive tri-state rail network in the nation.
“Newark embraces this collaboration with full support for the broader public private partnership that it represents.”
That being said, the magnitude of the proposals — and the number of organizations involved — means there are plenty of instances where it could be halted.
At this time, there appears to be plenty of optimism.
Simoncini stressed having multiple partners work together for a common good has been a key.
“We all knew how complicated this deal would be, but the relationships among the senior people at JLL, Edison and Horizon go back decades, and the mutual respect and familiarity among us enabled the rarest of deal structures to come together — one that hope will have a profound benefit of the city of Newark as well as NJ Transit and Horizon, two incredible organizations steeped in New Jersey history,” he said.
