Connell Foley: Redevelopment In Jersey City And Beyond

Editor: Please tell our readers about your professional background and what led you to join Connell Foley.

McGovern: I began my career with Connell Foley in 1982 as a second year law student. I worked primarily for Kenneth Kunzman and Adrian Foley undertaking assignments in a wide variety of real estate, corporate and commercial matters. After having spent a year in a judicial clerkship, I returned to the firm as an associate in 1985, and became a partner in 1992. My practice has evolved over the years - from primarily smaller real estate and commercial projects to the representation of clients in substantial land use and redevelopment projects, as well as multi-million dollar financings, large scale commercial leasing transactions, public financings and general corporate representation of public and private companies.

McCann: While I have been practicing in Jersey City for more than eighteen years, I joined Connell Foley in 2003 because I sensed its commitment to establishing a full service office in Jersey City to serve the development and business community. As that commitment has transitioned to reality, I have been able to offer my real estate clients a broader range of legal services including environmental compliance, bankruptcy, business transactions, leasing and bond work by drawing upon the expertise of other attorneys in the firm.

Editor: Would you describe the real estate practice at Connell Foley?

McGovern: Connell Foley handles major real estate projects in virtually every county in New Jersey and select areas of New York State. Our projects have varied in scope and have included the formation and development of the Bridgewater Commons Mall, the worldwide communications center for the United Parcel Service, the disposition of over one hundred and fifty properties on behalf of a multi-national oil company throughout the mid-Atlantic region, and numerous residential and commercial development projects throughout New Jersey. Our Jersey City office has participated in nearly every major development project constructed, or presently under construction, in Jersey City.

The Real Estate Group draws extensively on the firm's environmental, corporate and tax practices to analyze transactions and provide multi-disciplined advice to our clients.

Editor: What factors prompted the opening of your Jersey City office?

McGovern: I was born and raised in Jersey City. In the mid-1990s, I noticed the resurgence of the City's economic activity particularly in downtown Jersey City. I opened a dialogue with several of my partners regarding the potential for a fully staffed branch office located in Jersey City. In 2002, an opportunity arose to merge with a small local office which included Bernie Hartnett, Francis Schiller and Gene Squeo. I relocated my practice from our Roseland office, and Connell Foley's first Jersey City location was born. We quickly grew with the addition of Jim McCann, Tony Romano, Chuck Harrington, Nevins McCann and other attorneys, and we now maintain an office consisting of fifteen attorneys and ancillary support staff. Connell Foley is the only top 20 New Jersey law firm with a fully staffed office in Hudson County. We believe that our keen knowledge of local issues coupled with our firm's resources, enables us to adopt a comprehensive approach toward any legal matter.

Editor: You have been very involved in the renaissance that has taken place in Jersey City over the last 20 years. Would you provide our readers with an overview of the types of matters you handled and the clients you represented with respect to those projects?

McCann: For approximately 18 years I have handled all types of real estate matters for developers including acquisitions; land use and permitting under Jersey City's zoning ordinance and also under its many redevelopment plans established under New Jersey's Local Redevelopment and Housing Law; tax abatements under New Jersey's Long Term Tax Exemption Law; construction and permanent financing; liquor license transactions and alcoholic beverage licensing and regulatory compliance. I also represent developers in condominium conversions and the establishment of the condominium form of ownership for mixed-use, highrise buildings.

We have represented clients ranging from large nationally known development companies to small and medium sized home grown real estate developers that have been doing business in Jersey City for years.

One example is the Lefrak Organization, a family-owned company which is responsible in many ways for igniting Jersey City's renaissance. Lefrak Organization began the Newport project - one of the first and the largest mixed-use redevelopment projects in Jersey City - in about 1986. Other clients include Toll Brothers, Fisher Brothers, Trammell Crow Residential, Lincoln Properties, Centex Homes, Schenkman Kushner, Metro Homes, Cathartes Investments and Roseland Properties. We also represent a number of smaller developers, such as Panepinto Properties, Applied Companies, Willowbend Development, Garden State Development, Fields Development, Liberty Harbor Development and A & R Homes. Each has contributed to the Jersey City renaissance by developing notable real estate projects.

Editor: What are some of the unique regulatory challenges that a developer faces when initiating a new development in an urban setting such as Jersey City?

McCann: Developers in Jersey City must navigate New Jersey's Municipal Land Use Law and the Jersey City Zoning Ordinance, and often must comply with a redevelopment plan established under the Local Redevelopment and Housing Law. Each redevelopment plan has its own unique characteristics and requirements. Furthermore, because of Jersey City's architectural and industrial history, some plans require partial or complete historic renovations, or adaptive re-uses. Developing projects in these areas requires balancing the developer's economic and marketing needs with the City's desire to preserve its cultural heritage. Because of the often complex overlap of state and municipal legislation, awareness of local practices and experience within the state become imminently important when planning a project.

Jersey City established a tax abatement policy to offer developers the opportunity for real estate tax savings and stability to pass on to commercial or residential tenants or condominium unit owners. The Long Term Tax Exemption Law has been used by the City to foster development in redevelopment plan areas. However, the law is complex - both in its statutory construction and in its implementation. Developers must comply with affordable housing and affirmative action requirements, while at the same time participating in a quasi-political process in which the Mayor and City Council take individual action on each abatement. Though there are great benefits for developers, the tax abatement process can be extremely challenging without knowledgeable representation and guidance.

Another issue is that many properties on and near the Jersey City waterfront were previously below the tide line. Developers need to be aware that the state could have a riparian claim against the property under the new Tidelands Resource Council. Many professionals and developers have never been exposed to tidelands issues. Resolving tidelands issues can be difficult, and can negatively impact a project's budget and timeframe if not properly identified.

Jersey City is zoned for highrise development in many places. Many current projects are mixed-use highrise condominiums. The establishment of the condominium form of ownership for mixed-use highrise condominiums provides special challenges to developers. Insurance issues, along with detailed maintenance fee formulas must be addressed in the public offering statement, which must also include proper disclosure of tax abatements, particular redevelopment plan obligations, rent control exemptions, and the application of various Jersey City ordinances.

With its urban setting, its existing and aging infrastructure, and its dense population, Jersey City is a good example of the complex concerns faced by older cities and developers alike. Any successful project requires coordination in planning and the ability to foresee how the development will affect its surrounding area.

Editor: Has the Kelo v. City of New London Supreme Court decision had a significant impact on your representation of developers initiating projects in "blighted" neighborhoods?

McGovern: The Kelo decision has probably been most influential in coloring the minds of jurists throughout the State of New Jersey on the subject of condemnation. While on its face the Kelo decision can be read as being pro-developer, its actual impact in several instances has been the opposite.

Kelo has also given rise to proposals throughout the country to limit eminent domain for public use. In New Jersey, the movement received more attention because of publicity generated by condemnations at the Jersey Shore (involving the taking of single family homes for condominium development). However, limiting takings to government and public use projects would drastically reduce and possibly eliminate redevelopment plans in blighted areas. I do not think that type of change will ultimately result as the need to utilize eminent domain is critical to the acquisition of parcels in redevelopment areas. Otherwise, property owners will refuse to sell for fair market value and will hold out for exorbitant prices effectively killing the viability of any redevelopment plan and the economic development that comes with it.

Editor: I understand that Connell Foley also works with the Casino Reinvestment Development Authority in New Jersey. Has this representation extended to the increased redevelopment that has been taking place in Atlantic City?

McGovern: Our Partners John Murray and Rick McAuley have been very active with the Casino Reinvestment Development Authority ("CRDA"). As counsel to CRDA, we filed and supervised several hundred eminent domain actions in Atlantic City for creation of commercial facilities, entertainment facilities, housing and miscellaneous roadway, utilities and other infrastructure improvements. On behalf of CRDA, we negotiated development agreements and related financial instruments leading to the construction of the Atlantic City Convention Center Headquarters Hotel, the Sandcastle Baseball Stadium, the Marina Expressway, the Renaissance Plaza shopping center, the bus terminal, the retail commercial development in the Corridor of Atlantic City known as the "Walk" (currently being developed by the Cordish group) and miscellaneous housing developments.

Editor: At what stage in the development process should developers seek counsel with the needed expertise to successfully complete the development project?

McCann: Real estate developers should bring on knowledgeable real estate counsel prior to acquisition, and this is particularly appropriate for projects in Jersey City and similarly situated municipalities. Because of unique regulatory nuances, a developer must have knowledgeable counsel as early as possible to help recognize all of the risks and to negotiate contracts with appropriate timeframes and contingencies. Even a sophisticated real estate developer can benefit significantly from counsel's objective perspective of both the details and the broader view of the process. It should also be anticipated that the lending community may be unfamiliar with the regulatory process in such areas. Experienced counsel can educate and guide developers, lenders, and other essential parties to smooth the way for even the most complex projects.

Published April 1, 2007.