Newark project to energize downtown.

In a boost to downtown Newark's image, the former Macy's headquarters is being renovated into a new retail and office complex. The huge 1.2 million square-foot facility known as 161 Halsey, located at the comer of Market Street, will be renovated with new ground-level retail stores opening onto the outer shopping streets, and separate upper-story office and warehouse space.

Since Macy's computer and credit card. operations had been centered in the building, the developers, Market Halsey Associates, say there is ample support for similar large-scale electrical and computer usage.

The developers consist of Samuel J. Jemal, his brothers Joseph and David, and father Jack. Newmark's Edward A. Friedman is also an investor in the project.

New Jerseyites will remember the property as being first a Bambergers, which was in turn acquired by Macy's - taking on its name - which was then acquired by Federated Department Stores.

Like the Macy's in Herald Square, the Newark building is of a similar size and architecture, and holds a warm place in the hearts of the locals.

"People used to meet under the clock at Bambergers at the corner of the building," recalled Jemal, who hopes to eventually start up the clock.

Currently, the developers are spending "many millions" renovating the interior and exterior of the building to appeal to office tenants and major retailers.

Outside architectural details, such as beautiful window framing, are being restored on the first and second floors. Old brass lanterns are also being restored and relit. "The renovation will be respectful," insisted Jemal. "We had to pass the city's Planning Board and they praised our proposed renovation. We'll try to highlight the building in an attractive and respectful way."

Already, the new Market Street retail shops and their new awnings have attracted Rite Aid, which is creating a 15,000 square-foot superstore, and Urban Terrain, a men's clothing chain that is taking 3,000 square feet.

The team expects to rent to approximately 15 stores, including a big boxer or two and a few restaurants to serve the varied needs of the tenants, shoppers and soon to come next-door court visitors.

Hartz Mountain Industries sold approximately half of that neighboring building to the county and the space is now being renovated for use as the Essex County Courthouse.

"They will have 5,000 people a day coming in," said Jemal, pointing to those visitors as an ongoing market for his retail tenants and an attraction for the office space. "With the courthouse next door we see a big need for space for lawyers, storage facilities, and documents."

The developers are currently fixing up the lobby and main entrance to the office space, which will be located on Halsey Street.

The ground-floor comprises about 87,000 square feet, and while there are some office floors of that size available, as it goes higher up, the building sets back to 47,000 square feet.

Friedman says the 18-foot ceiling heights on five of the 16 stories are also appealing to companies.

While most of the frontage for the stores will be on Market and Halsey, the Washington and Bank Street frontage on the side and back will be used for deliveries and as a service street.

The building has four leading docks and a special elevator can accommodate up to a 40-foot truck. "You can drive in a garbage track," bragged Jemal. "Macy's used to have one floor just for trash and that's how they got rid of it."

Approximately 87,000 square-feet in the basement, which will accommodate 400 cars, has been rented to Square Parking, and that parking area has also been re-ramped.

"If you lease an office on the 15th floor, you can take an elevator on the garage level right up," said Jemal, who is handling leasing with his brother, Joe.

Some of the retailers will be able to add second floor space, and Friedman says retail deals will range from $60 a square foot for several areas to $20 for a "Big Box retailer that takes major space."

Yet upper floor warehouse space will go for just $3 a foot net, and offices are expected to rent for $10 net.

This is all below the market, even for Newark, they said, where certain stores are already paying $100 a foot.

Interest in Urban Core

Jemal says the national chains are beginning to take part in the country-wide urban retail revival. They tend to open New York City stores first, and then go to other urban centers.

Newark's resurgence has attracted a number of prominent retailers. Pathmark has two stores which Friedman says are "doing fantastic," and a nearby Woolworth store recently installed a Footlocker in a portion.

Other national retailers include Modells, Rite Aid - which already operates another store - Payless Shoe Source, Parade of Shoes, and Lane Bryant. McDonalds, Burger King, and Dunkin' Donuts have also found Newark to be welcoming.

Yet Newark also has innovative retailers such as Dr. J's, which recently opened on 34th Street in Manhattan; Ashley Stewart, which carries larger women's sizes; and Big and Tall Men.

The interest in Newark is being echoed by other retailers and urban development planners, who are reviving other core inner city retail.

In the metropolitan area, "You already see it in Harlem, in The Bronx, and in Downtown Brooklyn, It said Friedman.

"Newark mirrors those demographics, but it also has a large office market, so you have a mixture of users," said Jemal.

It is the local families that have money and need services that are fueling the retail growth, explains Friedman. "That is the real attraction for national big box retailers to come back into the inner city," he said. "The locals need clothing and health and beauty aides."

Newark is also the world headquarters for Prudential, houses offices for Blue Cross and the Internal Revenue Service, as well as "every major law firm" in the State of New Jersey.

Additionally, Newark, like downtown Brooklyn, is a center for higher education, with some 45,000 students and five schools. Rutgers, Seton Hall Law School, the University of Medicine and Dentistry and the Essex County College are located in Newark, and several are right across the street from the 161 Halsey project, said Jemal.

"A bookstore is certainly called for in our building," he said, adding that they would like to attract a national chain. For the same reason, Friedman says they are seeking a record store.

Much to Offer in Area

At one time, 5,000 workers were employed in the building and the retail operations alone took up 500,000 square feet. Warehouse and shipping operations took up approximately half of the building.

"At its height, Macy's sales were $45 million a year," said Jemal, and its demise took a bite out of Newark's economy.

"The redevelopment of Macy's as an active use retail location is important to the city," agreed Joel Freiser, deputy executive director of the Newark Economic Development Corp. "It will mean that a square block that had been basically out of use since Macy's closed will once again be offering amenities and retail services to the shopping population."

Freiser said the building is at a "strategic location" because Market Street is a major east-west shopping thoroughfare. "It will be offering on-site parking, which is a real necessary amenity these days to improve the viability of retail facilities and make them attractive," he said. "People can't just pull over."

He believes it is simply a matter of time before those "looking for a really good deal and who can see through or not be fooled by the historical negatives about the location will eventually see value."

Jemal agrees that Newark presents an image problem to those who aren't familiar with the city, but explained the reality is similar to the way out-of-towners think of New York City as full of muggers.

"It's hard to turn that image around, and will take time and lot of development," said Jemal. But he points to the regional crime drop that has helped New York City as well as New Jersey.

Already, Freiser says, there is evidence that companies are recognizing what Newark has to offer. "There are many people in the office and industrial market who feel very comfortable in the Newark environment and are moving here from similar environments in The Bronx, Brooklyn and Manhattan," he said.

"If you visit you will see a vibrant city," Jemal said. In the last 12 to 18 months, he noted, there has been a "real resurgence in the heart of downtown Newark.

Real estate players like Hovnavian and Stern are also "picking off buildings and putting in their own equity," said Jemal.

Office vacancies in this city of about 5 million square feet of Class A space is less than 5 percent, said Freiser, who sees ongoing leasing expansion from the locally situated major corporations, as well as others scouting the area.

He is seeing an interest by foreign investors who are uncomfortable in the New York market and who view that city as unaffordable. "These are serious players who said Manhattan is not in their league," said Freiser. "Their money is good, but not in the order of hundreds of millions."

Still, Prudential is investing over $50 million in space it owns and leases, and has brought close to 2,000 people to work in Newark, said Freiser.

Chase is also negotiating to move its New Jersey operation to Newark from Parsippany. "It recognizes the value and utility of being in a great location," said Freiser.

The modern Gateway Two was recently sold by AT&T to the Townsend Group and has been partially leased to Americare, a health care firm that is currently fitting out its space. Another tenant there is Prudential.

The 660,000 square-foot building at 744 Broad Street, which partially houses major fiber optics and computer sites for AT&T and MCI, is being offered for sale through Newmark. James D. Kuhn, the company's chairman, said "Someone at the right number is going to make a lot of money." The asking price is under $10 million.

Another private developer took over the former Hanes department store and is converting that, too, into retail and office.

Additionally, Jemal says, Hovnanian recently completed several townhouse and low-rise residential developments and has plans to build a retail shopping center to serve the occupants about half a mile away.

Thanks to the support of many local corporations, the State is completing a New Jersey State Performing Arts Center just a few blocks from 161 Halsey that is to become a "mini-Lincoln Center." It will house a State symphony orchestra in an Avery Fisher-type hall and have several smaller venues that will feature children's concerts and other programs. The center is scheduled to have its gala opening in October.

Construction Slated

Freiser said hundreds of millions of dollars worth of projects are already funded and being constructed.

Newark is a central transportation hub and New Jersey is investing in and expanding its transit facilities. New Jersey Transit handles major commuting from other portions of that state, while the nearby Newark International Airport is developing a new $30 million airport railroad station and light rail that will connect into Newark.

Light rail connections are also being developed from Newark to the Morrison Essex transit line and west to Elizabeth. PATH trains currently travel into Manhattan, while Penn Station of Newark is the hub for bus transportation. Amtrack brings travelers from Washington through Newark to Boston. A commute to Manhattan's Penn Station is a mere 15 minutes.

According to Freiser, there is a $75 million riverfront walkway in the works that would be constructed by the U.S. Army Corps of Engineers. Additionally, a $22 million soccer stadium is planned near the riverfront and east of Penn Station.

Ultimately, Freiser says, there will be new north entrances, escalators and elevators to Penn Station that will connect both the walkway and the $180 million New Jersey Performing Arts Center to the transportation hub.

Local property owners also have discussions underway to start a Business Improvement District, similar to what has been done all over New York and other cities.

Incentives Available

The 161 Halsey developers expect the stores and the garage to begin opening in mid-May. "We've gotten terrific help and a quick response in turning around approvals from the Governor's office, the New Jersey State Economic Development office and the Newark Economic Development Corp." said Jemal. "Mayor Sharpe James has been terrific."

The area qualifies under urban renewal districts for low cost sales tax, and there are State and Federal funds specifically targeted for Newark development. Tenants would also be able to take advantage of job training program incentives, low interest money for store fixturing, and low cost electricity. There are reduced unemployment insurance taxes, said Freiser, who added that the New Jersey State Urban Enterprise Zone includes just about the entire business district.

"It provides for employee tax credits, an exemption from sales and use taxes for purchases for the building and for the purchase of building materials, and a reduced sales tax collection by retailers," he explained. There is no sales tax on wearing apparel in New Jersey, while the rest of the zone's sales taxes are collected at 3 percent.

There is also special consideration by the state for job training financing and certain regulations.

Freiser said the Newark Economic Development Corp. will assist companies in arranging financing for larger commercial and retail projects through a combination of state EDA loans and loan guarantees and bond financing programs, as well as an innovative real estate tax abatement.

Freiser, the Jemals and Friedman all believe Newark is a welcoming city and ready to host more retailers and companies.