Manhattan-based 601W Cos. is advancing its plans to reposition Harborside buildings 1, 2 and 3 in Jersey City, a nearly 2 million-square-foot office complex along the Hudson River, after acquiring the property from Veris Residential Inc. for $420 million. — Courtesy: Cushman & Wakefield
By Joshua Burd
It wasn’t long before the team at The 601W Cos. learned what many in New Jersey commercial real estate have long known about Harborside buildings 1, 2 and 3 in Jersey City.
“It’s got the bricks and bones of an incredible asset,” the firm’s executives said.
That was made even clearer by the fact that the complex — with its nearly 2 million square feet of waterfront office space — is home to the likes of Morgan Stanley, Zurich American Insurance and Whole Foods’ Northeast headquarters, despite what they saw as a major shortcoming.
“There are no amenities in the building,” said Mark Karasick, a managing member of the firm, later adding: “They have an incredible roster of tenants despite not having any amenities, which is fascinating.”
For 601W, what was a weakness is now a source of great potential after the firm acquired the property earlier this year from Veris Residential Inc., in a $420 million deal that was billed as the largest U.S. office sale of 2023. The privately held, Manhattan-based company is now advancing its plan to reposition the historic complex, drawing on more than 25 years of revitalizing major commercial properties around the country.
It’s doing so with the conviction that tenants are still seeking dynamic, upscale spaces despite unease within the office market, as well as a long-term belief in the location.
“Jersey City is a growth market,” Karasick said, speaking through a company representative. “Its population is growing higher and higher and higher. … So we see a lot of pluses behind the noise and behind the numbers. And I think, at the end of the day, if you have a unique product of great distinction, there’s a great demand for it.”
The three interconnected buildings, part of a master-planned complex along the Hudson River, marked 601W’s first acquisition in New Jersey. Its past and present portfolio includes dozens of well-known properties spanning more than 45 million square feet throughout the country, including 12 in Manhattan, with a collective value of more than $12 billion.
It now hopes to make its mark in Jersey City with a team that includes Gensler, the global design and workplace strategy firm, which has worked on several previous 601W projects. It will focus largely on Harborside 2 and 3, which are 80 percent leased and where it plans to add a fitness center, a conference center and a tenant lounge. Each will measure between 8,000 and 10,000 square feet, the firm said, while it also expects to create a 10,000-square-foot rooftop deck that will treat tenants to uninterrupted views of Manhattan.
The company, meantime, will look to refresh the distinctive atrium between buildings 2 and 3, as it looks to build on the multimillion-dollar upgrades that were initiated roughly seven years ago by Mack-Cali Realty Corp., Veris Residentials’ predecessor. Admittedly, those plans were derailed by the COVID-19 pandemic, Karasick said, but he believes the former owners had “the right concept, which is to create an atmosphere, an environment, a collaborative office feel.”
“I think they had the right idea to create an inviting and dramatic space as you enter the property,” he said, noting that the complex is a converted former railroad warehouse built nearly a century ago. “But the next piece of the puzzle, which has not been solved, is creating an amenity set.”
He added that “we believe Harborside will become the hub for all of Jersey City.” Central to that effort will be the addition of new restaurant concepts by Green Group LLC, the operator of 1776 by David Burke in Morristown, which has helped activate the ground floor of a well-known office building downtown. 601W has signed a 45,000-square-foot lease with the hospitality group, which will bring two to three new restaurant concepts and a Topgolf location to Harborside as a step beyond the complex’s existing food hall.
“That’s bringing something important to the community by bringing upscale dining,” Karasick said. “There’s no upscale dining right now and, more importantly, it’s a nighttime and weekend option. 1776 in Morristown made that office building a 24/7 destination.”
The complex has fielded plenty of interest in the meantime. 601W and its leasing team with CBRE have hosted nearly 2 million square feet of tours since going under contract. That includes “two exceptional prospective tenants” that have walked Harborside 1 and “are intrigued by its vast potential as their respective headquarters,” he said. Notably, the nearly 438,000-square-foot space recently underwent a $157 million upgrade launched under Mack-Cali, but is completely vacant after the collapse of a full-building lease with Amazon in 2021.
The structure, previously the longtime home of Deutsche Bank, now has a new exterior skin and floor-to-ceiling windows throughout.
“We’ve studied and looked at Jersey City,” Karasick said. “I think, if you’ve been around for a long time, sometimes you have to unlearn Jersey City. Until 2012, it was a back office for the banks. And then from 2012 until now, it’s completely transformed itself. It’s become a primary destination just four minutes from Manhattan by both the PATH train and ferry.”
601W has already proved its grit by simply closing on its acquisition, which took six months from when it went under contract. Brokers with both CBRE and Cushman & Wakefield, which jointly represented Veris in the sale, cited the difficulty of securing both debt and equity for such a large transaction — all of it amid a near-freeze in the capital markets and in a time of major uncertainty for office space.
“This kind of deal just doesn’t happen quickly in a volatile environment,” Jeff Dunne, a vice chairman with CBRE and member of the brokerage team, said during an interview after the closing in early April. Yet he pointed to the buyer’s ability to raise equity and its “credibility with the lending community to get the debt done.”
He added: “What it takes to get a deal of this nature done in today’s world is good teamwork, and I think we had a very good buyer and seller that wanted to get it done.”
601W has built its track record over nearly three decades. The firm’s success stories include the 2.3 million-square-foot Starrett-Lehigh Building at 601 West 26th St. in Manhattan’s West Chelsea neighborhood — the source of the company’s name — which it acquired in 1998 for nearly $152 million. The former manufacturing building was 50 percent vacant at the time, but grew to 98 percent over the next 13 years after 601W’s massive overhaul of the complex, culminating in the $950 million sale of the asset in 2011.
The company has engineered a similar transformation in Chicago’s South West Loop, where it owns the 2.8 million-square-foot Old Post Office building. It acquired the historic but dilapidated property in 2016 for $130 million before renovating it with new windows, elevators and building systems, among other updates, as well as a new façade and amenities such as a three-acre rooftop deck, a 27,000-square-foot fitness center and conference space. The building was vacant for 20 years but is now 99 percent leased, with much of the activity coming during the pandemic.
“When people are just good people, they attract good things,” said Jeremy Neuer, a senior managing director with JLL, who also represented Veris in the Harborside sale while a member of CBRE.
“And I think that the deals will come easily to them once they start putting their creativity to work, because they do have a vision that is similar to what they did in Chicago … and they do have a vision of what Harborside can become, which is the epicenter of the waterfront, the epicenter of a dynamic live-work-play neighborhood that can really drive occupancy on the waterfront that will help drive rents for them and their neighbors.”
The 601W team believes firmly that Jersey City, “despite all its positivity, is still on the rise.” They point to the city’s workforce after the “explosive” growth of the historic Journal Square section, where developers have built or broken ground on thousands of units over the past decade. The firm also cites the growth of the downtown and waterfront neighborhoods, which still have a massive multifamily pipeline within a five-minute walk of Harborside.
It’s a major reason why 601W looked at another former Mack-Cali building, 101 Hudson, when the 42-story, 1.35 million-square-foot office tower hit the market some three years ago. The firm, however, ultimately took a pass, opting to wait for what truly felt like the right match.
“Once we got a full understanding of the extraordinary growth of the residential population in Jersey City, we were on the lookout for the right opportunity,” Karasick said. “And when Harborside became available, we knew right away this was the perfect property to develop.”
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Author: Joshua Burd