Vol. 3, No. 9, September 2006
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Living the High Life
The progress of residential development in Atlantic City
For the better part of 20 years journalists have taken shots at Atlantic City in articles borrowing the title of Charles Dickens’ “Tale of Two Cities,” where opulence and squalor coexist side by side. The subject has been so overdone that a local journalist, tongue firmly in cheek, once wrote a “How To” guide for visiting reporters on how to complete such a story, providing directions as to where they could find “glitzy” shots as well as ones that were “not-so-glitzy.”
Everyone from politicians to gaming executives, residents and visitors have argued the city’s immense potential for residential improvement. After all, you have the casinos, the beach, the Boardwalk, a rich and storied history. There is no city in the world like it. So what was the deal? Why weren’t certain areas being improved?
In the last 10 years, Atlantic City has been virtually reinvented, thanks to large-scale revitalization efforts from several segments and on multiple levels. Infrastructure and transportation improvements, beautification projects, large-scale casino and retail development and a full-scale marketing campaign billing a city that is “Always Turned On” have made Atlantic City a force to be reckoned with. And that, apparently, was just the beginning. The next 18 months will see a residential housing influx of such magnitude and magnificence that many are predicting the city will return to, even surpass, the glory days of the early 1900s.
Blueprints and Blue Bloods
One such development by Atlantic 17, LLC, is in the city’s south end. The Chelsea brings a 21-story residential high-rise to the former Seashore Gardens site at Elberon & Atlantic Avenues, offering a mix of 197 one-, two- and three-bedroom units as well as six penthouse units which will start in the low $400s.
Closer to the center of town at the beachfront site where the World’s Fair Casino once stood, BET Investments, owned by Bruce Toll of Toll Brothers, is planning on 400 luxury condominiums up to 2,500 square feet with two to three bedrooms, a high-end health spa and 60,000 square feet of retail space.
“We are hoping to dramatically change the high-end condominium market in Atlantic City and create some strong Boardwalk retail space that complements what is already going on in the city,” says Michael Markman of BET.
Other projects bring new housing to already-established communities, such as Tenor Square by the Gensis Group, a collection of 18 townhomes at Indiana and Hobart Avenues behind the Convention Center. The townhomes, which will range from two to four bedrooms, 1,600-2,300 square feet and priced from the mid $300s, will have a “dramatically different” look, says developer Bill Reddish. “Brick and stucco facades, a very urban upscale New York-style design, and a diversity in the type of brick used” will not only make Tenor Square stand out, according to Reddish, but complement the surrounding neighborhood.
“These townhomes will mirror more expensive projects on the water as far as style and quality, but create an opportunity for growth, expansion and added value to homes all over the area,” he says.
However, the area some say will benefit most from this boom is the north side. While the Inlet area has seen recent improvements through CRDA-funded housing and the popularity of Historic Gardner’s Basin, there remains a number of vacant lots and certain properties ready for improvement. That will soon change. “This will be the next Gold Coast of South Jersey,” says Tom Scannapieco of Scannapieco Development. “It has the views, the inlet, the ocean, and that is going to be a very, very desirable area.”
It’s also going to have some very lavish living options.
Scannapieco has converted the former Regency apartment building at Pacific and Connecticut Avenues, which he originally built 18 years ago, into a 27-story high-rise featuring 200 “ultra luxe” condominiums. The residences, ranging from 1,060 to 1,130 square feet and priced from $495,000, each have two bedrooms, two baths and a private balcony. Bella also has a 24-hour fitness center, glass-enclosed pool and solarium with cabanas, heated Jacuzzi spa, outdoor entertainment deck, and designer décor throughout.
Rumors of a second Bella-style condominium had been circulating several months ago, though no specific plans had surfaced. Scannapieco, however, has an ongoing concern with the revitalization of the area, and there is no doubt that he will continue to build either on his own or in partnership with other developers. Nearby, the former Garwood Mills site on Maine and Caspian will become the home of the Landings at Caspian Point from Kushner Companies/Westminster Communities, 390 residential condominiums, two-story duplexes, and two-story penthouse units, all connected in three separate buildings, and all with balconies. While plans and pricing have not been finalized, project manager Jay Murnick estimates layouts of one to three bedrooms around 1,300 square feet.
At Victoria and the Boardwalk, developer Simdag will create the soaring Victoria Tower. Spanning a three-block area, this 400 condominium, 38-story building will offer a variety of layouts, from one bedroom/one bath units on up to deluxe penthouse suites, ranging from 750 to 3,000 square feet and with pricing starting at $500,000.
Over at New Hampshire and Melrose, Lennar Homes will construct Reflections, a six-story building of 179 “ultra luxe” condos ranging from one to three bedrooms, one to three baths, private balconies and such onsite highlights as a fitness center, a “sky jogging” track with ocean views, lobby coffee nook, and a “South Beach-inspired” rooftop sky terrace with pool, hot spa, cabanas and sky bar. These 1,200-2,000-square-foot units will range from $650,000 to over $1 million.
Finally, at Maine and Atlantic, MRCEM, LLC, will develop Marbella, a collection of 306 condominium residences (24 of which are penthouse units) and 24 townhomes. Ranging from one-bedroom, 1.5-bath units on up to three-bedroom, two-bath units and 750-2,000 square feet, Marbella will have a number of unique design touches and amenities similar to neighboring ventures.
“Marbella has been designed from the beginning as a luxury high-rise condominium project with all the amenities—a concierge, security, valet attendant, spa, pool, nine-and-a-half-foot ceilings,” says MRCEM President Jim Maggs. “We’re looking to build a top-rate, high-end project.” Pricing at Marbella starts in the $500,000s.
Bang for the Buck
Some developers are concentrating on value for the dollar in condos, and even single-family homes. Joseph Jenci, a partner in Dwellings Real Estate, explains that his company is currently building 21 units in Atlantic City, and expects to build between 75 and 100 units in 2007.
“We've got a 14-unit development going in on Massachusetts Ave.,” he says, “and another seven units on the water at Gardner's Basin.”
Jenci says Atlantic City contains some of the most undervalued waterfront property on the East Coast. “Waterfront condos that would cost at least twice as much anywhere else in New Jersey, we're building for between $700,000 and $750,000 in Atlantic City,” he says. “It's a very attractive area to buy.
“The new casinos are going to have to find places for their employees to live, and that’s what we're trying to provide: good housing at reasonable prices.”
Christine Procida is president of Procida Homes, the developers of Madison Landing and other CRDA developments in the Inlet. With Carolina Homes, in the Atlantic Heights area on North Carolina Avenue, her company has now ventured into market-rate homes for the first time. Carolina Homes offers a total of 44 single-family homes with prices starting at $284,500. Each home has a front porch, fenced-in backyard, off-street parking and other amenities found in much more upscale homes.
“We’ve been developing home ownership in Atlantic City for years, and it’s taken too long to get to this stage,” she says. “But with the current interest in Atlantic City housing, we’re confident that Carolina Homes and our future developments in the city will draw stable and tax-paying homeowners to the town.” Believe it or not, these are just a few of the developments in the pipeline. So one may think that, with all of this residential construction coming into town, the competition would be contentious, but that is hardly the case. Scannapieco recently held a press conference and reception at Bella, inviting close to 500 guests and sharing the stage, literally, with four other developers advancing projects in the North Beach area. “We got a proclamation declaring it ‘North Beach Day,’ the mayor was there, there were council members there,” says Scannapieco. “It was an event that basically made people aware that North Beach is going to be a fabulous residential area of Atlantic City.”
MRCEM’s Maggs agrees.
“I think that, as was the case with Borgata coming in when people were concerned that it would hurt other casinos, this has actually made the marketplace that much bigger, brought more people and caused everyone to improve,” he says. “Then, Atlantic City was in need of rooms and it is now in need of residential condominium units, and it’s not an issue of competition. If more people built luxury and housing units, you’d see more people coming back and living in the city.”
And, unlike some other nearby towns, the approval process in Atlantic City is rather painless.
“For a developer in Atlantic City, the approval process is fairly quick,” says Nick Talvacchia, an attorney with some 18 years of practice concentrated in land use. “After submission of complete plans, you can obtain city approvals within 90 days. The longer approval processes happen through CAFRA and DEP, which take about six to nine months to obtain. In all, these approvals can be satisfied in nine months or less.”
Taxing Dilemma
So, if the need is there, and the process is so easy, why did it take so long to get this going?
Apparently, an out-of-whack tax structure was the culprit.
“The tax rate is extremely high," says Talvacchia. “If you were to build and sell a place that sold at $1 million, based on Atlantic City’s assessment and tax rates, that translates into a tax of almost $22,000 per year. Compare that to a nearby town like Margate. That same sale would only result in $12,000 in taxes, almost half that amount. So, in order to attract buyers and developers, there needs to be an incentive to build.”
Procida agrees.
“When we first built in the Inlet, we had a CRDA subsidy that allowed us to offer the homes at under-market-value costs,” she says. “And that worked so that today we can sell homes at market value.
“We’re all partners in making Atlantic City great again, and there’s no reason that city government can’t play a role in drawing new home buyers to the town.”
Last month, city government came through. In mid-August, City Council passed a comprehensive ordinance targeting the upcoming 2008 revaluation with tax incentives designed to promote new residential development across the board, including an incentive for renovation of an existing home. At press time, the measure was being considered by Mayor Bob Levy.
It took a concerted effort by a number of individuals under the leadership of Joe Kelly, president of the Atlantic City Regional Chamber of Commerce, to convince the city that changing the tax structure would change the future.
“We were being approached by developers saying, ‘We need a better tax environment in Atlantic City that will allow us to make the investments we’d like to make,’” says Kelly. “We were also getting approached by the public sector in the city saying, ‘Our residents would like a better tax environment,’ so have you both business and city saying, ‘This environment needs to improve.’”
The chamber then formed a special “Growth Partnership” committee and commissioned a comprehensive economic impact study on the market and the positive implications of a tax incentive program. Coupled with community outreach to residents and ongoing communication with city leaders, that effort laid the groundwork for creation of something that would not only benefit developers, but residents as well.
Instituting Incentives
After this concentrated effort, which spanned just a few months, the ordinance was crafted to provide for a tax payment based on project cost, or “PILOT” (Payment In Lieu of Taxes). “So, for the $1 million house that cost $750,000 to build, you’re only paying 2 percent on $750,000, or $15,000,” calculates Talvacchia. “So the city still gets a good amount from that property each year, and the buyers and developers have that incentive they were looking for.”
In addition to the PILOT incentive, the ordinance also contains several additional welcome incentives.
“There is a seniors program, a veterans program, and, because of the upcoming revaluation in 2008, which could be devastating to a lot of people, a phase-in program where a tax increase could instead be phased in over four years instead of at once,” says Kelly.
Councilman John Schultz, who heads the Planning and Development Committee for the city, agrees that the phase-in segment was critical.
“People for 25 years have had no tax increase, so if they bought their house at $100,000 and it’s now worth $400,000, they’re going to be hit,” says Schultz. “We said, ‘We can’t effect this kind of impact on our citizens.’”
With the ordinance in place, there remains important work to be done, according to Kelly and Schultz, and that is ongoing communication with residents.
“We’d like to go back out to those community groups we took input from as we prepared the ordinance,” says Kelly. “We want to be sure they understand all of the elements, that they are taking advantage of them and that we also continue to gather information.” The chamber was preparing to hold informational meetings throughout the city into September.
“Whatever happens, we as a city of elected officials must do the best we can and get the best bang for the tax dollars as we can,” says Schultz. “If we can benefit enough to get 100 more police officers out in the city, we can address several other quality issues… people are attracted to safety, people want to live here, bring their children here, visit here, buy here, and a safe city is one of the main agendas on our mind. To make the city clean, safe and running smooth, it takes vision. And now, we are changing all of that. We have the vision.”
Procida says an attractive city can draw all kinds of home ownership.
“Prior to Carolina Homes, we’ve sold primarily to first home owners,” she says. “But now, we’ve got people who are interested in second homes, investment property and more. That’s generating excitement for the entire city.”
Jenci of Dwellings says the tax incentive program takes Atlantic City to new levels for developers. “When you combine that with the upcoming revaluation,” he says, “Atlantic City could become the hottest real estate market on the East Coast. Other beach towns just can’t compare to what Atlantic City has to offer.”
Back in the North Beach area, Tom Scannapieco is pretty pumped about Bella, about the tax incentive, about Atlantic City in general.
“I intend to follow up Bella with other high-rise residential projects in the city,” says Scannapieco, hailing the incentive as a major catalyst for the future. “This will result in more services, more activities, everything that makes it a fine residential community. Boy, this is going to be exciting.”
