Corrections or additions?
This article by Euna Kwon Brossman was prepared for the November
17, 2004 issue of U.S. 1 Newspaper. All rights reserved.
From Toilets to Tenants
The movie “Field of Dreams” is based on the philosophy “build it and
they will come.” Preferred Real Estate Investments Inc., a
Conshohocken, Pennsylvania firm, has become a multimillion dollar
success story on the same idea with a twist: take an already existing
structure that’s in decline, renovate it, preserve it, and turn a
local albatross into a booming economic center.
They did it in Conshohocken, turning dingy but historic factories and
warehouses along the Schuylkill River into one of the Philadelphia
region’s most successful office markets. They did it in Jersey City,
converting the vacant powerplant into part of the sleek complex of
offices and apartments that sits on the river facing downtown
Manhattan.
And now they’re hoping to work their same magic on the old American
Standard manufacturing plant in Hamilton. Built in 1917, the old
American Standard plant in Hamilton once supplied most of the
country’s toilets. Though production had been declining for years, the
factory shut down completely only about two years ago when it moved
some 800 remaining jobs to Ohio and put the building up for bid.
Out of about 20 interested parties, Preferred Real Estate Investments
won the contract with a bid of $10 million, largely because of the
company’s intent to preserve the best of the original structure rather
than bring in the wrecking ball. “This is the biggest development in
Hamilton’s history,” says Erik Kolar, the company’s president. “We’re
taking a building that was an eyesore and turning it into an asset.
Generations of local families worked here, but in recent years there’s
been job loss, a general decline. We’re preserving what is historic
and beautiful and creating new jobs.”
In fact, the American Metro Center at 240 Princeton Avenue in
Hamilton, when completed, will consist of three restored buildings,
designed by Blackney Hayes, totaling 456,000 square feet. What was an
obsolete toilet manufacturing plant will be transformed into Class A
office space for nearly 1,500 workers. Best of all, the AMC is
strategically and conveniently located just 10 minutes from downtown
Princeton, one mile from Route 1 at Exit 65 of I-295/95, and within
walking distance of the Hamilton train station. Indeed, the company is
constructing a pedestrian walkway from the train station to the office
complex. Workers who now battle horrible rush hour traffic along Route
1 from Woodbridge to Lawrence would be able to commute by train into
Hamilton in 25 minutes. Workers from West Windsor and Plainsboro area
would be able to hop on the train at Princeton Junction and be in
Hamilton in six or seven minutes flat.
“Technology makes everything move faster. It increases the speed at
which we do business but you can’t take humans out of the equation,”
says Kolar. “When you need to get face to face time you don’t want to
waste time in traffic. Jumping on a train can make things a lot
easier. Princeton has the cachet but I think people are beginning to
understand that access is more important than address.” Kolar says a
fundamental change in the nature of today’s workforce means that
access to public transportation is playing a bigger role in the
workplace. “Instead of the boss in the corner office, work teams today
are more collaborative. You want to get your people out in the field
and have your customers come to you in the easiest and fastest way
possible.”
Originally the builder predicted that tenants would be moving in by
September, 2003, and acknowledges that some tenants have been
disappointed by delays. In fact, the first tenants, Duane Morris, a
Philadelphia-based law firm, moved in only last month, consolidating
its Princeton and Cherry Hill offices (see page 49). To date, the
company has leased about 105,000 square feet of some 352,000 square
feet of available space, with signed commitments from a dozen or so
tenants, including a number of marketing, engineering, finance and
accounting firms. The Federal Bureau of Investigation is leasing
second story office space.
Frank O’Neill, brother of company founder Mike O’Neill and one of the
Preferred Real Estate Investments brokers in New Jersey, predicts that
sections one and two of the building will be done by January, while
the last section, which includes the largest contiguous block, a
250,000 square foot chunk closest to the train station, will be
completed by the second quarter of 2005.
The company’s intent is to make the rent very competitive compared to
the region. At the Carnegie Center just up the road off Route 1, a
tenant can expect to pay $32 to $34 a square foot, largely because of
the Princeton address. At the American Metro Center rent runs $23 per
square foot, according to Matt Malatich, who recently came from CBRE
to join Frank O’Neill and Larry Doyle in the New Jersey office of
Preferred Real Estate Investments.
“Let’s face it, there are certain companies that are not going to pull
out of Princeton,” says Malatich. “But we have plenty of companies
willing to make the move. It’s cheaper to live in Pennsylvania because
of lower rates for property taxes and car insurance. We can still draw
from the large, well-educated workforce along Route 1 but heading
south to Hamilton you don’t get into that terrible Route 1 bottleneck.
After some time the CFOs have to realize they’re spending too much of
their operating budget on rent and suddenly that Princeton address is
not the be-all end-all.”
“Rehabbing a former manufacturing facility is a good idea and a good
trend. The train station location helps, and the highway system is
good,” agrees Jerry Fennelly of NAI Fennelly. But he points out that
11,000 square feet is the largest lease American Metro has announced
so far. “They are doing it the hard way. They are slugging it out. The
challenge right now is the costs. For all these rehab jobs, the cost
of steel goes out of sight.”
Today the 50-plus acre site is abuzz with earthmovers, backhoes, and
cement trucks. Workers in hardhats pound hammers as dust flies in the
shafts of sunlight pouring in from the skylights. The firm is working
with a historic renovation consultant to retain the architectural
integrity of the building. The original tile is being refurbished and
the handsome criss-cross mosaic brick will be cleaned. One of the
factory’s most unusual structures, a 360-foot brick kiln that runs
half the building’s length, once used to fire toilets, will be
preserved. The center will have a cafeteria, gym, and a shared
auditorium. There will be courtyards. While the structure currently
sports a tangled mess of old wiring and exposed pipes, the high beams
support a soaring vision of natural light and lofty ceilings with lots
of exposed brick giving an open, historic feel. The long rows of
skylights along both lengths of the structure will be preserved, the
frames refurbished, the glass replaced for safety. While the original
factory had about 760,000 square feet of space, some 300,000 square
feet on either side that were added on later will be demolished. The
entire roof is being replaced, and the building will have all new
mechanicals, including heat and air conditioning.
Total renovation cost: $30 million. That brings the total cost of the
or project to $40 million or about $114 per square foot. In
comparison, Patrinely Group sold two buildings on College Road West
for $240 per square foot.
Outside, much of the Belgian block curbing is in. The parking lot is
dotted with temporary lights. Across Sloan Avenue from the American
Metro Center stands the Congoleum plant, one of the few remaining
companies that represent Trenton’s manufacturing heritage and still an
active manufacturing center for tile. A three-lane entrance with a
traffic light will be built off Sloan Avenue West leading to the
American Metro Center.
While the entire project has enjoyed the support of Hamilton’s mayor,
there has been some resistance from the local community, especially
from people who live in the houses on Princeton Avenue behind the
center who are worried about increased traffic. “Change can be
difficult,” says Malatich, “but part of what we’re doing is long-term
brand-building for Hamilton. We’re building a bridge from Princeton to
Trenton, taking advantage of the Princeton amenities and the workforce
opportunities in Trenton and Bucks County. We are building cachet for
Hamilton and the prestige will come with it and have a trickle-down
effect on the entire community.”
In fact, another developer, Steve Goldin of the Columbia Group, is
building an upscale 700-unit townhouse complex on just over 50 acres
behind the site. “The developer has incorporated concerns about
traffic and looked at everything with an idea of a balanced impact,”
says Malatich.
Preferred Real Estate Investments has built its bread-and-butter
business model and reputation on historical renovations,
rehabilitation of industrial sites, and the revitalization of
under-utilized real estate. While the company focuses largely on
what’s known as the “EZ-Pass corridor” from Maine to Florida, it is
also looking at projects in California.
Says Malatich: “We don’t have blinders on when we’re looking to
acquire a site. We’re looking at everything. We’ve built a niche to
take a problem property where perhaps others might not see the value.
We pay a higher price than the company might have expected to get. If
it’s an environmentally contaminated site, we work with the Department
of Environmental Protection to clean it up.”
Kolar agrees that everybody loves the underdog and wants to see a
piece of history preserved. “America was built around rivers, rails,
and roads,” he says. “These old factories literally stand at the
crossroads of history. Europe’s been doing this kind of thing for
years, preserving and adapting functionally obsolete real estate for
modern use. But in America we have so much more open space that we’ve
been knocking down corn fields for new development. Our company has
built its success on taking the factories of the past and converting
them into buildings that promote creativity and energy and convey a
sense of character.”
Kolar grew up in Chester County and graduated from the University of
Delaware with an economics degree in 1988. He’s been with Preferred
Real Estate Investments for the last eight years. He was in commercial
real estate representing national clients when he met company founder
Mike O’Neill, became personal friends, and shared his vision of
turning old manufacturing sites that nobody wanted into revitalized
regional economic centers. “We started with seven people and now we’re
at 150 and still growing. In 2004 we will have bought 6 million square
feet of buildings. We own and operate over 10 million square feet
today, mostly on the eastern seaboard.”
One of Kolar’s favorite projects is the renovation of a 400,000 square
foot office building in Chester, Pennsylvania, which just opened in
September with Wells Fargo Bank as the lead tenant. Located on 90
acres on the Delaware River, it was a 1 million square foot power
plant that with 50,000 jobs, was part of the manufacturing backbone of
the state. After the war, with the decline of manufacturing, jobs had
dwindled to about 5,000 and the city fell into decay. The company saw
the potential in the rundown town with its regional presence, and
proximity to Philadelphia, the Philadelphia Airport and Wilmington. It
convinced the state to put ramps in off I-95. Some 2,000 people now
work at that site.
With three children ranging in age from seven months to five years,
Kolar feels driven to preserve the past for the enjoyment of future
generations. “While we are a for-profit development company, what we
do has an incredible impact on communities. It is so much more
responsible to take these development projects and create jobs where
there is loss. My business is just as much about economic development
as real estate development. Part of the victory of what we do is that
we initiate positive change and revitalize communities and that’s
exciting.”
– Euna Kwon Brossman
Preferred Real Estate Investments, 134 Franklin CornerRoad, Suite 202, Lawrenceville 08648. Larry Doyle, director.609-912-1144; fax, 609-912-1166. Home page:www.preferredrealestate.comNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
