VOLUME 27 NUMBER 1 JANUARY-MARCH 1997

RETAIL NEW COMMUNITY NEIGHBORHOOD SHOPPING CENTER NEWARK, NEW JERSEY

PROJECT TYPE

A 55,000-square-foot shopping center located in the central ward, an inner-city neighborhood of Newark. The Pathmark supermarket, which anchors the center, is the first to be built in the central ward since civil disturbances in the summer of 1967. Pathmark owns one-third of the joint-venture market and operates it under a management agreement between Supermarkets General, the parent company of Pathmark, and New Community Corporation (NCC), the nonprofit developer and sole owner of the shopping center. Franchises of several national retail establishments have located in the center.

SPECIAL FEATURES

Joint venture involving a nonprofit developer and a supermarket chain Inner-city retail development Land assembly issues Adaptation of store prototype to a small site

DEVELOPER/OWNER

New Community Corporation 233 West Market Street Newark, New Jersey 07103 201-623-2800

ARCHITECT/PLANNER

Bomad 47 Newark Street Hoboken, New Jersey 07030

BUILDER

Turner Construction Company 265 Davidson Avenue Somerset, New Jersey 08873 908-627-8300 GENERAL DESCRIPTION

Like the phoenix rising from the ashes, the New Community Neighborhood Shopping Center has risen out of the devastation of the central ward of Newark, New Jersey, that resulted from civil disturbances in the summer of 1967. The 47,000-square-foot Pathmark supermarket that anchors the shopping center is the first major supermarket to dot the landscape of the central ward in more than 20 years. Lack of supermarkets is not a problem in suburban America, where competition for the food dollar is fierce. However, in the inner cities the existence of a major supermarket is nothing short of a miracle. For residents of the predominantly low-income, African-American central ward, the miracle occurred on July 26, 1990, at the grand opening of the supermarket. Jack Kemp, then Secretary of Housing and Urban Development, was one of many politicians on hand for the ribbon-cutting ceremony.

Other mainstream businesses found in abundance in suburban America occupy the remaining 8,000 square feet in the New Community Neighborhood Shopping Center. Dunkin' Donuts, strategically located on the southeast corner of the shopping center, is open 24 hours a day, selling doughnuts, pastries, cookies, muffins, croissants, sandwiches, and beverages to a large clientele. Mail Boxes, Etc. provides postal, business, and communications services to consumers and small businesses, with 24-hour key access to mail boxes. With its state-of-the-art equipment, NC Print & Copy Shop helps individuals and small business owners produce stationery, invitations, flyers, brochures, booklets, and business cards. The need for transportation in a neighborhood where only one in three residents owns a car is filled by Grocery Delivery, a van service that transports customers, their packages, and often their children home. The World of Foods has fostered NCC businesses with its Southern Kitchen and New Community Bakery. In 1996, Pizza Hut, Taco Bell, Magic Fountain, and Nathan's were added to the World of Foods. Despite the growing list of national franchises, the crown jewel of the center is undeniably the Pathmark supermarket.

THE NEW COMMUNITY CORPORATION

The civil unrest of July 1967 strengthened the resolve of a handful of residents who already had begun meeting in Queen of Angels Catholic Church to discuss methods of breaking the cycle of abandonment and decay plaguing their neighborhood. In January 1968, the residents, led by Father William J. Linder, a priest at the church, officially incorporated as the New Community Corporation (NCC), a nonprofit community development corporation. Today, NCC has assets in excess of $300 million, with a 1996 cash flow of $200 million. Since its inception, NCC has formed many unique public/private partnerships, including ones with Hartz Mountain Industries; Bellemead Development Corporation; Pathmark Stores, Inc.; Colgate-Palmolive Company; Ford Motor Company; United Hospitals; Bloomfield College; Essex County College; Seton Hall University; Fairleigh Dickinson University; Rutgers University; and all levels of government. These partnerships, together with the tenacity of NCC's grassroots board of directors, have made many of the accomplishments possible.

Improving the neighborhood's quality of life has been the driving force behind all the projects undertaken by NCC. Responding to the desperate need for good-quality, affordable housing that broke the typical public housing mold, NCC developed its first housing units in October 1975. Against all odds, NCC convinced local politicians and influential business and community leaders that families should not be housed in towering high rises, which can become breeding grounds for crime. Consequently, the 120 units were contained within five-story buildings. Each unit has an entrance fronting on an elevated walkway. Since 1975, NCC has built or managed over 3,000 units in 18 housing developments in Newark, Englewood, Eatontown, and Jersey City, housing more than 7,000 residents.

In addition to housing, jobs were desperately needed. In 1968, NCC's goal was to create 1,100 jobs in 20 years, based on the number of households in the central ward on welfare. Since then, NCC has created 1,500 permanent jobs for former welfare recipients of the central ward and other areas. NCC also provides job training and employment services, placing more than 1,000 clients in jobs annually. In addition, NCC manages its own properties, employing many more individuals. NCC is now one of Newark's largest employers, one of only ten organizations and companies in the city that employ more than 1,000 people. NCC also has its own security force, which grew out of the need to provide security services for its many housing complexes; the security force now provides protection for the patrons of New Community Neighborhood Shopping Center and other NCC facilities.

The creation of jobs and training opportunities for central ward residents reinforced the need for daycare for children of the large number of single mothers who now looked to jobs, not welfare, for their future. Today, Babyland Family Services, Inc., provides daycare to some 700 infants and toddlers at affordable rates. The aging of central ward residents gave rise to the need for geriatric care and assisted living. The New Community Extended Care Facility provides first-rate care for elderly residents who might otherwise be forced to live in nursing homes far from their friends and neighborhood, as well as adult medical daycare and in-home services. NCC also offers short-term transitional housing for the ward's homeless population. Its credit union has over 2,000 members and assets of $2.7 million. St. Rose of Lima School, another of NCC's network partners, offers an alternative to the troubled public school system for educating children in kindergarten through the eighth grade.

It was the desperate need for high-quality, affordable food that gave rise to the New Community Neighborhood Shopping Center. The Pathmark supermarket has meant not only affordable food but also jobs with a career path for nearly 250 employees, most of them Newark residents.

LAND ASSEMBLY AND ACQUISITION

Land assembly is a difficult process in the inner city, where ownership of land typically is fragmented and absentee landlords are common. Assembling the parcels for the New Community Shopping Center was no exception. Between 1980 and 1984, NCC assembled land for the shopping center. The site comprised 62 parcels, 15 of which were owned by the city; 25 others had buildings on the property. The relocation of owners who were willing to relocate required extensive research and negotiation on the part of NCC.

Land acquisition was another hurdle to be overcome. In 1985, NCC began to buy individual lots for the site, acquiring 56 lots without resorting to condemnation. Condemnation of the remaining six parcels was sought because of the extremely high sales prices asked by their nonresident owners. In May 1985 the board of the New Jersey Housing Mortgage Finance Agency authorized the New Jersey Attorney General and Department of Transportation to proceed with the condemnation of the lots. However, the New Jersey Superior Court issued a decision favorable to the six property owners and several months later dismissed the agency's complaint that it needed to acquire the property for a public purpose. That decision was overturned by the appellate division of the superior court, which determined that the condemnation powers of the agency are valid when public benefit prevails, as it did in the case of the shopping center. In March 1987, the property owners filed notice of appeal to the Supreme Court of New Jersey to stay the condemnation process, but in a final ruling in May 1987, the supreme court denied the property owners' request that the court review the case further.

The zoning also had to be changed before breaking ground for the new shopping center. In October 1987, the board of adjustment voted unanimously for NCC's right to build the supermarket. One final holdout of the original six filed a complaint against the board of adjustment and NCC to have approval of the variance and site plan overturned; the court quickly dismissed the challenge.

The site is located at the intersection of South Orange Avenue, a main east/west artery, and Bergen Street, a main north/south artery; the shopping center faces South Orange Avenue. Across Bergen Street to the east of the shopping center is the University of Medicine and Dentistry of New Jersey and University Hospital. Small-scale commercial development largely characterizes land uses to the east and south of the site. To the north and west, uses are primarily residential.

OWNERSHIP, LEASING, AND FINANCING Finding the supermarket anchor proved less problematic than the land assembly and acquisition process. In the early 1980s, Father Linder approached Supermarkets General, the parent company of Pathmark, about the possibility of locating a store in the central ward. Pathmark, which remained a strong partner throughout the ten-year development campaign, agreed; it looked like a good business proposition, given the population density and lack of competition in the area. A 1980 study commissioned by NCC showed that, with 93,000 residents within a one-half mile radius, the site was a virtual mecca for shoppers, given appropriate commercial development. At the time, more than 90 percent of these residents shopped at lower-priced supermarkets outside Newark.

Pathmark also benefited from the site's location in an urban enterprise zone, which allows Pathmark to charge half the state sales tax and eliminates the sales tax on the store's equipment purchases. The company was also entitled to $1,500 tax credit for each hiree from Newark who had been unemployed for three months. Pathmark's commitment to revitalizing the central ward was sustained during its leveraged buyout by Equitable Life, Inc., and Merrill-Lynch. In fact, one of the terms of the transaction was that Supermarkets General continue to work with NCC to bring affordable food to the residents of the central ward.

In August 1987, NCC and Supermarkets General ironed out the ownership and lease arrangements. Under the terms of the agreement, NCC owns two-thirds of the joint-venture market, which is managed by Pathmark, ensuring that it will be run like any other in the chain. Supermarkets General owns one-third of the market. Community Supermarkets Corporation was formed to be the decision-making entity. It meets monthly to discuss issues affecting the community and to decide how to respond to the community's changing needs. The corporation consists of four NCC members and three Pathmark members. NCC is the sole developer and full owner of the shopping center. The satellite stores are mostly national chain franchises that are owned and operated by NCC.

The search for financing began in earnest in 1983. The first financial boost came as a seed loan for $275,000 from the New Jersey Department of Community Affairs. In May 1984, the New Jersey Housing Mortgage Finance Agency approved the withdrawal of $130,000 from a community development escrow account to partially fund development costs, land acquisition, and technical fees. In January 1989, NCC began intensive negotiations with lending institutions. Nearly 10 percent of the total development cost of $12,860,000 was funded by NCC itself. Fifty-six percent of the total cost was funded by a loan from the Prudential Insurance Company. Fourteen percent was funded by the federal government through the urban development action grant and community development block grant programs. Nearly one-fifth of the total cost of development was funded by the state of New Jersey, through various programs.

DESIGN

The focal point of the New Community Neighborhood Shopping Center is the Pathmark store, which accounts for 47,000 of the center's 55,000 square feet. NCC did not design the Pathmark supermarket, it had the Pathmark store built to Pathmark's specifications. The prototype of the Pathmark store is Pathmark 2000, the model for all Pathmark stores; the design had to be adapted slightly because the New Community store is somewhat smaller than Pathmark's suburban stores. Pathmark originally thought that perhaps it could do without the fresh seafood and deli departments, but community surveys indicated that these were precisely the departments in which the residents were most interested. Today, the fresh seafood department is thriving, just as the surveys predicted. Unlike its suburban counterparts, Pathmark does not have an on-site bakery. Pastries, cakes, and the like can be purchased at the center's New Community Bakery, which is owned and operated by NCC. Pathmark constantly evaluates product sales and adjusts its stock accordingly. For example, the fresh flower and plant department was eliminated after several months of lackluster sales.

The design of the remainder of the shopping center was dictated largely by the design requirements of the Dunkin' Donuts and Mail Boxes Etc. franchises, but the natural limitations of the site also played an important role. At only 3.3 acres, the site is smaller than the five to eight acres typical of many such centers in a suburban setting. Due to the slope of the site, a retaining wall was needed on the west side, also limiting the design of the center. At the southwest corner of the site, there is an anomaly reflecting the final holdout to the land sales. Because the owner wanted more than $1,000,000 for the small parcel, NCC determined that it was nonessential and decided to build around it. The only impact on the design was a reduction of about ten parking spaces and a rather oddly shaped site.

Security is an increasingly important issue for shopping centers, in both the inner city and the suburbs. At the Pathmark store, security costs constituted about 1.4 percent of operating expenses in 1996. As in most supermarkets, customer safety is maximized by a sophisticated in-store surveillance system. The entire center is protected around the clock by at least three NCC security guards, one of whom is stationed in a security booth at the east entrance of the parking lot; in addition, at least one Newark city policeman is always on duty. The parking lot is illuminated by extra outdoor lighting and is completely fenced, making for very limited access to the center. Access is further limited by geography and traffic patterns. But the most important feature of the shopping center's security system is the watchful eyes of its patrons. It had taken nearly a decade to make the shopping center a reality; patrons are determined to protect their Pathmark from petty theft.

EXPERIENCE GAINED

Federal, state, and local government agreement with NCC that high-quality, affordable food was desperately needed in the central ward led NCC to believe that there would be fewer obstacles to the shopping center's development than are typically encountered by commercial development projects in general. This wide-eyed optimism led to disappointment as NCC encountered one obstacle after another. The land assembly process, plagued by multiple absentee landowners, took from 1980 through 1984. The land assembly hurdle was cleared, only to be followed by the protracted condemnation process, which lasted for another two years.

Commitment and the ability to roll with the punches are key to realizing commercial development in inner-city neighborhoods. Construction on the New Community Shopping Center was expected to begin in fall 1984. In fact, ground breaking did not occur until May 1, 1989—nearly five years later.

The joint venture with Pathmark was a critical element in the success of the center. In addition to contributing one-third of the working capital, Pathmark brought management expertise, which provided a well-merchandised, customer-driven store, and its expertise in store design and layout. It also brought previous experience in a successful joint venture with a nonprofit community organization, the Bedford Stuyvesant Restoration Corporation in New York City. That experience taught Pathmark about retailing in the inner city, which differs from retailing in the suburbs. For example, sales volume skyrockets twice a month, coinciding with the receipt of welfare and social security checks. By recognizing the different sales patterns and buying habits of inner-city residents, Pathmark could plan for the increased volume.

The economics must be favorable in order for a retailer to come to the inner city, no matter how strong the retailer's commitment. This joint-venture supermarket has been an unmitigated success for Pathmark. Its initial sales projections have been far surpassed, and sales per square foot have catapulted the store to the ranks of the top 10 percent of supermarkets in neighborhood shopping centers throughout the United States.

The success of the shopping center and the Pathmark supermarket has come from listening to and responding to the needs of the community. Pathmark undertook several surveys of central ward residents to determine what products they wanted. The ethnicity of the neighborhood is reflected in many products that are not sold at suburban locations. Moreover, even before the electronics benefit transfer (EBT) system was put in the store so that welfare transactions could be carried out discreetly, Pathmark accepted food stamps and cashed customers' welfare checks at no charge. PROJECT DATA

LAND USE INFORMATION

Site Area: 3.3 acres Gross Building Area (GBA): 55,000 square feet Gross Leasable Area (GLA): 55,000 square feet Number of Levels: 1 Parking: 227 surface spaces

LAND USE PLAN Use Acres Percent of Site

Buildings 1.5 45

Parking Structures 0 0

Paved Areas 1.8 55

Total - 100

RETAIL TENANT INFORMATION Number of Total Classification Stores GLA

Food 1 47,000

Food Service 2 6,000

Personal 2 1,950 Services

Space Occupied Major Tenants (Square Feet)

Pathmark 47,000

Dunkin' Donuts 2,000

Mailboxes, Etc. 1,400

NC Print & Copy 550

World of Foods 4,000

Length of Lease: 1 to 20 years Typical Lease Provisions: Triple net lease Annual Rents: $18.00 per square foot

DEVELOPMENT COST INFORMATION

Land Acquisition $1,574,780 Demolition $672,462

Site Improvement Costs General conditions $433,500

Earth work 342,000

Site utilities 496,595 Site improvements 440,000

Total $1,712,095

Building Construction Costs Concrete 757,000

Masonry 440,221

Structural steel and 461,100 miscellaneous iron

Carpentry 61,500

Moisture protection 20,000

Roofing and skylights 293,850

Doors, frames, and hardware 162,600

Drywall 235,500

Finishes 154,330

Metal ceilings, loading dock 7,000

Canopy 47,000

Metal screens 28,800

Miscellaneous specialties 47,700

Plumbing 204,000

Sprinkler 99,000

HVAC 203,000

Electrical 476,000

Total $3,698,601

Professional Fees Architectural/engineering 350,000

Surveying 12,500

Legal 125,000

Accounting 20,000

Other professional fees 30,000

Planning and development 110,000

Total $647,500

Financing Costs $199,600

Construction Interest $600,000

Real Estate Taxes $12,000

Contingencies $642,962 Equipment $1,900,000

Working Capital $1,200,000

Total Project Cost $12,860,000

ANNUAL OPERATING EXPENSES FOR 1996 (ANCHOR TENANT ONLY) Total Labor and Store Direct Expenses $4,895,916

Total Advertising and Promotion 487,476

Total Maintenance 242,165

Rent 591,996

Real Estate Taxes 148,000

Utilities 251,600

Insurance (non—labor-related) 204,425

Other Expenses Net of Other Income 613,693

Total Operating Costs $7,435,271

FINANCING INFORMATION Source Amount

Prudential Insurance (permanent) $7,200,000

New Jersey Local Development Finance Fund 1,380,000

Urban Development Action Grant 1,530,000

New Jersey Office of Community Service 500,000

Community Development Block Grant 300,000

New Jersey Economic Development Authority 717,000

New Community Corporation 1,233,000

Total $12,860,000

DEVELOPMENT SCHEDULE

Planning Started: March 1979 Land Assembly: 1980 through 1984 Condemnation Process: 1985 through 1987 Approvals Obtained: 1987 Construction Started: May 1, 1989 Project Opened: July 26, 1990

DIRECTIONS

From Newark International Airport: Take Route 1 & 9 North to 78 West (local lanes). Exit at Clinton Avenue. Stay on Hillside Avenue to end (Avon Avenue). Make left at light. Turn right on Irvine Turner Boulevard. Proceed north to South Orange Avenue. Turn left on South Orange Avenue; proceed west to Bergen Street. Turn right to entrance to New Community Neighborhood Shopping Center, located at the northwest corner.

Driving Time:20 minutes in nonpeak traffic. The Project Reference File is intended as a resource tool for use by the subscribers in improving the quality of future projects. Data contained herein were made available by the Development team and constitute a report on, not an endorsement of, the project by ULI - The Urban Land Institute.

Copyright 1997, 1997, by ULI - the Urban Land Institute 1025 Thomas Jefferson Street, N.W. Ste. 500w, Washington, D. C. 20007-5201 DOCUMENT IMAGES

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