College interest loan low rate

Slow Growth Spurred? Low Interest Rate Affects On Development

Just about everyone agrees that the repeated lowering of interest rates this past year has helped fuel the ongoing real estate boom, especially the housing market. Realtors complain that they can't list enough homes to satisfy demand and homebuyers are not only snapping up new dwellings, but old ones as well. But has the availability of low cost money equally influenced builders in other fields such as office and store construction, warehouses, etc.? The consensus seems to be that low loan rates have certainly helped the large builder, but perhaps not as dramatically as it has the housing market.

Jim Murray, Director of Development for Matrix, a large firm engaged in construction projects requiring the expenditure of millions of dollars does not see his firm doing either less or more construction due to interest rates. He reports that Matrix always looks at projects on a longterm basis, and interest rates are just another factor to consider in overall planning, but not a deciding factor.

Often huge storage facilities are integrated as part of an industrial park so as to blend into the neighborhood and add to its attractiveness, rather than act as an unwelcome excrescence. It takes a big firm to turn out big buildings. One such company is Matrix Realty Associates of Washington Township.

Over the past couple of years Matrix has constructed the Northeast Business Park in Washington Township at turnpike exit 7A consisting of four buildings with a total square footage of slightly less than two million square feet. One of these is a million square foot structure along the turnpike that is the principal Eastern Regional warehouse of Seaman's Furniture.

In addition to the four existing buildings in the park, another 473,000 square foot facility is under construction for W.W. Granger, a supplier of business needs products. Matrix has plans to expand its development of the Northeast Industrial Park by adding 5.6 million square feet of warehouse space on a 434-acre tract of land. The company estimates that the township will reap about $670,000 in additional direct taxes, $83,000 in open space funds and more than $3 million for the school district.

Matrix (the name means a sum of parts coming together as one) was founded by central Jersey resident Joseph S. Taylor 22 years ago. It has a billboard division and also constructs residential housing developments, some of which are located in the Cranbury and Monroe Township areas. Matrix has interests in a number of New Jersey and Pennsylvania golf courses, according to Murray. Employing about seventy people in Mercer County, the firm is also active in community and charitable affairs.

Jim Kinzig of Aegis Properties is cautiously optimistic about his business as the final quarter of 2002 looms.

"I think retail real estate (new housing) continues to boom, but we've seen a slowdown in the office market over the past year," he told Mercer Business. "Industrial equals out between the two."

"The economy has slowed a lot and it has created some softness in the overall real estate market. People who rode the boom during the nineties and up to 2000 have seen some softness develop, the dot-coms and telecoms had problems and some people have been shedding workers, and these factors have softened the office market - a little bit, anyway."

Kinzig, whose company was founded in 1980 by company principle Peter Longstreth and another partner no longer with the firm, specializes in office construction, sees the lowering of interest rates by Alan Greenspan as a good thing for the retail residential market. And that market stays "hot" he noted.

"In terms of the commercial side, for well leased properties, (lowering of rates) has helped," said Kinzig, "but it hasn't really stimulated demand that a lot of properties need for leasing."

Recent Aegis (the name means "shield") building completions include two major office locations in Forrestal Center on E. College Rd. totaling 268,000 square feet. Both locations are fully leased. However, the firm does have some space available in the popular complex because one firm downsized.

Aegis has done several major projects for Lockheed Martin Corp. including a 575,000 square foot facility at the Camden Aerospace Center and were the project managers of 475,000 square feet developed for the aircraft giant in Newtown, Pa. Currently Aegis has some twenty different projects underway in the Philadelphia and south central New Jersey areas. Several of these are for AMTRAK including a new parking garage at 30th St. Station in the Quaker City.

Kinzig sees economic recovery on the horizon, but believes it will be at a slow pace, perhaps as long as two years. The company's main office is in Philadelphia. They also have an office in Princeton and service an area of about 150 miles radius to this area.

Interest rates also have an impact on the operations of Mack-Cali Realty Corp. with headquarters in Cranford. A developer-builder of very large office and multiuse complexes, the company is currently constructing a 95,000 square foot regional call center for Verizon, the telephone giant, which will be located just off Route 130 and I-195. The $10 million state of the art structure will accommodate some 500 workers. There are a number of other structures located on the site, and still to be completed there is a New Jersey State Police facility that will contain laboratories and related facilities.

"This is a very helpful lending environment for us, as an investment grade rated company who borrows off our credit facility, the interest rates have been very helpful in terms of financing development that we're doing, lowering the cost of money and therefore the overall cost. of doing business," said Mitchell Hersh, Chief Operating Officer. He sees a recovery underway, but described it as "slow and lackluster."

"I think smaller entrepreneurial companies are again making commitments, and I'm seeing that throughout the region. Generally, this is a pre-cursor toward economic recovery, however we need to see more hiring than we currently do," Hersh said.

Mack-Cali is a major developer of the Jersey City waterfront and owns Harbor Side Financial Center in that city. The firm is in the process of completing two office towers, (about 3.6 million square feet when completed) and recently finished building a Hyatt-Regency hotel on a pier over the Hudson River.

Mack-Cali was formed through a merger with several family businesses. It went public in 1994 and its CEO said that the stock (on the NY Stock Exchange, symbol CLI) "is doing very well."