JERSEY CITY, N.J. -- Of all the real estate debacles and broken dreams of the recession a decade ago, few were more spectacular than the collapse of Port Liberte. Starry-eyed developers envisioned it as a kind of Venice-on-the-Hudson, with a network of canals dredged out of a dilapidated waterfront and high-priced European-style townhouses offering views of the Statue of Liberty and the Manhattan skyline.
But only a tiny portion of the $750 million project -- a few apartments and only one canal -- was ever built here, and Port Liberte earned its spot in history as the largest real estate bankruptcy east of the Mississippi.
From that disaster, though, Joseph Barry anticipates making a fortune.
In 1994, Barry, a former anti-poverty lawyer, bought the carcass for a pittance, completed the existing apartments and waited out the recession. Now he is building 134 more condominiums and an 18-hole golf course. And he is hardly by himself.
In a real estate boom taking place up and down New Jersey's industrial coast, developers are building as fast as they can, and reshaping the skyline from Bayonne to the George Washington Bridge.
Samuel and Richard LeFrak are building two apartment towers, two office buildings and a hotel on their 600-acre Newport complex in Jersey City. Ara Hovnanian is building 15 million-dollar, 4,000-square-foot townhouses in West New York, and a dozen other developers are jostling for space on River Road, below the cliffs of the Palisades.
And Barry, chairman of Applied Cos. of Hoboken, a development company, has five projects in the works worth $1 billion.
"This is not a speculative boom," Barry said. "It's Manhattan-driven. It's a market of young workers who are trading the convenience of living in Manhattan for the price and amenities of Jersey."
For decades, developers have struggled to build a post-industrial frontier along what many wishfully call New Jersey's "gold coast." And for many, those wishes are finally coming true: White-collar office parks are going up where factories once stood; luxury apartments are replacing gantry cranes on the piers, and stylish shops are being carved out of railroad warehouses.
But not everyone is caught up in the real estate euphoria. While many of the eight towns along the Hudson River waterfront see an economic bounty, Weehawken and Hoboken worry about traffic-choked streets at rush hour and the aesthetics of brick- and vinyl-sided town houses and boxy glass office buildings that rob the views and block public access to the waterfront.
In May, development issues figured prominently in the City Council elections in Hoboken, where anti-development dissidents captured two seats and community protests forced Mayor Anthony Russo to recommend that a developer withdraw his plan to build the tallest towers in the city.
And just to the north, in Weehawken, which embraces the mouth of the Lincoln Tunnel, residents at a recent community meeting criticized proposals for a pair of office towers and for more than 1,600 apartments and 1.3 million square feet of commercial space.
"We're afraid of the cumulative effect of all this," said Judith Wadia, a 16-year resident of Weehawken. "I'm afraid this project is going to choke itself to death. There'll be so many thousands of new residents trying to get into the Lincoln Tunnel that the whole project will come to a screeching halt. Then we'll be stuck with empty buildings."
, Too much housing
But the debates in Weehawken and Hoboken have done little to dampen the construction craze. And while some economists warn that too much housing is being built, most developers just shrug.
"It's going to take a lot to turn this baby off," said an ebullient Gabe Pasquale, executive vice president for sales and marketing at K. Hovnanian Enterprises of Red Bank, which is building 445 townhouses at three projects in Guttenberg and West New York just north of the Lincoln Tunnel.
The transformation of the waterfront started in the late 1970s and early '80s. From Jersey City to Weehawken, municipal leaders, residents, environmentalists and developers discussed what to do with the abandoned factories, docks and warehouses.
Developers including the LeFraks, Arthur Imperatore and Hartz Mountain assembled large tracts, expecting the demand for new offices and apartments to continue unabated. Eventually, plans to build 30 million square feet of office space and 37,000 housing units were drawn up.
But the recession of the late '80s and early '90s left vacant more than 37 percent of the 7.8 million square feet of office space that had been built in Jersey City, Hoboken and Weehawken. Condominiums sold for less than 70 percent of construction costs, and apartment rents plummeted. Developers went bankrupt, leaving behind half-finished projects that resembled Roman ruins.
Like the previous one, the current building boom is fueled by the surging economy in Manhattan. The number of jobs on Wall Street has jumped by 40,000 since 1991, forcing many investment banks to look for expansion space. Most want to stay in Manhattan, but with prime offices in Manhattan renting for $50 to $60 per square foot a year, Jersey City and the other coast towns look inviting at less than half the price.
Apartments and townhouses are also significantly cheaper on the New Jersey waterfront. A luxurious 2,300-square-foot townhouse on the water might cost $500,000, less than half the price of the average Manhattan apartment of the same size.
"I was hesitant to consider anything out of the city," said Deena Edington, an executive with Ralph Lauren who moved with her husband from the Upper West Side of Manhattan to Jacob's Ferry, a new townhouse development in West New York. "But we're quadrupling our living space for the same payment as our city rent."
Farther down the waterfront, Jersey City has been transformed from an industrial backwater into a corporate annex to Manhattan's financial district. American Express recently announced plans to move 900 employees to Hartz Mountain's new office building at 90 Hudson St. in Jersey City, while PaineWebber, Cigna and U.S. Trust are moving hundreds of employees to the newest office building at the nearby Newport complex.
Supply may exceed demand
But the memories of what happened when the stock market crash of 1987 sent the region into a tailspin remain quite fresh, and some developers and investors worry privately that with so many apartments and townhouses under construction, the supply may soon exceed the demand.
"There are 5,000 units coming on line in a market that's never absorbed more than 300 to 400 a year," a developer lamented.
Fred Daibes, chief executive of Daibes Brothers development company of Edgewater, said he worried constantly about the next downturn. His family firm is building a 16-story luxury apartment house on River Road in Edgewater and twin 14-story residential towers for the elderly, also in Edgewater. But carpenters are hard at work building townhouses and apartments all along River Road.
"I'm nervous," Daibes said. "I'm battening down the hatches. The population isn't growing as fast as we're building apartments."
"The music does not have to stop," said Richard Speciale, a managing principal at Aequitas, a Manhattan real estate investment firm, "but it always slows down. And some of these developers could get hurt. We tend to forget about the cyclical nature of markets."