Boraie Development broke ground this month on The Beach at South Inlet in Atlantic City, an $81 million residential complex that is the first market-rate apartment project to go up in the city in decades.
The building will have 250 apartments filled with top-shelf amenities, such as hardwood floors, granite countertops and stainless steel appliances, according to Boraie Development Vice President Wasseem Boraie.
Boraie said the rent at the apartments will be $1,200 a month, but 20 percent of the units will be rented at a “workforce rate” of about $800 a month.
Some would say the story surrounding The Beach at South Inlet is not about the amenities, but the fact it is being built in the first place. Conventional wisdom says Atlantic City is not a place where developers want to build.
Boraie disputes that. It’s the reason why the New Brunswick-based company, which also is moving forward with a market-rate apartment complex in Newark, is betting on Atlantic City.
NJBIZ asked Boraie to break down five myths about doing business in Atlantic City. Here is our conversation.
Myth No. 1: Developers don’t want to build in Atlantic City
“This was the absolute universal opinion when we came to town. Everyone said developers don’t want to be there and that it’s too expensive. After being here, we realized what the issue was: It was years of inverse rent control. Whereas rent controls keep rents low to where it’s impossible to keep buildings up and make money, this was the opposite. No one wanted to build here because the land was so prohibitively priced because every landowner thought he was going to have a casino to sell to, whether it was for a shiny new casino or just for parking or employee housing. And that raised all the pricing in the market. It wasn’t until recently that people realized future casino growth was being halted. Then, everyone became more reasonable about what land was worth.
“Once people see proof of concept in the market and they see new product pricing, I think there is going to be a lot of people rushing to A.C. We saw it in New Brunswick, where people thought it was a dead market. Then my dad (President Omar Boraie) put up a high rise with some units selling for a million bucks and every developer wanted to be in New Brunswick. I think once people see new products on the street in Atlantic City, you’ll see more developers say, ‘Land is properly priced now, let’s give it a shot.’ ”
Myth No. 2: Nobody lives in Atlantic City
“There are more than 16,000 private residences in Atlantic City and more than 60 percent of them are rentals. Instead of saying no one lives in A.C., I would restate that as, ‘No one lives in a new rental in A.C.’ There are more than 10,000 renters in Atlantic City and more than 30,000 renters in Atlantic County, so I think 1,500 or 2,000 units of new residential over the next five to seven years will be easily absorbed in Atlantic City. If Asbury Park and Wildwood can do it just by cleaning up their boardwalk and immediate surrounding areas, than Atlantic City can do it.”
Myth No. 3: Atlantic City needs to radically change its economy
“It’s the consensus, but it’s not based on any real evidence or study. The town’s been through a tough period trying to save its tax base with appeals and repricing. It’s a tough adjustment. But rather than playing chess pieces with the community, trying to invent new industries that you have no idea if they are going to work, you still have a $2.5 billion economy based on gaming. You have new potential revenue streams: college students in the Chelsea section, millennials in the South Inlet and other areas, but the key is the city’s strong points. Atlantic City has a 100-year history of being a tourist city. That is what the city is known for. If they can clean up the boardwalk and clean up the retail, you’re going to see people flock to Atlantic City. It’s already happening.
“When you have a really smart company like MGM investing $800 million more into Borgata, that’s the definition of the smart money saying the city is at its low point and a rebound is in sight. You can’t guarantee it, but it makes you feel that way. Atlantic City’s economy can change with college kids and millennials and empty-nesters, who say it’s better living down the Shore than paying $25,000 in taxes. I think that’s what’s going to do it. But don’t forget, the numbers don’t lie, whatever the (state-sponsored) PILOT (program) turns out to be, whether it’s $120 million or $110 million from casinos, you would need to do a 120 projects like mine to get $120 million in revenue. It would take a hundred years to get 100 projects in Atlantic City. The myth never hits the reality when you look at the numbers.”
Myth No. 4: We need to find the next giant idea for Atlantic City.
“You don’t need a giant idea, it’s just a matter of improving the quality of life in the city. Before, you had casinos making $5 or $6 billion dollars for the city. That’s been cut in half, and you need to readjust. Maybe what comes out of this is that neighborhoods matter, sidewalks matter, streetscapes matter — things that all other urban areas are dealing with. Maybe Atlantic City takes whatever is left of the PILOT and sales taxes coming into the town and says, ‘We’re going to invest by connecting our sidewalks, by connecting these abandoned building lots, by connecting the boardwalk.’ I think that will create a positive quality of life.
“You’re already hearing people talk about Atlantic City’s neighborhoods, which is something no one ever used to talk about. You have the marina district with MGM overseeing it, the South Inlet, with the new TEN as the start of it, you’ve got midtown, with Caesars, Tropicana and the hospital, Chelsea will be Stockton and some of the hotels around it. So every neighborhood will have its star that everything rotates around, it won’t just be one big thing.”
Myth No. 5: Atlantic City is hurt because there’s no good train service or PATH stations
“Atlantic City is on the beach; show me a beach town that’s got a great train. I can’t think of many. People are fine driving or taking the bus in these communities. I think it’s more important to clean the city up with the neighborhood approach. At the end of the day, what’s going to push A.C. forward, is the quality of life that they had in the ’30s, ’40s and ’50s — when their population was double what it is now. That’s what’s going to carry A.C. forward. It’s what’s happening in Asbury Park, it’s what’s happening in Wildwood.
“I think there are going to be waves of private developers coming in during the next five years. You couldn’t have done a deal like mine five years ago because there wouldn’t have been any interest in getting private development started because they were making so much money of casinos. Why did they need to find other revenue streams? Now they do.”