After the Launching (and Scrapping) of Navy Ships, a New Mission

KEARNY, N.J. — Though small, this town has played an aircraft-carrier-size role in naval history.

Numerous warships set sail from the Federal Shipbuilding and Dry Dock Company here on the Hackensack River. And after tours in areas like the South Pacific and Korea, famous vessels were sliced up and sold as scrap here, too.

Now, the facility is embarking on a new mission. As former shipyards across the country reinvent themselves, the site in Kearny (pronounced CAR-nee) is being made over as a mixed-use industrial park, called Kearny Point, that favors start-ups making products like bath oils, piñatas and chocolates.

“We had a decision to make,” said Wendy Kelman Neu, the chief executive of the Hugo Neu Corporation, the landlord, referring to the time after Hurricane Sandy swept through in 2012. “What should we do with the site? What could we do that would be transformative?”

The storm significantly damaged the property, which then housed the types of businesses one might associate with a gritty industrial parcel in a remote corner of the Meadowlands: a trucking company, an electrical-inspection firm and a nut importer.

Adding smaller-scale offices and workshops, plus stores, a food hall and public parks — as well as better flood protections — was a bet made with an eye on the modern economy, Ms. Neu said. A decline in the electronics-recycling industry, a previous Hugo Neu business, was also a factor, company executives said.

Hugo Neu started its $1 billion, seven-year project in 2014. Through a combination of razing some crumbling structures and renovating others, the company hopes to eventually remake its entire 130-acre property.

The initial step was gutting a four-story, 1930s warehouse and renovating it as an office building by polishing its concrete floors, installing a stylish ground-floor bistro and creating a roof deck with Manhattan views. The family-owned Hugo Neu tapped its own reserves for the $30 million renovation, said Steve Nislick, the company’s chief financial officer.

Today, the 160,000-square-foot structure, called Building 78, is home to around 175 companies with berths from 120 square feet to 12,000 square feet, Mr. Nislick said.

Rents at the building, which is 95 percent leased, range from $14 to $25 a square foot, steeper than rates for comparable real estate in nearby Newark but below the average in Brooklyn. Tenants at Building 78, including several manufacturers, can opt for leases as short as six months, somewhat unusual in commercial real estate.

Companies have the flexibility to expand as they grow, said Alak Vasa, the founder of Elements Truffles, a start-up in Building 78 with eight workers. They make chocolate bars, some flavored with cardamom and lavender, and cranked out as many as 1,000 a day around Christmas.

Started in Jersey City in 2015, when the company used a deli’s kitchen after hours to make its desserts, Element Truffles moved to a 400-square-foot room in Kearny in March of last year.

Three months later, the company traded up to an 800-square-foot space, said Ms. Vasa, who added that landlords elsewhere had wanted inflexible 10-year leases.

“You don’t want to make a big investment in real estate and stress about it,” Ms. Vasa said, “but grow as the business grows.”

Relying on start-ups as tenants can be a risky approach for a real estate venture, said David E. Thurston, a vice president of the brokerage firm Marcus & Millichap based in New Jersey, who has handled industrial deals.

“A landlord is most interested in steady income,” he said. “A plumbing company, even a guy who just wants to park his trucks, can be more advantageous.”

Similarly, banks that underwrite redevelopment projects can be skittish if a property has few demonstrable long-term tenants, said Mr. Thurston, who is not involved with the project.

Yet despite its infusion of small entrepreneurs, Kearny Point is not showing its larger tenants the door.

”We want a mix,” Mr. Nislick said. “Small tenants bring more energy.”

Hugo Neu picked up the $26 million tab for the second major project at Kearny Point, Building 197, a 197,000-square-foot development to open next year.

Mr. Nislick said he was also talking to lenders about helping fund the repurposing of a third site, a towering 150,000-square-foot column-lined structure where ship boilers were made, with a ceiling 62 feet high.

As housing nibbles away at manufacturing zones and the military has less demand for an armada, former naval facilities have become tempting targets for redevelopment, even if they are sometimes in out-of-the-way locations.

For instance, the Brooklyn Navy Yard, one of six federal yards established around the end of the 18th century to fortify a national navy, has become a popular industrial park. The 300-acre site, now owned by the city after closing in 1966, offers a mix of tenants akin to Kearny Point: a whiskey distiller, a glass engraver and a furniture maker, but also a cement company and even traditional dry docks, where tugboats are repaired.

Once employing about 70,000, the yard has about 7,000 workers today.

Philadelphia’s Navy Yard, a 1,200-acre former base that closed in the mid-1990s, is home to 165 companies — most of them with big footprints — that employ more than 13,500 people, a spokeswoman said. The Navy retains 200 acres for storage and maintenance of old ships, like the aircraft carrier John F. Kennedy, as well as research.

And in the Charlestown section of Boston, another yard was redeveloped to provide a home for the MGH Institute of Health Professions, a graduate school founded by Massachusetts General Hospital, as well as a section of a national park.

Three other federally owned naval yards — in Kittery, Me.; Portsmouth, Va.; and Washington — have more traditional maritime uses.

“One of the great things about the redevelopment of the Navy yards is that there’s been so much preservation of the historic character,” said Andrew Gustafson, who has led tours of the Brooklyn Navy Yard since 2010. “The history’s a selling point. It makes the place unique and attractive.”

A visit helps convey the vastness of Kearny’s shipbuilding operation, which at its peak during World War II churned out a finished ship every six days courtesy of 35,000 employees, according to Hugo Neu.

The first ship, for World War I, was the Liberty II, which launched in 1918 and hauled horses to France, according to historical accounts from the Navy. But perhaps the best-known Kearney vessel was the Juneau, a light cruiser that slipped into the Hackensack in 1941 and about a year later, after being struck by Japanese torpedoes, sank in the South Pacific during the Battle of Guadalcanal. Among the victims were five brothers from Iowa with the last name Sullivan, whose story inspired a plot point in the movie “Saving Private Ryan,” Mr. Gustafson said.

Later, scores of ships were also dismantled at the site, like the Essex, an aircraft carrier that earned 17 battle stars for its service in World War II and the Korean War. In 1975, Hugo Neu workers chopped up the 28,200-ton giant and sold the pieces for scrap.

Content originally published on https://www.nytimes.com/2017/12/26/business/navy-shipyard-kearny.html by C. J. HUGHES