A RETAIL MARKET ANALYSIS FOR ELIZABETHPORT

Report to Brand New Day, Inc.

May 29, 1996

PROGRAMS AND DEVELOPMENTS

There are several existing programs, projects and developments that affect retail development in Elizabethport. Parts of Elizabethport enjoy an Urban Enterprise Zone (UEZ) designation. The Elizabeth Development Company (EDC) and the New Jersey Economic Development Authority's Entrepreneurial Training Institute (ETI) offer programs to assist business development. The Metromall and Kapkowski Road development projects could have a large impact on development in Elizabethport.

In 1985, portions of Elizabeth were designated by the New Jersey Urban Enterprise Zone Authority as Urban Enterprise Zones (UEZ). The UEZs are administered by the New Jersey Department of Commerce. The zones are designed to attract and retain businesses by offering them special benefits, including a reduction in the state's sales tax, tax credits, and job training programs. A portion of Elizabethport, the old shopping district along First Street, is located within the UEZ.

The Elizabeth Development Company (EDC) is a public, nonprofit economic development corporation with an independent board of trustees and has a close working relationship with the municipal government. The EDC offers a host of services including business financing. EDC has envisioned a small business incubator at the proposed Brand New Day site on First Street. The incubator is to house either retail establishments or small contractors (e.g., masons, tilers, carpenters).

The Entrepreneurial Training Institute (ETI) offers a business program operated by the New Jersey Development Authority in conjunction with the Elizabeth Development Company and the Union County Economic Development Corporation. The eight-week program is designed to teach new and aspiring entrepreneurs the basics of operating a business. It covers topics from business planning and goal setting to finance and marketing. Participants are eligible to receive financing from a fund established for ETI graduates. Numerous graduates are currently searching for business sites in Union County.

Soon to be developed within Elizabeth is a shopping mall, known as the Metromall. The Metromall is currently in the final stages of predevelopment planning. Located on a 166-acre site, the Orion Elizabeth New Jersey (OENJ) Corp. is developing a $320-million project consisting of a 1.5-million square foot retail discount mall with twelve major anchor tenants, 250 factory outlet stores, and eighteen restaurants. An additional 300,000 square feet of retail space will be built on a 30-acre parcel directly across from the main mall. The project has received preliminary site plan approval. The Redeveloper's Agreement is scheduled to be considered later this summer by the Elizabeth City Council, and the mall is scheduled to open in the spring of 1998. As part of this agreement, the redeveloper must assure that city residents will be employed. In addition, the redeveloper will give local preference to facilitate contracting or purchasing as well as to local retailers and restaurants that may relocate to the project if compatible. The Industrial Areas Foundation has assumed a watchdog role in this regard.

Developers estimate that this project will create 1,700 construction jobs and 5,200 permanent jobs when the mall opens. The New Jersey Department of Labor, using the Regional Industrial Multiplier System ("RIMS") to measure the impact of the project, concluded that the project would result in 18,300 permanent jobs for the region once construction is completed. This project is slated to yield a minimum of $6.5 million in new tax money for the city of Elizabeth, which will increase by $195,000 each year after the first year.

Discussions with the leasing representative indicate the tenant mix for the Metromall will be primarily manufacturers outlets stores with a food court. No retail services or sit-down restaurants are anticipated. Leasing activity has been very brisk, however, the representative was reluctant to disclose the actual preleasing statistics.

Located next to the mall will be IKEA, the Swedish discount furniture and home furnishings chain, which is expanding and developing a 375,000 square foot specialized retail center on an adjacent 50-acre site. The project will create the IKEA Power Center and will include three buildings to accommodate six major tenants. Incredible Universe, a division of the Tandy Corporation (Radio Shack), will occupy 185,000 square feet in the new development. Developers estimate that the project will create approximately 1,200 new full-time jobs and yield $750,000 in new tax money for the city of Elizabeth. The tenant mix at this development will constitute large-box discount retailing.

Currently, Elizabethport is cut-off from the Metromall location due to the incomplete road system that should join the two sites. Eventually, the completion of the Kapkowski Road will connect the Metromall complex to Third Street in Elizabethport. This project will improve access to Elizabethport. Infrastructure improvements directly associated with this project include: the reconstruction, extension, and widening of Kapkowski Road from its intersection with North Avenue on the North to the Great Ditch on the South; the construction of a new fly-over, connecting Kapkowski Road with the New Jersey Turnpike at interchange 13A; and the extension of Kapkowski Road to the North from the area of the proposed fly-over to Trumbull Street at its intersection with Third Street. The Trumbull and Third Street connection will greatly affect Elizabethport by providing immediate vehicular access to the mall development. The city council has approved the contract with the Port Authority for the project.