Sunday, June 12, 2011

King of Prussia developer J. Brian O'Neill has big plans in New York metro area

"The performance was vintage J. Brian O'Neill.

The King of Prussia developer paced around a conference room at his company's headquarters, talking animatedly about his latest project as he used a black marker on a flip chart to make certain points, letting loose with a profanity every so often to emphasize his excitement.

It was a side of the typically effusive, boastful, readily smiling O'Neill that hasn't been on display much lately.

Not since the economy tanked, leaving an admittedly unprepared O'Neill with sleepless nights "agonizing over keeping the company alive and laying off employees." (O'Neill Properties Group L.P. is down to 47 employees from 175.)

Not since the news releases announcing grand openings and groundbreakings stopped in 2009.

Not since O'Neill went to war with his longtime lender in January 2010, filing an $8 billion lawsuit against Citizens Bank of Pennsylvania alleging fraud and partial ruination of his company.

"It's been . . . brutal," he said last week.

But settlement talks are showing promise, according to one lawyer involved. And O'Neill Properties Group, whose work has been predominantly local in its 23-year history, is embarking on a business expansion to establish a footprint in a market its founder has longed to be in for a decade or more: the New York metropolitan area.

"We outgrew the ability to function entirely in the Philadelphia market; the sheer absorption numbers weren't enough," O'Neill said. "So I've targeted the Manhattan metro market as our next primary focus."

His plan is to enter that market in spectacular fashion: 8 million square feet of waterfront shopping, offices, hotels, and high-end housing at the confluence of three heavily traveled roads (Garden State Parkway and Routes 9 and 35) in Sayreville, N.J., about 30 miles from Manhattan.

If execution follows what's planned, there indeed will be no missing The Point, a $2.9 billion project expected to take 10 years to complete.

The vast exterior walls of its 3 million-square-foot "fortress mall" will include LED screens touting retailers and merchandise in colorful high-definition lighting. There will be 250,000 square feet of outdoor signage and "brandscaping," an amount rivaling Times Square and the Las Vegas Strip combined, says a flashy promotional video set to music.

The numbers that matter more to O'Neill are these demographics, which help lure tenants to the first phase of The Point, a 620,000-square-foot shopping center:

The 453-acre brownfield in Middlesex County, a former paint-factory site O'Neill bought for $50 million in fall 2008, is passed by more than 400,000 cars a day, is within a 20-minute drive to more than two million people, and sits among average household incomes that exceed $80,000.

"It's a growth market for our business," O'Neill said. "We have to rebuild. We've been harmed substantially by the recession and its effects."

And taught some painful lessons. A rarely self-critical O'Neill said, "I did a lot of things wrong."

Two big blunders: "I misinterpreted the ferocity of the financial meltdown. I allowed my overhead to be tied to growth, not current business."

He has become convinced of the importance of partnerships. The Point will involve an assortment of them, including Prudential Insurance Co., along with a national housing developer not yet selected to build the 650 units of for-sale housing, and a mall developer to be picked through a competitive process, O'Neill said.

O'Neill Properties will build 1,350 apartments and some retail. The company's financial stake in the entire project is "yet to be determined," he said.

"The financial markets are healing, but still very difficult," O'Neill said. "The Point will require a 24-hour, seven-day-a-week effort, a tremendous amount of tenacity, and great partners in order for us to realize its full potential. We have a plan to make all that happen."

Including naming son Brian Jr. to manage it. That O'Neill, 24, said last week that Bass Pro Shops, a Missouri-based outdoors recreation retailer, was finalizing paperwork to become the first signed tenant. The planned 200,000-square-foot store would be one of the largest in its 56-store chain, said spokesman Larry Whiteley.

There's already a hiccup: O'Neill was supposed to preside at a groundbreaking ceremony in Sayreville this week to whip up excitement and announce Bass Pro's signing. Friday brought the announcement that scheduling conflicts had forced a postponement.

Closer to home, things are equally fluid with the Citizens Bank litigation, currently scheduled for trial in Philadelphia in December. O'Neill has alleged that Citizens, Citizens Financial Group, and their parent, Royal Bank of Scotland Group P.L.C., breached significant financial commitments to him, destroying or seriously harming some projects.

Last week, he referred questions about the case to one of his attorneys, Lawrence G. McMichael, a partner at Dilworth Paxson L.L.P.

"The case is not settled yet, but we're very close," McMichael said. In April 2010, O'Neill's damage claims were drastically amended down to $297 million.

Robert C. Heim, a lawyer from Dechert L.L.P. representing Citizens Bank, declined comment last week.

A resolution would jump-start construction at O'Neill's stalled, and largely incomplete, $700 million Uptown Worthington retail/office/residential development on 101 acres along Route 202 in Malvern, the financing for which is at the center of the lawsuit.

What exactly the finished product will look like is uncertain, however. What had been planned there - a town-center concept with an open-air store arrangement - is now out of vogue.

O'Neill, 51, acknowledged as much last week in explaining why the heart of The Point will be an enclosed mall - albeit with lots of windows and airy spaces of natural lighting that were not primary to mall design in the 1970s and '80s, when most in this region were built. "Due primarily to the weather," he said, "people for convenience are going back to the mall."

"If Uptown could be enclosed, I would" do it, O'Neill said, while insisting that "there still is a place" for the project as originally envisioned, especially in a suburban area with no downtown.

"Uptown will become the Center City of Great Valley," he said. Currently, Uptown consists of two stores: a Wegman's and a Target.

As for O'Neill Properties' plans in the Philadelphia market, where it has several million square feet of office, residential and retail space, he said the company would do "fewer larger projects" and had "a very diligent strategy of selling off our smaller projects."
Among those currently in play is the $59 million upscale Londonbury at Millennium apartment complex in Conshohocken, completed last July as part of a fire-related reconstruction. O'Neill would not confirm recent published reports that a potential buyer has offered $80 million.

Construction continues on a 500,000-square-foot retail/entertainment complex next to the Philadelphia Premium Outlets in Limerick.

O'Neill would not provide any sales projections for his privately held enterprise other than to say: "This company is getting better, but is still in the rehabilitative stage."

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