Dormant ‘Sleep Cheap’ Store Awakens to a New Day

After its years-long slumber, a three-story former mattress store with a quirky, aging façade will soon awake to a new life.

Entrepreneurial redevelopers' dreams for the 7,000-square-foot “Sleep Cheap” in Jersey City, New Jersey, once included luxury mid-rise apartments built out to maximum-density, and more recently, a cannabis lounge.

As far back as 2008, the storefront’s previous owner had big plans to redevelop the 1900-built, Class C masonry in-line box into a seven-story residential mid-rise with private rooftop decks — and they’d even gotten approval from the city to do so.

But a lot has changed since then. The previous retail tenants moved out more than five years ago, and the building was “in rough shape,” according to listing broker Medhat “Zak” Dewaik of Coldwell Banker Commercial Realty. The pandemic also shot up construction costs and saw the street close down to cater to outdoor dining and casual shopping.

Now, after a $4.75 million transaction, its buyer has landed on plans to gut the property and convert ground floor retail space to cater to its street’s new pedestrian plaza, with boutique offices above.

Dewaik and the owner initially listed the property for $6 million because of its “excellent” location. Half a block from the Grove Street light rail station and equidistant from the Historic Downtown and Waterfront neighborhoods, 155 Newark Ave boasts an “Excellent Transit” rating from Walk Score and the elusive “Walker’s Paradise” designation with a perfect score of 100.

The list price reflected plans for the building to have 17 luxury one-bedroom rentals starting at $2,611, with a three-bedroom penthouse targeting rent of approximately $6,400. The development would include two commercial units attracting a projected total monthly rent of $32,773. Based on his more than 25 years of doing business in downtown Jersey City, Dewaik believed these estimates looked promising.

But by the time the deal started rousing buyers, the pandemic had turned the lights out on construction spending. “What happened in 2020 was a disaster” for new multifamily builds, Dewaik explained. “Rent in Jersey City, Newark — everywhere — went down by almost 20%.”

At the same time, he said, construction costs continued skyrocketing. “To build above five stories you have to use concrete, and [the plan for apartments] was going to cost too much. The owners became afraid of the cost of construction.” The cap rate, with those projections, shook out to barely more than 1%.

But the pandemic also wrought positive changes for the property’s prospects. Beginning in 2021, Jersey City and the Historic Downtown Special Improvement District started planning and renovating two blocks of Newark Ave into a car-free community space.

Enduring both the retail recession of 2020 and a rough year of transition during construction and planning, the stretch where the subject property sits was officially transformed into a $7 million pedestrian plaza in time to celebrate the area’s already popular Restaurant Week this past July.

With trees, planters, bioswales, bike racks and decorative lighting, it made sense to position the property for a use case that would thrive on foot traffic.

As projections pivoted, a new prospective buyer saw high hopes for redeveloping the property to serve as a self-operated cannabis dispensary.

Thanks to New Jersey’s legalization of recreational cannabis use and possession earlier this year, buyer Matthew Cimiluca (who couldn’t be reached prior to publication) started envisioning the property as a fully legal cannabis retail store that his own enterprise would operate. The state’s regulatory commission and treasury department reported in August that recreational cannabis sales in New Jersey reached nearly $80 million from the day sales began, on April 21, through June 30.

Represented by Lauren Stangl, of Boutique Realty at the time, Cimiluca’s company’s “cannabis lounge,” dubbed Local Modiv, was approved for conditional use by the city in March, according to Hudson Reporter.

But those plans went up in smoke.

The application for cannabis dispensaries in New Jersey currently favors minority- and women-owned businesses and entrepreneurs, Dewaik explained, but it comes down to a number of requirements that can make the approval unpredictable.

Despite its female CEO, Chelsea Duffy, for instance, Local Modiv expressed that it had been treated unfairly in a July lawsuit against the city and its Cannabis Control Board. “The process can be quite political,” Dewaik explained. But there are also physical restrictions to approval, such as a requirement that two dispensaries be located at least 200 feet apart from each other.

“[Cimiluca] was really looking forward to getting the dispensary, and I was hoping he was going to get it because it’s a really good business in this market,” Dewaik continued. “But unfortunately, the planning board ultimately didn’t provide [next-level] approvals.”

Another buyer had looked at the same property for cannabis retail as well, Dewaik said, but ultimately decided against it. “They ended up really regretting it,” he said, “but they found another property nearby, at 141 Newark, and I heard they got approved for a dispensary there.”

By the end of a closing process that took around 150 days, the seller ended up accepting a much lower offer than their original asking price: $4.75 million.

Cimiluca went through with the purchase, planning to make the best use of the pedestrian plaza with a retail store or restaurant on the ground floor, Dewaik explained. “They are going to gut it, fix it and extend it to the very back of the lot line and [they] may be looking for a large restaurant that should be able to attract rent of at least $30,000 - $35,000 per month.”

Based on those projections, the property’s new cap rate lands at around 4.5%.