As anyone who lives there will tell you, property values and rents have soared in much of Jersey City as new residents have come in droves. But the arts scene in New Jersey's second-largest city has not kept pace when it comes to public entertainment venues. While the historic Loews Jersey Theatre shows movies and hosts a smattering of events, most of the city's theater and live music is still confined to restaurants, bars and borrowed spaces.

That could soon change. A developer and his partner have set their sights on an...