Affordable units could be moved
By: Vic Monaco
HIGHTSTOWN The borough’s redevelopment plan, which limits to 80 the number of residential units that can be built at the former rug mill property, is not financially feasible, according to a hired consultant.
In addition, the latest redeveloper’s plan for the 7-acre tract drastically underestimates both the cost of environmental remediation and the number of affordable housing units needed if the borough sticks to its plan to locate all those state-mandated COAH units on the tract, the consultant told Borough Council this week.
Despite the gloomy prognosis, borough leaders were widely split in their opinions on the impact of the long-awaited consultant’s report.
Mayor Bob Patten, a proponent of the latest developer’s plan which features 98 residential units, said he believes Borough Council needs to go back to square one.
"It’s up to council but I think we’re going to have to change our redevelopment ordinance unless we think we can get a developer who wants to lose money," he said.
The mayor added his belief that the borough’s issuance of a request for proposals from other developers last week will render meaningless plans based on a faulty ordinance.
"What I would recommend is looking at what kind of proposals come in later," he said.
Meanwhile, Council President Dave Schneider suggested another significant turnabout.
"I think we’re heading toward the possibility of moving the COAH units off site," he said. "It may be causing too many problems."
But Councilman Walt Sikorski frustratingly asked, "Where else would you put them?"
Consultant Pete Sockler presented a market research and marketability report Tuesday that addresses both the borough’s redevelopment ordinance and the most recent proposal that features 88 market-rate residential units and 10 COAH units. Surprisingly, he also analyzed a third scenario with 88 market-rate units and 18 COAH units, saying that the developer and borough hadn’t factored in state requirements for affordable units linked to the office and retail aspects of the developer’s proposal.
Mr. Sockler said any developer limited to 65 market-rate units and 15 COAH units, per the borough’s ordinance, would spend about $27.4 million on the project and would recoup only about $26.7 million, for a $673,524 loss. The main reason for that lack of profitability, he said, is that developer Greystone Mill’s $300,000 estimated cost for environmental remediation has risen to about $1 million.
"The redevelopment plan, as proposed, is very difficult to make profitable," Mr. Sockler said. "I don’t think it really works, unfortunately."
Mr. Sockler said the current plan for 88 market-rate units and 10 COAH units would cost Greystone and partner Satish Mehta about $30.2 million and render gross sales of $31.9 million, for a profit of about $1.7 million. But when adding another eight COAH units that would be required by virtue of the office and retail space planned, that profit would fall to less than $400,000, he said.
Mr. Sockler was peppered with questions by Councilman Patrick Thompson, who indicated his belief that Mr. Sockler may have used condominium sales prices that are too low. He estimated that the developer could make a profit of $3.2 million if he sticks to his selling price of $290,000 per market-rate condo, which compares to Mr. Sockler’s estimate of $245,000.
Mr. Sockler later said the developer’s price was for a condo that significantly exceeds the borough ordinance limit of 1,500 square feet and includes some optional upgrades. However, the ordinance calls for an average size of at least 1,500 square feet.
[vmo: could be cut : ]Prompted by Mayor Patten, Mr. Sockler, a former member of the borough Planning Board, explained that he is a real estate appraiser, broker and counselor of real estate with about 20 years of experience.
Mr. Sockler was assigned the study by Borough Council in August, at a price of $10,000. The consultant said delays in finalizing it were a result of changing plans being presented to the borough.
Greystone Mill, which has an agreement of sale on the land, last spring presented a plan with 80 units but soon after reportedly upped that number to 130, citing the necessary profit margin. Borough Council, after having worked about two years with Greystone and Mr. Mehta, an area partner of the firm, voted 4-2 earlier this month to seek proposals from other developers.
Councilman Sikorski said Tuesday that if the borough were to select another developer, that entity would likely have to buy the land from Greystone at a higher price, thus pushing up the total cost of the project.
"Greystone has spent about $194,000 to cover our professionals’ fees and probably another $200,000 for his professionals," he said. "Isn’t it likely that the price of the land could go to $5 million or $6 million?"
Mr. Sockler, who said the current land deal stands at $3.4 million, replied, "Certainly, yes, the developer would try to get the highest market rate on the sale."
Asked by Councilman Thompson, Mr. Sockler said the typical profit on a project the size of this one is between 20 percent and 30 percent.
John Wolfington of Greystone Mill could not be reached for comment. However, Mr. Sockler said he believes Greystone is aware of the results of his report.
"I don’t think they were too happy," he said.