The continued willingness of the National Park Service to grant extension after extension to Sandy Hook Partners (SHP) for its planned development of Sandy Hook is of great concern. What worries me even more, however, is what will likely happen if they ever do manage to finance the deal.
Anyone who has borrowed money from a lending institution knows that the interest on a loan is expensive. In a typical mortgage, for example, the borrower eventually has to pay back about double the original loan. Investors in real estate deals have even higher expectations for earnings on their invested capital. Let’s assume that Sandy Hook Partners arranges for $80 million in financing for the development project, some of which will be covered by tax subsidies. In addition to paying back the principal, they must also pay interest – typically something like 7 percent over 10 years – which is likely a conservative estimate.
To service this loan, SHP will have to pay over $600,000 per month from rent on the buildings and whatever other fees they have in mind. It seems highly unlikely, if not impossible, that this kind of revenue can be generated from the education and conservation-oriented organizations that we are told will be the tenants of the renovated buildings. The only way to generate this level of cash flow would be from a substantial number of commercial, for-profit enterprises.
To my knowledge, the business plan for the development has not been made publicly available. One can only assume that the public would not like what it sees in this document.
In my view, what makes Sandy Hook so special is not its human-constructed buildings that have little historical or architectural significance, but rather it is the remarkable unspoiled natural beauty and habitat for wildlife within sight of one of the world’s largest cities. Commercialization of this jewel would be a tragedy.
Jennifer Francis
Institute of Marine and Coastal Sciences
Rutgers University
Highlands