E.B. may bond to buy back Golden Triangle

Negotiations expected, as builder seeks changes

BY VINCENT TODARO Staff Writer

Three years after it sold the Golden Triangle property to Toll Brothers, East Brunswick could wind up buying it back.

The Township Council last week introduced a $25 million bond ordinance that would provide the necessary funding in the event officials decide to repurchase the Route 18 parcel that has often been the subject of political debate in recent years.

The bond ordinance follows two meetings between representatives of the township and Toll Brothers to discuss the development firm’s Nov. 7 letter to Mayor William Neary. In the letter, the firm says it wants to revisit the redevelopment plan and possibly make changes, such as eliminating the housing portion and increasing the retail component.

Toll Brothers bought the land from the township for $35 million and has approval to build 402 residential units and more than 180,000 square feet of retail space on the property. The new “transit village” was to take the place of the buildings currently home to Sam’s Club, Jason’s Furniture and the now-vacant Route 18 Indoor Market.

In the letter, the development firm said current economic conditions are forcing it to reconsider aspects of the project. In particular, Toll Brothers said there is no market for housing at this time, making that part of the plan not feasible.

“In today’s climate, there is no doubt that the Golden Triangle redevelopment plan fails and is not economically viable,” Toll Brothers’ Robert Fuller wrote in the letter. “The residential units would cost more to construct than the price at which the units could be sold, assuming that buyers and mortgage financing could be found.”

The letter wasn’t exactly what Councilman David Stahl wanted to see as he prepares to begin his first year as mayor. Introducing a bond ordinance to repurchase the site is a way of protecting the township, as well as giving it some leverage, he said. Stahl said the ordinance would provide money in case Toll Brothers does not remit the $4.5 million payment due at the end of 2008. The incremental payments from Toll Brothers are anticipated in the township’s annual budgets. Without a funding mechanism in place, the township would have a $4.5 million budget deficit, Stahl said. The state requires that municipalities have balanced budgets, so should Toll Brothers not make the payment, the town would have to use the borrowed money to fill the gap, he said.

Stahl said it would be premature to say whether the township will wind up purchasing the land or what it would do with the property in that event. He said officials are presently focused on good-faith negotiations with the developer.

The bond ordinance is scheduled for a second reading and adoption at the Dec. 8 council meeting, Stahl said.

Toll Brothers has been paying the township $4.5 million per year since 2004, but the payments will decrease over the next two years and will cease entirely in 2011. Township officials had hoped its development would be in place by then in order to generate tax revenue to replace the developer’s payments.

If it reacquires the property, the township may stand to gain back money in the form of rents the businesses there pay to Toll Brothers. When the township owned the land, those businesses paid about $500,000 a year to the town, which used the money for the township’s commuter parking utility budget. The township operates the Transportation and Commerce Center parking garage on the Golden Triangle site and recently bonded for $32 million to have the deck built.

Stahl described the bond ordinance as being “like an insurance policy, because if Toll does not pay, we would be in a deficit.” However, he noted that the township has not received any word from Toll Brothers that it might not submit its 2008 payment.

Another reason for the ordinance, Stahl said, is to give the township leverage in its negotiations with Toll Brothers. If the township renegotiates with the firm, Stahl said, he wants the town’s position to be based solely on its best interest, not desperation.

“I don’t want a timeline set,” he said. “I don’t want to act hastily.”

While the bond ordinance is for $25 million, it does mean the town would spend that much, Stahl noted. If it is adopted Dec. 8, the township will go to the bond market for $4.5 million.

The council met in a lengthy closed session after its Nov. 24 meeting, discussing the issue with township Finance Director L. Mason Neely and its new redevelopment attorney, Matthew Karrenberg.

Stahl said the two meetings with Toll Brothers were to consider the renegotiation items, and the town is awaiting a financial analysis from the firm, as well as an independent analysis.

“You have to recognize the economic time. Homebuilders are suffering from the credit crunch,” Stahl said.

In the letter, Fuller said the extraordinary economic conditions have Toll Brothers considering ways of making the project feasible. He noted that one solution would be to “unwind” the redevelopment agreement, but other alternatives would be to include the existing buildings in the plan, instead of replacing them. The developer suggested that it enter long-term leases with businesses in those buildings, and possibly refurbish or reconfigure them.

In particular, the developer suggested the following modifications to the agreement:

“At the redeveloper’s discretion, the residential component of the plan shall either be replaced with viable retail and/or commercial uses, or modified and delayed for an indefinite period until market and construction conditions have improved to the degree necessary to make the development and sale of residential units financially feasible.

“The redeveloper may refurbish, rehabilitate and/or reconfigure the existing buildings on the site and attempt to re-tenant the buildings with long-term commercial leases. All deadlines in the redevelopment agreement … will be tolled for the term of the leases. Additionally, the redeveloper may … develop those components of the currently approved project that the developer determines can be developed.”

The developer concluded the letter by saying it looked forward to meeting with township officials to discuss the possible changes, saying they can make the Golden Triangle “a vital ratable to the township while the economy struggles through turbulent economic times.”