The Whalepond Village senior housing complex in Ocean Township has been purchased by the township and leased to Community Investment Strategies, which is expected to purchase the property within the next 18 months. KENNY WALTER Ownership of Whalepond Village on Stacey Drive is changing hands, but Ocean Township is taking steps to ensure the 95-unit complex remains affordable senior housing.
Ocean Township purchased the Whalepond Village complex on Feb. 21 from K. Hovnanian Homes and immediately signed a one-year lease of the complex with Community Investment Strategies (CIS) that will eventually result in CIS purchasing the property. “They will take over immediately with the management and the leasehold interest,” Township Attorney Martin Arbus said during a special Feb. 19 Township Council workshop meeting.
“Our concept here is to try to preserve this for low- to moderate-income seniors,” he added. “The town’s not looking to be the landlord. CIS is ultimately going to be the owner and landlord, because this is what they do.”
Arbus explained that the township purchased the property initially, while CIS, a Lawrenceville-based real estate management company, is in the process of securing tax credits that will facilitate the purchase.
He said the township-imposed 20-year senior-housing restriction on the complex expired, and the township purchased the property to prevent the complex from becoming market-rate housing, available to all ages.
“This was going to be sold by K. Hov. to a third-party purchaser who was going to make these market-rate units,” Arbus said.
According to Arbus, the complex was not previously included in the township’s mandated affordable-housing quota, but most likely would now be.
“K. Hov. was never covered either, but now that the ownership is changing and there is going to be rehabilitation, we will get some credit,” he said.
The lease agreement with CIS will be for a one-year term, which can be extended once for an additional six months. Arbus said CIS could purchase the Stacey Drive property at any point during the term of the lease.
“The property is going to be leased by them, they are going to be in charge, and we will maintain some control,” he said. “They will then be obtaining financing for the ultimate purchase.”
Arbus classified the agreement as a “pass-through,” meaning the purchase will not cost the township other than some legal expenses and insurance on the title.
According to Township Manager Andrew Brannen, the council bonded for $7.1 million for the purchase of the property, and once it is sold, will pay off the bonds.
“When we get the money back from CIS, we will be able to immediately repay those loans,” he said.
Arbus also said CIS will pay full taxes on the property and an additional $25,000 a month during the duration of the lease.
However, once CIS owns the property, the town will enter into a payment-in-lieuof taxes (PILOT) agreement.
“When we ultimately sell to them, they will be paying a PILOT at 6.28 percent [of revenues],” Arbus said. “The term of the dollar amount for the purchase is basically the same price that we paid.”
Deputy Mayor Chris Siciliano said he expects the township’s portion of taxes from the property to almost double with the PILOT, because under the agreement the school district will receive less tax revenue.
According to Brannen, the township collects approximately $100,000 in annual taxes from the complex.
Arbus also said CIS will likely receive grant monies for the purchase from both the township and the Department of Community Affairs (DCA).
“The town is giving them a grant of $500,000, and there is also a grant from DCA that we are anticipating that is going to be $1 million,” Arbus said.
“Part of the concept of the grant from DCA is to preserve the low- or moderate-income housing project,” he added. “That grant is ultimately going to be repaid over a very long period of time.”
Other costs the town expects to incur include subsidizing some of the rentals.
“We are also subsidizing certain rents over a period of time for the people in the apartments who are not paying the full low- or moderate-income rent,” Arbus said. “The town is picking up part of the cost for that.”
The agreement with CIS will ensure the complex remains senior affordable housing for at least another 30 years, the maximum allowable period of time under state law.
According to Arbus, the township has taken steps to protect against any liability related to the deal with CIS.
“Certainly anybody can renege on a deal; however, they are obligated to purchase, and that obligation is not contingent on if they can get the financing,” he said. “So even if the financing doesn’t work out to their benefit, they are still obligated to purchase.
“Obviously if they don’t purchase, there will be a claim against them,” he added. “Either way, if they get no financing legally they are still obligated to close.”
Since 1994, CIS has been a developer of multi-family housing, senior housing and mixed-use redevelopments, as well as market rate and affordable housing, valued in excess of $350 million. The company’s portfolio includes more than 2,000 apartmentrental units in the Northeast, with a high concentration in New Jersey, including properties in Manalapan, Jackson and Toms River.