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IT HAS COST TAXPAYERS $7.1 MILLION PLUS:

Gloucester City Sells the 100 Chatham Square Apartments for $1.5 Million with Contingencies

William E. Cleary Sr. | CNBNewsnet

GLOUCESTER CITY, NJ (August 2, 2017)(CNBNewsnet)—Gloucester City Screen Shot 2017-07-27 at 3.38.59Mayor and Council approved an ordinance on first reading titled “Adopting a Redevelopment Agreement by and between the City of Gloucester and Cyzner Properties Inc., or its Nominee, a New Jersey Corporation” for the purchase of the Chatham Square Apartments, Route 130 and Klemm Avenue; address 54 Crescent Blvd. The agreement sale between the two parties was dated September 15, 2015, and was amended and supplemented to date on May 4, 2017, according to the ordinance.

RELATED: THE MORE THINGS CHANGE IN GLOUCESTER CITY, THE MORE THEY STAY THE SAME

The sale between the City and Cyzner Properties is contingent upon the buyer’s acquisition of the 34 privately owned Gloucester Terrace Apartments, located next to Chatham Square. The agreed sale price between the two parties for the 100 apartments at Chatham Square is $1.5 million.

The financial arrangement calls for Cyzner Properties to provide payments to the city in lieu of taxes in an accordance with the Long Term Tax Exemption Law NJSA 40A:20-1 et.seq. The second reading and public hearing on the ordinance is scheduled for Monday, 5 PM at the Municipal Building, 512 Monmouth Street.

City Solicitor Leonard Wood was asked today how much will the Cyzner Properties pay annually in lieu of taxes. Wood said, “You are referring to the PILOT program. That information won't be known until Monday night’s council meeting.”

Asked how can mayor and council approve this ordinance without knowing that number beforehand?

Wood said , "Thisis not unusual. Negotiations are still ongoing sometimes up until the final moment.  If you or the public want to know that number come to Monday’s council meeting and speak during the public hearing.”

PILOT is a payment in lieu of taxes (also sometimes abbreviated "PILT" or "PILOT"), made to compensate a local government for some or all of the tax revenue lost due to tax exempt ownership or use of a particular piece of real property. Usually, it relates to the foregone property tax revenue. (source Wikipedia)

Asked what happened to the deal between the City and the NHP Foundation. That group wanted to redevelop the apartments into a senior citizens 55 and over housing. Wood said he didn’t know anything about that. “I was not involved in those negotiations.

Asked why the City doesn’t post the entire ordinances on first reading so the public could see if they wanted to speak on a new law or bond ordinance. Not everybody reads the legal notices in a newspaper. Wood said, “I don’t know why. I will bring it to their attention.”  He said the law doesn’t require a local government to post an ordinance on their website before it is finalized.

In 2007-08 Gloucester City purchased Chatham Square, a 100-unit apartment complex for $4.25 million. At the time Mayor William James said the reason for the purchase was because some of the residents living in the complex were criminals who were selling illegal drugs. James said the criminals and drug dealers were “a strain on the local police department.”  He said too that some residents with children were putting “a strain on the school system.”  

After the purchase Democrat Councilman Nick Marchese said the city was going to demolish the apartments to be replaced by a 55-and-older development. Shortly thereafter that idea was scrapped without explanation. 

Two years later the city hired Oren Brothers of Philadelphia to develop the units into townhouses. Oren borrowed $1.1 million from the City’s UDAG program to fund the development of those properties into townhouses. None of the renovated apartments were ever sold. Oren Brothers did pay back the loan. The new homes were priced between $175,000 and $180,000. Not one of the sample properties were sold even though the city lowered their asking price several times. 

 Related: Gloucester City Fixing Housing Code Violations at Chatham Square  

During the 10 year period the apartments sat empty, the city became a landlord to help with expenses and rented some of the apartments after repairing them. Presently there are 11 units being rented. 

In 2013, the city began talks with NHP Foundation about developing the site. In August of that year, NHP Foundation put forth a plan that called for a total redevelopment of the property which would include installing new utilities and a gut rehabilitation of all units. The courtyard will be converted into a functional space with a walked path, gardens, benches and other activities. One of the presently completed units will be converted into a Resident Services Center where residents can come to socialize and take advantage of various activities. “In addition, and subject to availability of funding, we will build a new Community Center in the courtyard area of the property.” The name for that development would have been Meadowbrook Commons.

From the 2013 NHPF proposal: 

Assuming a 100 unit development, 80 of the apartment units will be rented to people 55 and older having an income below 60% of the Area Median Income for Camden County ($33,300 for an individual) for a total monthly rent, including utilities of $832.

The remaining 20 apartments will be rented to people 55 and older having an income below 50% of the Area Median Income ($27,750) for a total monthly rent, including utilities of $693 (see Appendix for more detailed Financial Analysis).

We estimate a total development cost of $18.6 million, of which $6 million is for the acquisition of the Property, $8.2 million for rehabilitation and associated costs, $2 million for financing, professional costs and project reserves and $2.4 million for developer fee.

The two main sources of new cash for the project will be: a new conventional mortgage of approximately $2.5 million, which is serviced from operations and $9.8 million sale of the allocation of 9% Low-Income Housing Tax Credits for a total of $12.3 million.

The difference of $6.3 million will be provided by the $6 million subordinated mortgage from Gloucester City, plus $300,000 of deferral of developer fee.

The NHP Foundation Submits a Proposal to Buy Chatham Square Apartment Complex

Editor's Note: In 2015 CNBNews filed a lawsuit against the City for not releasing certain documents pertaining to Chatham Square sale negotiations. The date for the case was scheduled for November. In October we were able to negotiate an out of court settlement with the city and received the paperwork. We followed that request with another OPRA seeking how much money the city taxpayers had spent on Chatham Square since 2008 when it was purchased. Below is that information

UP UNTIL 2015 TAXPAYERS SPENT $7,184,450--The City floated a 6a00d8341bf7d953ef0192abded29b970d-800wi$4,350,000 bond in February 2008 to purchase the property and to pay for closing costs. The note was for 40 years with a maximum rate of interest of 8 percent.

Wanting to know how much the City has spent on the apartment complex since it was purchased seven years ago CNBNews submitted an Open Public Records Act (OPRA) request to Jentsch in November. She is also the City’s Custodian of Records. 

As a result, Gloucester City’s Chief Financial Officer Frank Robertson prepared an itemized list (see copy below) of the Chatham Square expenses as of December 8, 2015. 

Some of the numbers that jump out from that list are:

  • $2,043,631 rehabilitation expenses
  •  568,653 paid in interest on the $4,350,000 bond 
  •  61,214 legal fees
  •  92,253  employee salaries
  •  351,196 for operating expenses
  •  17,470 bond council service-financing
  • 28,631 engineering/legal-survey/subdivision
  • 25,000 to Daniel Aaron private contractor

 The grand total spent on the Chatham Square property over the past seven years is $7,184,450 which includes the $4 million plus to purchase the property. It also includes the $1.8 million that Oren Brothers borrowed from the UDAG program to construct towns houses at the site.

Robertson said the total for Orens Brothers includes $414,538 encumbered but not yet paid. Likewise, the $52,844.81 interest on the current $4,050,000 bond anticipation note won't be paid until next year.

In 2008, the taxes on the property were $75,939. Assuming the tax rate stayed the same for the past seven years the amount that would have been paid to the city by a private owner would have totaled $531,923. 

By submitting another OPRA, we learned that The NHP Foundation submitted a proposal in 2013 to purchase the city property for $6 million.  

The public hearing on the latest offer for those apartments is Monday, August 7, 2017, at 5 PM, Gloucester City Municipal Building, 512 Monmouth Street. 

 

 

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