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Details of Gloucester City's Sale of Chatham Square; Includes Interview with City Solicitor

 

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The new owner of Chatham Square was able to obtain the 34 Gloucester Terrace Apartments for $2 million plus. Those buildings will be included in the renovation and rebuilding of the Chatham Square complex (CNBNews photo)

 

 

William E. Cleary Sr. | CNBNewsnet

GLOUCESTER CITY, NJ (September 25, 2017)-The CNB article on the sale of the Chatham Square Apartments last month(Gloucester City Sells the 100 Chatham Square Apartments) was missing details such as how much will the Screen Shot 2017-09-24 at 14.8.05new owner pay the city in lieu of taxes. In order to obtain the answer to that question and others we submitted an Open Public Records Act request (OPRA) for copies of the Redevelopment and Financial agreements between the city and Cyzner Properties Edison Inc. The agreement sale was dated September 15, 2015, and was amended and supplemented to date on May 4, 2017.

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 June 1, 2010, Gloucester City announces it has hired Orens Brothers to convert the 100 apartments into 50 Townhouses. Prices for the townhouses range from $167,000 to $195,000.  The arrangement with Orens, who borrows $1.1 million from the city’s UDAG program to help pay for the work, calls for the town homes to be built as they are sold.  CNBNEWS Photo: City council along with officers from Orens Brothers attend ceremonial groundbreaking at Chatham Square.


The financial arrangement calls for Cyzner Properties to provide $1.5 million downpayment and $155,000 annually to the city in lieu of taxes in an accordance with the Long Term Tax Exemption Law NJSA 40A:20-1 et.seq. The 30-year-contract contains no cost of a living clause as such the payments, labeled in the contract as an Annual Service Charge will remain at that figure. "Likewise, the Annual Service Charge shall not be affected by any revaluation or reassessment during the term of the agreement," as per the contract. Cyzner will pay taxes on the land which will be assessed later.


According to the documents, Cyzner was able to obtain the nearby 34 Gloucester Terrace apartments for a purchase price of $2 million plus.
The Redevelopment plan includes the rehabilitation, reconstruction, and construction of up 134 upscale apartments. The project calls for 87 construction jobs and two permanent jobs. The project is expected to take two years to complete starting from September 2017.


The construction cost estimate for the 134 apartments is $17.4 million or $130,119 per unit. (copy below)

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City solicitor Howard C. Long Jr.Jr., (photo) said in a phone interview that the city in 2015 Screen Shot 2017-09-14 at 12.36.42declared the area in need of rehabilitation. "Not only was Chatham Square in need of rehab so was the 34 apartments at Gloucester Terrace. We had buildings that were caving in and the area needed millions of dollars in improvements. It was my position, and the council agreed that we should not be in that business."

The firm of Wade, Long, Wood, and Long, of Laurel Springs,  has represented the City of Gloucester for the past two and half years.

"We started to market it as a redevelopment area," said Long. "We had three redevelopers come to the table. We interviewed them all decided on Cyzner. We negotiated a deal with Cyzner and they agreed to make substantial improvements to the property. Taking a dilapidated abandon property and turning it into a beautiful thriving, nice maintained community, which was very important to the city council. Cyzner will build a clubhouse for the tenants. "

"Cyzner's focus in the way they will be renting these apartments will be on attracting young folks, the 20 to 30-year-old group who are working in Philly and are looking for a place to live that is close to the bridges. That is who they will be marketing it to," the solicitor said.


Long said the 30-year deal with Cyzner totals $4.65 million. "It comes with $1.5 million up front. Which will be used to pay down the 2008 purchase price of $4.2 Keep in mind we (the taxpayers, emphasis reporter) are presently paying $200,000 annually in debt service. We don't have that any longer."

"What is happening is the debt will go out to long-term financing and the estimated bid service payment, when you apply the $1.5 million, which the city is doing, is $4.26 million. What we have done is negotiated a deal were Cyzner paid $1.5 million up front, a flat $155,000 per year. Over the course of 30 years that will pay all of the debt service, that the city has occurred. At the end of 30-years there will be between $160,000 to $200,000 net gain to this city."

"If we did not do this deal and sat on the property the cost in debt service payments, try to follow me, would be nearly $7 million over 30 years. We are out from under that obligation which frees up the money for other projects. Cyzner, without asking, donated $100,000 to the community."


Long said, "The positive results of this is we are not paying $7 million. We are going to end up with about $160,000 net. All our debt service is taken care of. Millions of dollars are being put into that facility. And the people who live there are going to be the type of folks that may decide to eat in town, may decide to support the community in someway.."


Asked about the NHP Foundation plans to build a 55 and over complex, Long said they wanted the city to finance the project.(see article)


When asked about the flat fee of $155,000 annually in lieu of taxes without any increase in 30 years, Long said "We negotiated that again and again, and they were not willing to bend. I am convinced we got the most out of them as we could. This is a positive thing for the city. I wouldn't recommend it if it wasn't. "

In 2015 CNBNews submitted an OPRA to find out how much the City taxpayers had spent on the apartment complex since it was purchased in 2008. As a result, of our request Gloucester City’s Chief Financial Officer Frank Robertson prepared an itemized list (see article) of the Chatham Square expenses titled Chatham Square Expenses (As of December 8, 2015) showing the total cost was around $7.1 million. That number did not include the tax ratables that were lost over the period of eight years. Asked about that number Long disagreed with that amount.

"They (the City) didn't put that much money into that property," he said. "That isn't even close."

After sending Long a copy of our 2015 article which included the itemized list that Robertson released we spoke with him again.

"That $7.1 million was the number that was going to be bonded, said Long. "All that we did was pay interest payments on that amount. That $4 million is not out of pocket dollars. It was never paid. That is why Cyzner gave us $1.5 million up front plus payments to equal that amount. Actually, we will finish about $200,000 to the positive at the end of that agreement. If you subtract the $4 million from that expense sheet the total is about $3.5 million. We have also received rent. At this time I can only find rent receipts for 5 years. Over that period we collected nearly $500,000. Deducting that we are down to $3 million or $3.1 million. We, actually been collecting rents for about 9 years so I am willing to give you a rough guess that we collected close to $600,000 to $700,000 in rents which would bring the amount spent on that property to about $2.5 million. So the city actually spent that amount on that property to maintain and operate that facility for nearly a decade. The finance officer will be back to work on Monday, September 18. I will talk with him about the rent for the other years."

NOTE: We wonder why the City's Chief Financial Officer would release an itemized statement to the media in 2015 showing the total expenses for the property up to that date was $7,184,450; it doesn't make sense. (see document below) That number included a total of $6.8 million for capital and financing expenses, along with $61,214 charged to the budget for legal and bond expenses, and $289,982 for non-Capital expenses. It is also confusing why he didn't include the rent receipts in that statement as income.

After discussing those concerns with Long we closed our interview with a request that he provide the public with an accurate cost sheet on the total expenses and receipts for the property over the 9 years that it was owned by the city. We followed up that request with a telephone call to his office on Friday, September 22 asking for that information.

As of this date, we are still waiting for that information.

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