Profitability of PILOTs

Alister

The 2006 PILOT approved for the Alister does not calculate the annual service charge based upon actual rents; there is only a set amount per unit that escalates to a maximum of $3,300 in September 2034. Current rents for 2-bedroom apartments are over $4,000. What’s even more concerning is the financial agreement provision for additional income based upon the profit rate is illusory. Any opportunity for the Township to be compensated fairly was eliminated by the slick lawyers representing the project.

The entity that owns the project leased the property to a wholly owned disregarded entity, so the only revenue that appears on the project with the PILOT is the land lease, a fixed annual amount of $1.6 million, a fraction of the actual annual rent roll of $4 to $5 million. The attorneys for the project owner were Waters McPherson McNeill, the same attorneys currently representing the Township in connection with the Lackawanna Plaza PILOT financial agreement, loaded with concessions favoring the developer not the municipality.

The Alister project cost $35 million to build. The Certificate of Completion was issued in September 2011. The property was sold a year later in October 2012 for $53 million, generating an $18 million profit, and a more than 50% gain. The project value is 151% of the project cost, making it obvious that there was no economic substance to the PILOT financial agreement that was based on representations that the project would not be profitable without the subsidy.

The property was sold again, nine years later in December 2021 for $78 million, generating an additional $25 million profit, and a more than 50% gain.

The PILOT agreement required the owner to build a 6,000 square foot daycare facility which the Township never received.

The building is worth $78 million, but it is assessed for less than $20 million, not even a third of the value. And when the 2028 revaluation is complete, Montclair residents will be left picking up the real estate tax tab for the Alister.

2 So. Willow

For the three-year period 2022 – 2024, real estate taxes on the assessed value ($46 million – half of the project cost) exceeded the PILOT payments by $1.8 million.

The project cost $87 million and was completed in 2021. The Certificate of Completion was issued November 21, 2023, and one year later, the building was sold for $96 million, generating a $19 million profit in just three years.

The “open space” plaza is built on land owned by the Township, but the Town can only use the Township owned property twelve times a year, and only if it asks to use it.

The Township has never evaluated the cost benefit of any PILOT agreement, a gross dereliction of duty to the residents.

The Township has engaged attorneys, Waters, McPherson, McNeill, as legal advisors for both the 2 So. Willow and Lackawanna Projects. Waters, McPherson, McNeill has a conflict, they cannot possibly represent the Township’s interest while simultaneously representing the developers.

The Township has lost over $150 million of ratables relying on advice from conflicted attorneys who have undermined the financial security of the community.

References

Financial Agreement by and between LINCOLN MONTCLAIR URBAN RENEWAL LLC and the TOWNSHIP OF MONTCLAIR
Certificate of Completion Block 4201, Lot 6.01 prepared by E. Neal Zimmerman, Waters, McPherson, McNeill PC
Deed between LINCOLN MONTCLAIR URBAN RENEWAL LLC and CLFP-MONTCLAIR URBAN RENEWAL LLC
Deed between CLFP-MONTCLAIR URBAN RENEWAL LLC and MONTCLAIR 11 PINE URBAN RENEWAL LLC
Financial Agreement by and between BSREP II WELLMONT EAST URBAN RENEWAL LLC and the TOWNSHIP OF MONTCLAIR
Financial Agreement by and between BSREP II WELLMONT WEST URBAN RENEWAL LLC and the TOWNSHIP OF MONTCLAIR
BSREP II Wellmont East Urban Renewal LLC Audited Financial Statements for the year ended December 31, 2024