SO designates Village Hall redeveloper, gives 20-year PILOT

File Photo Village Hall, above, the icon of South Orange, will be redeveloped into a restaurant by a subsidiary of Landmark Hospitality.
File Photo
Village Hall, above, the icon of South Orange, will be redeveloped into a restaurant by a subsidiary of Landmark Hospitality.

SOUTH ORANGE, NJ — The Village Hall renovation and repurposing took a giant step forward at the South Orange Board of Trustees meeting on Nov. 23, when the board voted unanimously to designate 101 South Orange Avenue Urban Renewal LLC, a subsidiary of Landmark Hospitalities, as the redeveloper of Village Hall and to grant the redeveloper a 20-year tax abatement.

The board voted 6-0 to pass Resolution No. 2015-259 to designate Urban Renewal, or URE, as the redeveloper of the former seat of the village’s government; prior to passing that resolution, the board unanimously passed Ordinance No. 2015-20 on second reading to grant a PILOT, or payment in lieu of taxes, tax exemption to URE.

URE currently has plans to turn the iconic Village Hall into a restaurant while preserving the building’s exterior and respecting its history. According to current plans, which are not yet final and are subject to Planning Board approval, the first floor will hold the restaurant, a bar, a beer garden and an outdoor dining area; the second floor will hold a banquet hall — where the Board of Trustees previously met — and three meeting rooms. Village President Sheena Collum said research showed there were a number of corporations in the area that would be interested in renting out those meeting rooms.

As for parking, there will be two lots, each with 37 spaces. The first lot will be restricted to Village Hall restaurant parking, while the second lot will be both restaurant and public parking.

Prior to passing either the resolution or the ordinance, village officials delivered a comprehensive presentation on the redevelopment project.

“The Board of Trustees has been working very closely with our redevelopment counsel to finalize both the financial agreement, which we introduced on first reading (previously) — tonight is going to be the second reading of the financial agreement — and under our resolutions is our redevelopment agreement,” Collum said, opening the Nov. 23 meeting. “The purpose of tonight was to inform the public and take everyone through a holistic look at how we got to the point that we did in late July, what the considerations were.”

Collum said the presentation, which included the hard numbers many residents had asked for, was to relieve frustrations felt by the community about being kept in the dark regarding certain facets of the project; these details, mostly financial, had been kept quiet, as they are exempt from the Open Public Meetings Act.

“I think a lot of the frustrations at the time were that the public didn’t have the actual numbers, the purchase price, what would the annual service charge look like …” Collum continued. “So there was a lot of frustration on our part not being able to share the economic analysis that the board was going through as part of our comprehensive review, and we are going to do that tonight.”

In the presentation, Collum went through the steps taken since 2008, to bring the board to approving the redevelopment agreement Nov. 23. She explained how, when the board first issued a Request for Expressions of Interest regarding the purchase and conversion of Village Hall in July 2011, only one submission was received, which the board deemed inadequate.

In June 2014, however, the board decided to issue a Request for Proposals for Village Hall, mainly to see what the options were; at the same time, the village was receiving renovation bids as well, so it could compare the two and choose the best option, Collum said. In 2014, the board received much more favorable bids for adaptive reuse; Collum cited a few possible reasons for this. First, the village had already abated the asbestos in the building, which likely made the structure more appealing to prospective buyers; second, the RFEI had been issued during a downturn in the economy, whereas in 2014 things were finally beginning to spring back.

The board received two viable proposals for adaptive reuse to compare to municipal renovation: the first from Landmark, which was eventually selected, was to create a restaurant, catering facility and event space inside the building; the second from the South Orange Hotel Group was to create a boutique hotel. The hotel group offered a purchase price of $1.1 million; while Landmark originally offered $700,000, the village was able to negotiate that up to $1.2 million.

Alternatively, the renovation bids the village received — a cost the village would have to shoulder — ranged from $5.6 million to $7.7 million. According to the presentation, however, Landmark’s URE will be able to complete the renovation for less money as it is not subject to the same bidding requirements as the village.
Though tax abatement PILOTs can last up to 30 years, the PILOT for Village Hall will last 20 years. This PILOT only covers real estate taxes on the site’s planned improvements; it does not affect real estate taxes on the land, which will still be paid and split among South Orange, Essex County and the South Orange-Maplewood School District.

“This project, this couldn’t happen unless the village was willing to do a PILOT for some length of time,” South Orange’s redevelopment counsel, Joseph Baumann Jr. of McManimon, Scotland & Baumann LLC, said. “The finances and numbers just don’t add up.”

Baumann said the board felt the financial agreement was required because URE will be spending approximately $6,456,000 in order to purchase the property, for construction costs, site work, landscaping, soft costs and a liquor license.

Under the PILOT agreement, URE will pay $38,000 in the first four years, $45,600 in the next four, $54,720 in the next four, $65,664 in the following four, $78,797 in the next two years and $94,556 in the final two years. After the 20 years, URE will begin paying regular taxes on both the land and the improvements.

According to Collum, many factors went into the village’s decision to go with Landmark’s URE — a decision the president said was reached following public meetings; a community forum; receiving advisory opinions from the South Orange Historic Preservation Commission, South Orange Village Center Alliance and South Orange Development Committee; and various announcements through local media, social media and more.

The board also looked at cost scenarios, especially considering significant funds will likely go toward renovating the South Orange Public Library and Police Headquarters in the coming years, according to Collum.

As for the village offices, village Administrator Barry Lewis Jr. explained that the village, which has been looking at reducing its municipal footprint, had three options: leasing, renovating and building.

“We had relocated, what we thought was temporarily, but when we got there, we realized it really does work, it flowed,” Lewis said of the village moving its offices out of Village Hall and across the street. “Business went on without skipping a beat.”

By taking a detailed look at the finances, the village believes that continuing to lease space for its offices makes the most financial sense. The numbers show, according to Lewis, that in the first five years of leasing, the village will actually earn $93,514 thanks to the sale of Village Hall, whereas renovation would cost more than $3 million and constructing a new building would cost more than $1 million. While the numbers show that, 30 years down the line, the cost of leasing will also be in the millions, it is still be the better financial option.

“The leasing cost is the most evenly distributed, though it does get up there 30 years out,” Lewis said. “We can always look into more shared services with leasing to reduce the municipal footprint.”

At the meeting, resident Alyssa Aronson asked the board members whether they intend for the village offices to remain grouped together in the future, and what will happen if the South Orange Performing Arts Center decides to end its agreement with the village that allows the board to meet on SOPAC’s main stage.

“We’re looking into municipal consolidations into other village-owned buildings, but I don’t know if it will all be in the same building in the future,” Collum said. As for the SOPAC question, Collum stated that the village works closely with SOPAC and does not anticipate a problem, but, just in case, is in discussions with the South Orange-Maplewood Board of Education to use school district meeting space if necessary.

Trustee Mark Rosner added that, when SOPAC needs the main stage for a performance, the board meets in SOPAC’s Loft.

With the numbers supporting selling Village Hall and leasing office space, the village then had to choose a redeveloper. When deciding between Landmark and the Hotel Group, Collum said the board considered the historic preservation of the building, saying they want it “preserved as is, but are flexible about use”; the redeveloper’s track record of historic renovations; the likelihood of success; and land-use considerations — the corner of South Orange Avenue and Scotland Road being a challenging corner. “We felt the Village Hall offices were a less intense use of that corner that made that corner quiet at night,” Collum said.

Looking at everything, the Board of Trustees felt Landmark was best for the job.

“We didn’t want to chop up the meeting room for hotel rooms,” Collum said. “Also, if the restaurant leaves, it is easier to get another restaurant than another boutique hotel.”

Additionally, Landmark has a history of renovating and reusing historic buildings, such as 1721’s Logan Inn, 1770’s Ryland Inn, 1921’s Hotel DuVillage, 1902’s Courier News Building and 1905’s Plainfield Trust Company.

“We picked Landmark for a reason,” Baumann said at the meeting. “They have a great track record; they’ve done this before, they have a significant balance sheet, have a history, are family-owned. They’re a redeveloper we feel comfortable turning this icon over to (in order) to make this happen.”

Baumann took over the presentation to explain the redevelopment agreement, and began his portion of the presentation by praising village officials, telling residents that Collum and the board had displayed extreme diligence.

“You should be really pleased with your village president, your trustees and your professionals. In 25 years of doing this, I’ve never seen a more diligent, careful, well thought out and, to the extent possible, transparent process including all the stakeholders involved,” Baumann said, calling South Orange’s approach “a model process.”

Prior to closing the agreement and land sale, Baumann explained that URE had to meet several criteria and conditions.

First, the village had to be sure there were no financial issues in URE’s or Landmark’s past and present that could affect the project; that URE and Landmark will comply with all stipulations of the agreement; that URE is not purchasing Village Hall for speculation in land holding; and more.

Additionally, URE had to accept the deed and property restrictions.

Under the deed, should URE look to re-sell the building, the village will have the opportunity to buy back Village Hall; the owner must maintain the property and establish a maintenance fund that cannot dip below $10,000; no mortgage or lien may be for more than 80 percent of market value to prevent over-leveraging; and the village has the right to acquire the property and liquor license for 80 percent of the property’s fair market value should the deed restrictions be violated.

Baumann said it was important to put certain restrictions to preserve Village Hall’s historic authenticity in the deed, because the redevelopment agreement is no longer a binding document once the redevelopment is completed. According to Baumann, this will ensure these restrictions “in perpetuity.” The building has a perpetual historic easement.

Historic Preservation Commission member Amy Dahn asked the board several questions with regard to preserving the building’s historicity and that of the items within it. Dahn questioned what would happen to the oak horseshoe table, formerly used by the Board of Trustees during meetings.

Lewis said he believes Landmark plans to maintain the horseshoe table and to keep it in its current spot; the board meeting room is expected to become a banquet hall and the horseshoe table would be used for events.

Dahn also asked what would happen to the walk-in safe inside Village Hall. Though village officials did not have an answer for Dahn at the time, they promised to look into it. Collum told the News-Record on Nov. 30 that the village was still looking into answering Dahn’s questions and would have answers prior to the closing.

Dahn also questioned the village as to what it plans to do with the possible time capsule that may be behind a plaque in the building. She questioned whether, when the village sells the building, if the time capsule will then belong to URE. Village officials also promised to look into this, though Lewis did say that the time capsule is not in any imminent danger as the building is not being demolished.

URE must also maintain an escrow for ongoing third-party costs to the village related to the redevelopment, which Baumann assured the URE has been doing thus far; maintain the property’s appearance; work to minimize the impact of the redevelopment work on the site’s neighbors, partially by creating a traffic study, a traffic plan and off-site parking arrangements for construction workers; controlling pests; minimizing noise and light pollution; indemnifying the village and village officials in case of lawsuit; complying with all environmental laws; and maintaining proper insurances.

Rosner seconded the importance of ensuring that patrons of the downtown will not be inconvenienced during the construction period and will have places to park.

Baumann also assured residents that, although URE will own the building, the village will still be involved in the process. Not only must URE share all surveys, reports and studies with the village prior to closing, but URE officials must periodically attend board meetings to update the village on the site’s progress and provide progress reports.

“We’re not going to hand over the keys and say ‘Tell us when you’re done,’” Baumann said of the village’s future relationship with URE.

In response to a concern brought up during the public forum, the village assured that it will retain the right to use the image of Village Hall as its icon; URE will also have the same right to use the Village Hall image.

Under the redevelopment agreement, the project is expected to be completed in June 2017, though Baumann explained that it is always possible for holdups to occur — as Maplewood knows with the Daibes site and West Orange knows with the Edison Battery site.

“The project schedule can slip,” Baumann said, attributing the possibility to either force majeure events, which are beyond the redeveloper’s control, or a failure on the redeveloper’s part. Should the schedule slip, Baumann said, the redeveloper will be expected to give a solution; village officials and the redeveloper will then discuss and decide the proper path forward.

Baumann said that if URE is found to be in default before the project’s completion, the village can terminate the agreement. The village has set up certain agreements with URE and parent company Landmark to ensure that, should the contract be terminated, the village will not see an immense financial loss.

“You think of worst-case scenarios and set up remedies,” Baumann said, adding that this planning in no way implies a lack of trust between the village and URE.

To view the board’s presentation, click here.