Real Estate Firm Wants to Amend Contract; Mayor Urges Council To Reject Proposed Changes

The real estate developer that bought the site of the municipal garage in 2007 introduced amendments to the proposal during Wednesday night's council meeting, in order to make the plan profitable. 

The S. Hekemian Group bought the site in December 2007 for $25.5 million. The current worth of the site has been estimated at $14 million, said Doug Cohen, Hekemian's corporate counsel. 

In order to still get the city the full $25.5 million, some concessions will have to be made, Cohen said. One of them: paying the city less taxes.

In return, Hekemian is offering the city 12 more months to vacate the site and find an appropriate new location. 

Hekemian will still build 240 residential units (which was the original proposal) on the site. But, Cohen said, there'll be more three-bedroom apartments in order to attract more families. He said about 15 percent of the 240 units would be three-bedrooms. On average the three-bedroom apartments are 1,400 square feet, Cohen said. 

"The proposal also included the elimination of the obligation to provide 24 units of affordable housing.  Instead of a community benefit worth, by Hekemian's own calculation, $1.8 million - $4.8 million, Hekemian is proposing a single $1 million payment," Mayor Dawn Zimmer wrote in a statement on Thursday afternoon. 

Hekemian is also asking to pay less taxes as long as the market is down and rents are lower. Until the market returns to its original value, the developer wants to pay a 5 percent tax, rather than a 15 percent, Cohen said. Cohen could give no exact timeline as to when the firm would be paying the full taxes again. 

This would change the annual revenue for the city from approximately $1.6. million to approximately $600,000. 

"We need the City Council's agreement," Cohen said, "we intend to close on August 13 ... It's our intention to close."

Zimmer urged the Council to reject the proposal. "The proposed changes might be in the best interest of the developer, but the dramatic price reduction requested is not what's best for Hoboken and our taxpayers," she said in the statement. 

Before that date, the city has to clean up the site and meet certain environmental requirements. Although Cohen said he thought it unlikely that the city would be able to close on that date, Director of Environmental Services Jennifer Maier said the city will be ready to hand over the property on Aug. 13.

Cohen said also that the ground floor commercial space will be used to place an "upscale grocer." He could not name the grocery store yet, but he said it's a name everyone will recognize. 

Cohen presented his ideas to City Council, after Mayor Dawn Zimmer asked him that morning to make the presentation. Cohen said he was asking for the amendments to "help you get $25.5 million" and "allow the project to succeed."

Council members were advised by Corporate Counsel Michael Kates to keep their comments as brief as possible and discuss the amendments during official negotiations. 

After the presentation Cohen said he wants to see the project succeed. "We're not interested in getting our money back," he said. 

Members of the public especially liked the extra year the city would get to find a location for the new garage. 

"We don't know if we're ready to close," said City Council regular Perry Belfiore. "The one commodity we're short on is time."

For now the closing date on which the city needs to vacate the location is August 13. The City, with the help of Corporation Counsel, will have to negotiate with Hekemian to come to a mutual agreement. 

But, what if the deal doesn't happen as planned?

"In order to be prepared for this possibility," Zimmer said in the statement, "we need to make the necessary preparations to refinance the existing debt on the garage at the most favorable rate possible."  

City Spokesman Juan Melli (in a conversation after the initial publication of this article) said that Zimmer was referring to a scenario in which Hekemian won't be able to close. 

It's possible that—if the council rejects the amended proposal—Hekemian won't be able to finance the $25.5 million come Aug. 13. It's also possible that the City won't be able to clean up and vacate the site before then.  

The City is planning to bond for the possible necessity of having to buy back the garage. On Sunday June 13, at 7 p.m., Council will meet to discuss the $16 million bond ordinance. 

As for Cohen, he made his speech and will have to wait for the council's response. "It's up to the city," he said.