Development as Russian roulette?

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As Mayor Robinson-Briggs' administration squeezes the development trigger in rapid succession, the thought occurs to PT how similar the development game is to Russian roulette.

As everyone knows, one of those cylinders packs a terminal punch -- but which one is it?

And keep in mind that the ONLY player in this game is the City -- unless you count the TAXPAYERS, who have a chance of being the losers.

Three out of the four redevelopment projects being contemplated have HOUSING as a major -- make that THE MAJOR -- component.

How good a bet is that at the moment?

Thursday's Ledger carries a story ("Home sales, prices keep sliding") with the following information--

"Nationally, existing home sales, which generally account for 85 percent of total home sales, dropped 14.2 percent in September compared with a year ago and the median price of a home fell 2.2 percent, to $220,000.

"IN THE NORTHEAST (PT's emphasis), sales of existing homes fell 13.4 percent year over year, while the median price of a single-family home in September was more pronounced, falling 5.1 percent, to $259,000."

Today's New York Times brings similar news about the NEW-HOME CONSTRUCTION market segment --

"The Commerce Department reported yesterday that the median price of a new home plunged 9.7 percent last month, compared with September 2005, falling to $217,100, the biggest such drop since December 1970."

The story also details 'hidden' factors -- such as 'sweeteners' that don't affect the sticker price -- which mask the REAL SLIDE in the market.

Everyone understands the housing market is cyclical. The question is: Where are we in the cycle?

The market is definitely softening -- wise builders are trimming their sails (see Hovnanian story and PT's take) -- but how far will it deflate? And how long will it be until a recovery sets in? Three years? Five years?

Let's review this revolver chamber by chamber.

1. EAST 3RD / RICHMOND / COTTAGE PLACE

The Capodagli Property Company LLC of Pompton Plains presented a concept overview to Council a week ago Monday (as reported by Bernice) and was slated to be conditionally designated the developer of the site at the Wednesday meeting. The designation resolution was withdrawn without explanation at Wednesday's meeting.

The firm's general counsel made the pitch and explained they intended to do the project in several phases, moving on to the next as each was built out and sold. The 352 one- and two-bedroom market-rate units would be offered in the $300-$350,000 range, the Council was told.

(One gauge of the possible viability of Capodagli's plans will be how long it takes Faith Bricks & Mortar to sell its newly renovated 4-bedroom, 2½ bath units near 7th & Watchung, for which it is asking $350,000.)

Unasked -- and therefore unanswered -- questions include whether the developer doesn't have the wherewithal to do the whole project at once? Or whether Capodagli figured buying out the PMUA might be time-consuming and possibly contentious, thus better left out of the discussion at this point? Or whether the firm figures it wants to see just how long this down-cycle in the housing market is going to last before it puts any more eggs in the basket?

The other interesting elephant-in-the-room is the fact that George M. Capodagli and any firm he is associated with is DEBARRED from public contracts for a three-year period ending April 19, 2007. Does that cover this project? And did it cover his work in Rahway -- awarded under Ms. Wenson-Maier's leadership as that city's Council President?

Beside these questions and issues, there is the matter of the PMUA's response to what may be regarded as an UNWARRANTED INTRUSION into its own plans for a portion of the area in question. For which it has the PLANS and the MONEY IN HAND.

Meanwhile, the PMUA is showing signs of feistiness with regard to City demands for reviews of improvements it has made at Cottage Place and Richmond Street. You'll want to watch how this one unfolds. As PT recalls, the last time the City tangled with the PMUA in a courtroom, the judge dismissed the City's case WITH PREJUDICE. Which amounts to a judicial bitch-slap by PT's lights. Is more of the same in store?

2. SENIOR CENTER / CONDOS

The Seniors have pushed for years for a new Center. The McWilliams administration worked with Jayson Williams and a local architect and the Seniors' building committee to develop plans for a new Center.

Property was acquired for the project and a portion of last year's BANs was set aside SPECIFICALLY for this project.

The new Administration set aside all that work when Mayor Robinson-Briggs came into office. Assemblyman Green announced nearly at once that the project was being converted from a mixed-use Senior Center/commercial development to a combined Senior Center with CONDOS above.

Once again, market-rate units in the $300-$350,000 range -- where do these numbers come from? Central casting?

How good are the chances the project is in the cards for the NEAR-TERM future?

The developers here are the Fishman brothers and pals -- through their DORNOCH operation.

PT was told at the time that they made a very smooooth presentation to the Seniors back on July 11, citing their work in Asbury Park, the Savoy (under way) in Rahway and the Palisades in Paterson. But they have something of a checkered past.

Although many remember the Fishmans as wanting to tear down Asbury's 'Tillie the Clown,' perhaps more important is the finagling that went on over getting the redevelopment agreement in the first place, as reported by AsburyPark.net back in 2002.

What kind of a deal has to be bracketed with a decision NOT

"to have principals in the waterfront negotiations take an oath to affirm that they didn't do anything wrong along the way."

And MOMENTS after the development deal is approved the Asbury Park administrator resigned, to plead guilty two days later to extorting $64,000 in the neighboring town where he was mayor.

Not only was there a great cloud over getting the deal launched, INCLUDING catching the Fishmans in CONTRADICTORY STATEMENTS about the mare's nest of corporate entities they control and what each does and its relationship to the whole deal, Asbury Park eventually had complaints about how pokey the actual development was once it got under way.

(Click on image to enlarge)

The skeleton structure on the waterfront, a leftover of failed 1980s development, was to be demolished as part of the new deal. The new deal was inked in 2002. The structure was scheduled for demolition before Memorial Day 2004. It was finally demolished in the summer of 2006. See photo above of the Asbury Partners sign. Pokey.

Meanwhile, the Fishman brothers and pals were offering to come to the rescue of Paterson's Mayor Torres with a deal on an assemblage of property liens that is now reckoned to have brought the city near to financial ruin.

Aside from all the bells these stories should be setting off in the heads of our chief deciders, PT worries that the deal won't be able to fly as MARKET-RATE -- yes Council, KEEP ON DEMANDING those market studies! -- and will be converted to ALL subsidized units. Somebody needs to PROVE THESE THINGS CAN BE SOLD AT FULL FREIGHT. Or else the Council risks being BAMBOOZLED.

3. NORTH AVENUE REDEVELOPMENT

Little has been heard of the progress on the North Avenue proposal, but the clock is ticking.

As Bernice pointed out in the Plain Talker, at its August 23 business meeting, the Council

"...recommends to the UCIA that Landmark Development Corp. be conditionally named the designated redeveloper of the North Avenue Historic District. Landmark proposes a new entertainment plaza and 415 residential units while retaining the ornate facades of the district’s 1880s buildings."

Once again, we have HOUSING. It's central to the TRANSIT-VILLAGE concept which is all the rage these days. And PT believes NEW HOUSING OPPORTUNITIES DOWNTOWN will be key to a downtown resurgence.

But, again, we need to know there is a REASONABLE EXPECTATION, based on MARKET RESEARCH that there will be buyers IN THE CURRENT MARKET CLIMATE. Is that too much to ask?

Of course, Landmark Development's task is NOT made easier by the question of expanding the North Avenue redevelopment area. By the rules, the area is 'spozed to be designated AFTER A STUDY, and only then followed by a PLAN. Has this sequence gotten gummed up with regard to this project? Stay tuned.

As soon as the Latino property owners and merchants began to organize to insist on a role in these plans about to affect their investments, Assemblyman Jerry Green showed up.

Visiting up and down the block on a recent weekend, the Assemblyman passed out his private business card, telling -- so PT has been told by those who got the 'treatment' -- all who would listen that he was a partner in the development project.

Hmmmm. Isn't this kind of what John Lynch was doing?

4. WEST FRONT SUPERMARKET

Though AST, the designated developer of the former Marino's parcel on West Front Street (across from the Drake House), has kept a low profile, it is the developer with which the City at least has some prior experience.

Of a mixed sort, if you recall Bernice's reportage on Bill Nierstedt's letter to AST and PT's essay on the unfinished business with the Union County office building on the Park-Madison parcel and PT's accompanying photo essay.

Nevertheless, there are some positives here --

• This is a devil we know...
  
  
• Everyone agrees a supermarket is needed;
  
  
• There is NO housing component to this project.

So, what's not to like?

5. DEVELOPER TRICKS?

Eternal vigilance is the price of successful development.

Developers have plenty of reason to want to rejigger deals -- ranging from ever-changing financial and marketing situations, to changing costs of materials and unexpected surprises when ground is actually broken (remember the North Avenue road construction project overruns?).

Will the developer DELAY the onset of a project? Will the developer ask for relief from taxes, permits, or other fees -- either associated with OWNING the property or doing CONSTRUCTION? Will the mix of subsidized and market-rate housing shift -- toward ALL subsidized?

And what should the City's reaction to such situations be? Where should lines be drawn? By whom? When should the City bend, and when should it hold firm?

6. BEST PRACTICES OR CORNER-CUTTING?

The promise of TRANSIT-VILLAGE and SMART-GROWTH development is supposed to be that New Jersey's older communities are to be made more attractive as places to live and work by making or remaking the downtown space in a way that is not only attractive ON ITS SURFACE (read: new and penny-bright), but good for the LONG-TERM BENEFIT of the community.

Everyone is aware that we must be more concerned and careful of the environment. Which means our construction should 'rest lightly' on the environment -- be clean, energy-efficient, and ready for high-technology capabilities. Buildings should be well-designed, solidly built and use quality materials with top-notch constructions techniques.

Would you be surprised to learn that corners could be cut here? And costs shaved? What should the Adiministration -- AND THE COMMUNITY -- demand here?

What good would it do if ten years down the road, these new projects had to be declared IN NEED OF REDEVELOPMENT themselves because they had become obsolete before their time?

The cathedral builders built for the ages. Should we not insist at the very least that our developers build for A FEW DECADES?

Six chambers. Are there any deadly surprises waiting?

-- Dan Damon

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