Here’s a quick look at four scenarios regarding real estate development when public land is being considered. The examples use the recently sold Village Post Office site for which current tax and sale information is available. The scenarios considered are:
- The Township retains ownership of the building and modernizes the front portion to be used as a postal service counter and professional offices. The remainder of the building (totaling approximately 9,000 square feet) is either shuttered for the short-term, or put to below-market/public uses.
- The Township modernizes the building in preparation for a supermarket tenant. A management firm is contracted to manage the construction and on-going building management. Other than the preparation work, this arrangement parallels the lease that the Postal Service operated under since 1958.
- The Township sells the property, and a private investor executes example number two.
- The Township sells the property to JMF Properties and the Post House is constructed as proposed.
Assumptions have been made regarding rents and tax assessments.¹ Market values were estimated using a capitalization ratio of .065.²
The four examples are shown graphically in the following chart:
Some findings from the chart:
- All three alternatives to Post House are more profitable to the Town than the deal with JMF Properties.
- Example 1 utilizes 1/3 of the building. This example leaves 9,000 square feet for profit, non-profit, or other public service use.
- The most profitable use of the three (example 2) parallels the arrangement that the Town had with the US Postal Service whereby the use of the structure was leased by the Town or a third party to the Postal Service. In Example 2 the lessee is a supermarket that uses all 15,000 square feet of floor space.
The results here come from the fact that the structure was owned by the Township and is, by its design, highly adaptable. This result would not be expected for a structure that was not adaptable, or for vacant Township land. The potential would be even greater with addition of a third floor. This site is unique, and thus provided unique financial opportunities and unique opportunities in general.
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Controlling the destiny of our Town means a lot to us, and in Northern Jersey if you don’t have influence over development decisions, all else is window dressing. We sincerely hope that lessons learned from this project can be carried forward. We continue to pray that something will stop it.
For more background, see some of our other pages:
- On the site history
- On Charm and having A Sense of Place
- On the many views of real estate and having A Vision
- On Tax Income and Lease Income
- On Assessments in Maplewood Village
- And on more of the details …if you are insatiable.
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¹Rents are assumed to be $25 square foot for example 1, and $20 for examples 2 and 3. Both of these are well below market rate in Maplewood Village. Tax assessments are based on the current land value at the site (except example 4, for which the assessment was arrived at in connection with the sale price negotiation between the Town and JMF Properities). Tax assessment for the building is assumed to be $182 per square foot for examples 2 and 3, which is the current assessment for the building across the street where Kings is located today. More on Village assessments here.
²This ratio was applied to examples 1, 2, and 3. Market value for example four was based on the information provided by JMF Properties in their PILOT application, and a capitalization ratio of .06 was used. The numbers from the PILOT application are probably conservative as the application needed to demonstrate a need for tax relief. As a result, the income and market value estimates shown for Post House will likely be higher once the building is operational.
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[We survive on community awareness. Please submit your email below for future updates. Also, explore our site for much more info on the history and potential of the site. We hope that these insights will inform future discussion on similar Township issues.]