Park Square, the 159-unit rental complex downtown that was purchased last month, reached a tax appeal settlement with the city in October, which reduced its assessment by more than a third.
Park Square was acquired by Mack-Cali Realty for $46.5 million with the transaction closing after the City Council approved transfer of the Payment In Lieu Of Taxes (PILOT) agreement (AR-243) last month, in addition to the tax appeal settlement. AR-233-13, approved at the City Council‘s Oct. 15 meeting, authorizes the settlement of tax appeal litigation by Landmark at Rahway, LLC, and specifically states “to change the assessment of the property to conform to terms of the PILOT agreement for 2012 and 2013, apply Freeze Act (54:51A-8) for tax years 2014 and 2015 based on 2013 assessment, and Landmark waives the right to any tax refunds for 2012 and 2013.”
2 Park Square (Block 157/Lot 1.01) on Irving Street was assessed at $6.05 million in 2010 before it was reduced by a third, to $4.077 million. 1 Park Square on Main Street (Block 157/Lot 1.02) originally was assessed at $8.965 million in 2012 and was reduced to $5,766,839 as a result of the settlement.
At 96 units, 1 Park Square on Main Street is about 1.5 times the size of 2 Park Square on Irving Street (63 units), so the assessment should have been comparable — about 1.5 times that of 2 Park Square, said Joel Schwartz of Landmark Companies, which built the project. “The appeal that settled it brought 1 Park Square in line with 2 Park Square,” he said.
In addition to the 159 total units, Park Square includes 205 garage space and eight on-street spaces along with 6,400 square feet of ground-floor retail in the Irving Street building (2 Park Square). The retail space is comparable to about five apartments, Schwartz said.
Park Square’s PILOT financial agreement stipulates a payment of 20 percent of the eventual assessment of the built-out project in the first year, rising by 20 percent each year until it reaches 100 percent, which Schwartz said should be 2015. The five-year PILOT, described by Schwartz a more of a phase-in of taxes than a typical PILOT, was approved by City Council in November 2003 and commenced Dec. 15, 2010, once construction was completed on 2 Park Square. Construction of 1 Park Square was completed in April 2012.
Assuming a municipal an overall tax rate (municipal + school + county) of at least $6.047 per $100 of assessed value (as it was for 2013), the new assessments would generate a property tax bill of almost $600,000 by 2015 — at least $250,000 for 2 Park Square (Irving) and $350,000 for 1 Park Square (Main). The projected payment in the first 100-percent year (based on 2010 tax rates at the time of the previous appeal) was more than $500,000 in total. Approximate payments for the life of the PILOT can be found on the last page of this updated financial agreement.