Urban Land Institute

FEBRUARY 26, 2013

Property Tax Appeals and Financial Opportunities Presented by a Challenging Market: Using the Tax Appeal Process and Understanding Tax Abatements and Incentives to Navigate a Down Market

Partnership for Action

Lt. Governor Kim Guadagno

State, County and Local Partners

New Jersey Business

Action Center

New Jersey’s Bank

Financing small and mid-sized businesses

Administering State tax incentives to retain and grow jobs

Revitalizing communities through redevelopment initiatives

Supporting entrepreneurial development

Focus – Urban Redevelopment

City of Newark

Courtyard by Marriott Newark Downtown

In September 2012, Tucker Development’s $35 million Courtyard by Marriott became the first hotel in Newark’s downtown in over four decades.

Adjacent to the Prudential Center, the 150-room hotel includes 14,000 square feet of street-level retail; last November, it was announced that Joe’s Crab Shack would occupy nearly 5,400 square feet.

The development project generated an estimated 175 construction jobs and will create between 50-75 permanent jobs through the hotel and retail operations.

Courtyard by Marriott Newark Downtown

Economic Redevelopment & Growth Grant $6.58 million

Redevelopment Area Bonds $6.56 million

Recovery Zone Facilities Bonds (Essex County) $4.73 million

Equity* $10.0 million

First Mortgage $15.6 million

Financing Sources

*State Pension Fund

Courtyard by Marriott Newark Downtown

Without Incentives With ERG and Hub Market Range

Equity IRR 8.06% 11.10% 15%-20%

Cash-on-Cash Yield 6.18% 6.97% 8%-10%

Based on the expected generation of $28.5 million of incremental direct annual gross income, hotel occupancy and sales taxes over 20 years, and a 75% rebate of eligible taxes, there were deemed to be adequate funds to support the reimbursement of taxes to the project.

Present value of the Net Positive Benefit to the State totals $19.45 million.

Teachers Village

RBH Group is developing this $149 million retail, educational and residential project in downtown Newark, which will include 205 residential units, pre-marketed to Newark teachers; three charter schools and a daycare facility totaling 100,000 square feet; and, more than 20 on-street retail establishments.

The first phase of a larger development, Teachers Village will result in an estimated 450 construction jobs and 460 new permanent jobs.

The project was financed through a complex series of public and private investments that helped get major financial institutions to back the project after more than three years of negotiations.

Teachers Village

Urban Transit Hub Tax Credit $39.45 million

Economic Redevelopment & Growth Grant $20.5 million

Redevelopment Area Bonds $5.265 million

New Markets Tax Credits $38.9 million

Public Loans (CRDA, BCDC, City) $12.0 million

Community Development Block Grant $2.0 million

Senior Debt $31.7 million

Equity $12.7 million

Financing Sources

Teachers Village

Without Incentives With ERG and Hub Market Range

Equity IRR -6.04% 9.11% 15%-20%

Cash-on-Cash Yield 5.58% 7.25% 8%-10%

Although the potential returns appear to be below market-acceptable levels, RBH Group expressed a willingness to move forward because Teachers Village is the first phase of additional development the company plans as part of the overall SoMa Newark redevelopment plan.

In addition to the project site, RBH owns 5.9 million square feet of adjacent land, representing approximately $100 million in land purchased. RBH expects to make significant progress on additional phases in the next five to seven years, with the entire plan executed in the next 10 to 12 years.

Present value of the Net Positive Benefit to the State totals $7.4 million.