Hours after reporting that the Kushner Companies/KABR Group’s plan to redevelop One Journal Square had hit a significant snag, the Jersey City Redevelopment Agency (JCRA) informed the developers that they have violated their agreement on the project.
By John Heinis and Marc Bussanich
“Since the execution of the Redeveloper Agreement, the Redeveloper has parted ways with its joint venture partner, proposed significant changes to the Project scope, sough multiple amendments to site plan approval, and has submitted its annual administrative fee due on April 21, 2017 to the Agency on April 4, 2018, nearly one full year past due,” JCRA Acting Executive Director Diana Jeffrey wrote.
“All of the forgoing raise concerns regarding Redeveloper’s ability to present a cohesive capital stack and to see the Project through to fruition.”
Jeffrey sent the letter to KABR Group attorney Laurence J. Rappaport and carbon copied a number of other parties involved in the project.
Hudson County View exclusively reported yesterday that the One Journal Square developers and the JCRA were sparring over a potential tax break and the latest wrinkle in the project indicates it may be in real jeopardy.
Jeffrey specified in the letter that Kushner Cos. and the KABR Group failed to start construction by January 1st, 2017, failed to submit firm financing commitments to the JCRA and failed to obtain or waive redeveloper contingencies before they expired.
Following an uneventful meeting of the JCRA last night, HCV caught up with Jeffrey to ask her about the situation.
“We had a redevelopment agreement with the developers whereby they asked the city to issue a tax abatement and redevelopment area bonds. They have been seeking other changes to the redevelopment agreement, but currently they are not in compliance with the agreement and there have been other issues, which you reported on,” said Jeffrey.
Jeffrey then provided a synopsis of the timetable of events up to this point. In 2015, the New York-based co-working giant WeWork agreed at the time to become an anchor tenant at the new towers.
“At that time the project involved what we considered to be a really unique feature, that is a joint venture partnership with WeWork, which we thought was a very innovative idea that would really rejuvenate Journal Square by creating a lot of jobs,” said Jeffrey.
However, as has been previously reported, WeWork surprisingly and unexpectedly backed out of the joint venture partnership.
“Unfortunately, that partnership dissolved, and then the developer amended the redevelopment agreement and the scope of the project changed from bringing a unique feature to the area to the developer falling back on doing what we would consider to be a more traditional residential project,” Jeffrey said.
“They then started making demands for proposed payment in lieu of taxes [PILOT] and redevelopment area bonds.”
In response to yesterday’s story, Mayor Steven Fulop reiterated on Twitter that the city is not interested in granting a tax break to the $800 million project, which would include two 56-story towers.
We asked Jeffrey if the city’s and JCRA’s interests are aligned on this particular issue.
“At the time that WeWork pulled out, the project’s capital stack started to unravel because the developer lost their state tax credits.”
“The PILOT and bonds that they were demanding just didn’t justify a proposal to build a traditional residential project rather than an innovative project with WeWork, so we began to lose confidence in their capacity to build the original project that they proposed,” she added.
A spokeswoman for Kushner Cos. and attorneys for the project did not retain emails seeking comment.