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Borough to Proceed with $4.5M LumberYard Refinancing

Collingswood is still on the hook for nearly $5 million in loans, but will retain ownership of 13 unsold condos while getting a chance to salvage its credit rating under terms of the deal.

The borough will move forward with a refinancing settlement to secure its ownership of 13 unsold units at the LumberYard Condominums site while repaying nearly $5 million in outstanding construction loans.

Borough commissioners on Monday authorized Mayor James Maley to sign off on an agreement with TCIC, a subsidiary of the New Jersey Bankers Association, that would repay $4.5 million—half the $8.5 million remaining on the $18 million original loan to Lumberyard Redevelopment, LLC. Collingswood intends to raise the money through the sale of municipal bonds.

Maley pointed out that although Collingswood is not a partner in the limited-liability company that funded the project, it is still a guarantor on the loan note. Without establishing the terms of the refinancing agreement, he said, the town would be on the hook for the bill—but without any stake in the existing, unsold units, which could eventually generate revenue.

“What we negotiated is that we’re paying and getting our guarantee but we’re getting units for them,” Maley said. “In essence, the bank is losing collateral. I told Moody’s instead of getting downgraded, you should give me a gold star.”

(Maley was referring to Moody's decision last year to  the borough's credit rating to junk-bond status, based in part on the debt created by the LumberYard deal.)

Then, to his frequent critic, Collingswood resident Joseph Dinella, Maley quipped, “I know you’re never going to give me a gold star,” to a broad chuckle from the room.

According to Maley, the nuts and bolts of the deal were formulated in the summer of 2011, and the arrangement is “exactly the same” as the deal that was announced “before all the Moody’s stuff.”

“What’s taken five months to get this agreement is, I have eight banks on the other side with lawyers, and Moody’s jumping into the fray,” he said.

Maley blamed the Moody’s rating for two lost condo sales “because of the delays in getting this [deal] done with the bank.

“If we get started on the balance of it, I think we’ll sell the rest,” he said. “That means in the next five years, we can pay down the note.”

One resident asked whether leasing the vacant properties was still a viable option. Maley responded that after leasing “three or four” vacant units, the borough has halted that strategy because the remaining units require some $20,000 of work to complete, “and we’re not trying to spend that.”

Maley says leasing would also undermine any possibility of recouping money on the deal if developers propose the construction of apartment units on the remaining parcel of land.

“We would run afoul of some requirements in the bylaws about how many units can be rented,” Maley said.

Despite the sizable repayment amount the borough now faces as a result of developers’ failure to complete the project, Maley claims it’s too soon to label the deal a bust. Neither could Maley comment on the total assessed value of the LumberYard, he said, because the borough has invested in “the infrastructure, the roads, the garage, and the development itself.”

“This has always been structured that completing the project would make money in the end,” Maley said. “When we started, the goal was that we’d come out of this and have the [Collings Avenue parking] garage paid for. A lot depends on completion of the project.”

“If we get a third of our money back, if we get half, if we get all of it, whatever we get back from our guarantee for owning these units, we are way ahead of the game,” Maley said.

Maley’s remarks were punctuated at regular intervals by the noise of light rail traffic from the nearby PATCO Hi-Speedline—a reminder of popular criticisms that the LumberYard condos are unsalable for their proximity to the tracks.

LumberYard resident Colleen Gramkowski, whose unit is used frequently by realtors as a display model for prospective buyers, said she and her husband don’t find the Speedline noise intrusive.

“Maybe the newspapers should talk to the people who live there,” Gramkowski said. “We did talk to the papers about how much we love it and the only thing they printed was that I said [LumberYard developer] Mr. [John] Costanza is a blockhead.”

After the deal with TCIC is finalized, Maley said he hopes bond ratings agencies will re-consider Collingswood’s rating as a first step to advancing the project “in a way that resolves the total loan.”

“We get that Moody’s rating fixed, we should be in good shape,” Maley said. “We don’t get that fixed … it’s not a typical bond market.”

Joe February 07, 2012 at 03:21 PM
Am I the only one who is really confused at this point? I thought the entirety of Plan Y was to lease the 13 or 14 units WE just bought; half of those would be enough to pay the debt service and the other half would just be gravy. Now, WE are not only going to stop leasing the units WE bought, and well short of the seven or so required to pay the debt service, but WE were limited, by contract, in the number of units that could be leased to begin with? It seems like somebody dropped the ball. I would still like to know where Costanza Builders is in all of this. How can a builder just up and walk away from a project it botched? I certainly appreciate Mayor Maley's optimism with regard to selling the remaining properties but I do not see it unless there is a substantial reduction in the listing price. I mean, who is going to pay $372,500 for a 2-bed, 2.5-bath townhouse next to the train tracks; especially when there is a 2-bed, 2.0-bath condo for $250,000 right next to it with many of the same features? Obviously, I hope I turn out to be 100% wrong.
Citzen Kane February 07, 2012 at 04:08 PM
So if the Borugh is selling municipal bonds to raise the money for purchasing the units and the borough has a "junk bond ranking" credit status, aren't they really just selling municpal junk bonds?
Unhappy Colls Resident February 07, 2012 at 06:01 PM
just more spin from our esteemed mayor. Just admit it's a flop and move on.
badge 50 February 07, 2012 at 06:36 PM
Let's not forget the pending civil complaints against the borough which are in excess of $5 million and that could be the low end of the suit, if the judge awards the plaintiff punitive damages.
collingswood resident February 08, 2012 at 12:13 AM
Collingswood resident First I'd like to say that all of the info in the comment about the purchase of the 13 units at the Lumberyard is not exactly correctly stated as explained at the Commissioner's meeting by the Mayor. The debt to be paid next is $4.5 million. The borough owes that amount to the bank - cut and dry. However, by negotiating the deal, it has been worked out that when the borough pays the due amount (4.5 million) the bank will credit the borough debt and will turn ownership of 13 units over to the borough. The options were to pay the next installment as required or pay it as required and receive 13 units. Sounds like the second option is a better deal to me. Either way the debt had to be paid so why get an extra something (13 units) out of the deal??????
collingswood resident February 08, 2012 at 12:28 AM
Lumberyard owner Before buying a condo at the Lumberyard (on the speedline side), I lived on Park Avenue across from Knight's Park with the speedline in my backyard. The noise from the speedline (not to mention the street and park noise) was loud in the old historical house even though it was further away from the tracks. The sound proofing in the 600 building at the Lumberyard is most efficient. We don't miss a word when talking or watching TV. The small swish of the trains passing are not even noticable and certainly do not interfere with the quality of life. The indoor parking is awesome especially on bad weather days. We thought we would miss living in the old house...NOT no yard to care for, snow to shovel or leaves to rake and rake. Of course, no up and down stairs to do wash and cleaning. It is the best move that we ever made to live at the Lumberyard. We can walk up to the Avenue where there are so many delicious places to dine and are BYOB. We enjoy going to the great shops and visiting The Candy Jar. By the time people walk back to their car we have already walked back home. What a Life! Everything in life has it's ups and downs and certainly mistakes were made with the Lumberyard in regards to financing/business plans, etc. However, I am tired of only hearing the negative and wanted to share some positivity. Had the recession not hit and the plan was a success everyone would be bragging about what a great idea it was.
Collingswoodnative February 08, 2012 at 09:51 PM
Glad to hear a positive about living at the Lumberyard. I've had big concerns about the units against the speedline. I live on Stokes Ave. about two blocks from the line and the noise on summer nights without the AC on is loud as are the planes overhead.
bikespinning February 09, 2012 at 03:07 PM
I am a resident of Collingswood. Many disturbing issues with this project. 1. Why did we purchase the property from a "insider" Capelli bought the property from the original owner and we purchased from Capelli so he could make a tidy profit of 1.5 M Where was Collingswoods interests Mayor. The guy sat on the Planning Commision. The Builder knew this was a risky project. To answer the question above. The builder was unwilling to issue a bond to the Town that would guarantte the completion. So the Mayor put the Town at great risk by agreeing to the terms with the bank. In essence people..."Collingswood" is the builder at risk. They then hired a GC who then hired the subs. All costs...change order, etc. are the responsiblity of Collingswood. This is a failed idea...and now we (tax payers) are on the hook big time. There are many more hurdles to go. Wait until we get the tax bills the few yrs. How do you think Collingswood is going to pay for this ? Is he kidding ? Selling these units in this market. What a dope.
Seth May 17, 2012 at 07:39 PM
Anyone but Maley

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