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.”