NJ Transit looks for revenue in housing at stations
Land near Metropark leased to developers
By: Colleen Wilson
NorthJersey.com
USA Today Network - New Jersey
..... Could playing a greater role as a landlord help part some of the dark fiscal clouds looming over NJ Transit?
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Agency President and CEO Kevin Corbet and at least one expert think so.
..... The NJ Transit board unanimously approved a least Wednesday [11/08/2023] with the developers looking to build a mix of housing, retail and office space on agency property next to Metorpark Station in Woodbridge Township - the largest-scale landlord arrangement in NJ Transit's portfolio of properties.
..... With the deal approved Wednesday, [11/08/2023] NJ Transit added a new sustainable revenue source to its operation budget, which is predicted to be in the red to the tune of $119 million next year and nearly $1 billion the next.
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Here's what the 99-year lease - struck with developers Russo, Dinallo and Onyx, the firm with which NJ Transit signed a controversial lease for a new headquarters - entails for NJ transit:
* Up-front payment of $3 million.
* Base rent of $600,000 per year with 2% annual increases.
* 4.5% of gross revenue generated by the developers goes to NJ Transit.
* Parking lease includes $300,000 annual payments with increases.
* 4.5% of "capital event participation" if the developers sell the assets at an appreciated value.
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The deal is significant because NJ Transit, like many public transportation agencies around the country, has generated real estate value at properties near transit stations, but rarely reaps those fiscal benefits despite facing symmetric funding shortfalls. A lease arrangement like the one signed at Metropark flips that narrative, Corbett said.
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Developers "get a lot of upside, but what does NJ Transit get out of it?" Corbett said. "so we are participating not just in the revenue - the 4.5% of their gross revenue will come to us above their base [rent] payments - but also if they flip the property we also get an upside on the capital appreciation as well."
..... He added that in the past, the agency was more inclined to sell property, rather than seek a recurring revenue stream through a lease arrangement like the one at Metropark.
..... Transit-oriented development like this also creates built-in ridership so close to rail connections for NJ Transit and Amtrak.
..... "We want to make sure that it meets Transit's needs and really drives Transit's ridership and all the environmental benefits everybody has touched on," Corbett added.
..... The only other real estate deal of similar scale for NJ Transit with LCOR in 2022 to redevelop the area around Hoboken Terminal, though that came with a $176 million state commitment to improve and rehabilitate the terminal area.
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Zoe Baldwin, New Jersey director for the regional Plan Association, said this is an exciting development for the agency.
..... "It not only represents a sorely needed source of revenue for NJ Transit, but it's also the exact type of development we want to see in New Jersey," she said. "Putting attractive destinations and housing next to train stations will help boost ridership, reduce car congestion on our roads, and the state will benefit from reduced traffic and environmental pollutants."
Hope to replicate at other NJ Transit properties
..... The agency is hoping to replicate this kind of arrangement at other NJ Transit properties, with a focus no on one near Liberty State Park in Jersey City and another in Matawan, where it is still negotiating with the town.
..... Baldwin warned that this doesn't reduce the state's obligation to address the agency's financial crisis.
..... "While this is an exciting development that will produce some revenue for the agency, it;s not a panacea," she said. "And we need to make sure that we're both doubling down on good development like this but also making suer that the state is properly funding the agency so it can maintain the service that makes these developments viable."
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Whether state legislators and Governor Phil Murphy plan to address NJ Transit's fiscal crisis predicted in the next two years [2024 & 2025] is still a mystery. It's been seven months Transportation Commissioner Diane Gutierez-Scaccetti, who is also now Murphy's chief of staff, announced a restructuring effort to identify potential cuts to service, corporate costs, fare hikes and layoffs.
..... With the election in the rear-view and Democrats expanding their reach in the Legislature, the three-month countdown is on until Murphy's February budget presentation, which often sets the tone for the spring budget negotiation season about what issues will get the most attention form legislators.
..... "We have to show to the public, legislators we're doing everything possible to be as efficient in our delivery but using every tool in the toolbox, every asset we can to get the best value for the riders," Corbett said, "so ... whatever gap there is that they [legislators] can fill that NJ Transit is well manage and they are doing the best with what they've got."