One Theater Square, unveiled at the NJ Performing Arts Center five years ago, was intended to spark the creation of a new community. Today, the site remains a parking lot, construction has yet to begin and a bailout bill has been quietly introduced in the state senate to extend its critical tax credits.
NEWARK--It was called a "game changer" for the state's largest city.
One Theater Square, unveiled at the New Jersey Performing Arts Center five years ago, was intended to spark the creation of a new community around NJPAC.
With its curved glass tower and striking architecture, the ambitious $190 million development plan proposed a luxury residential high-rise, new stores and retail space, trendy restaurants, a conference center and a parking garage, to be built on a 1.2-acre parcel of land owned by the non-profit center in downtown Newark. The state put up $38 million in tax credits and NJPAC invested millions in pre-construction planning.
Today, the site remains a parking lot. Construction has yet to begin and the scale of the project sharply reduced. A special bailout bill has been quietly introduced in the state senate to extend its critical tax credits, which could begin to expire before the building opens--even if work were to begin today.
John Schreiber, president and CEO of NJPAC, which has been working on the development deal in partnership with Dranoff Properties of Philadelphia, said the arts center remains committed to the long-planned project.
"The real estate landscape has changed since this project was first envisioned," he said. "Five years ago the economy was soft and many projects were delayed. The good news is that Newark is more popular than ever. Now is the time to move forward."
Schreiber predicted One Theater Square would play "a key role" in Newark's future as a place to live, work and play. "We are confident that our developer, Dranoff Properties, is on track to a closing and groundbreaking in the very near future," he said in a statement.
RELATED: As Atlantic City struggles, a bet on new casinos
Delay, though, has been a hallmark of a project first put on the table a decade ago, in a city that has yet to fully capitalize on the promise not only of the arts center itself, but of the Prudential Center sports arena several blocks away. Hobbled by the recession and recast by major design changes over the years, One Theater Square ran into ongoing financing difficulties that have still yet to be resolved.
A new community
Long a vision of former NJPAC president and CEO Lawrence P. Goldman, One Theater Square was first proposed as far back as 2005. Goldman wanted the arts center to expand its footprint with a vibrant residential community in the blocks surrounding it that would include shops, galleries and cafes.
The city of Newark declared the site adjacent to the Robert Treat Hotel as part of a redevelopment zone and conceptual designs were drafted. Dranoff Properties, which had built a high-rise near the Kimmel Center for the Performing Arts in Philadelphia and converted the historic RCA Victor factory on the Camden waterfront into luxury loft apartments, was selected as the developer in 2008.
Initial plans depicted a 28-story building featuring 30,000 square feet of retail space, 640 parking spaces and 250 rental apartments that would include artists' studios eligible for federal tax credits. By 2010, though, the concept had grown into a 44-story tower soaring 480 into the skyline, making it the tallest building in the city. It was to include 328 residential rental units, a pool and a spa, and a grand lobby.
The new plans were made public at a May 2010 press conference on the arts center's Prudential Hall stage, attended by Gov. Chris Christie and then-Mayor Cory Booker. "This isn't just housing in Newark. This is a game changer," Goldman announced at the time. "The notion is to create a new center of gravity for the city and the state."
Under the plan, NJPAC would grant a long-term ground lease to Dranoff as the developer and equity holder. The state approved $38 million in tax credits and while financing was still a question even then, there were bold predictions for the start of construction.
"I pledge to you we will build this building," declared Booker.
But the project heralded on the stage of Prudential Hall never was able to secure financing, according to the state Economic Development Authority, which said it was subsequently "abandoned" not long afterward "due to the economic downturn." The tax credits, so important to the project, were lost.
Financing troubles
James Hughes, dean of the Edward J. Bloustein School for Planning and Public Policy at Rutgers University, said the financing snags were unsurprising, given the burst in the housing bubble at the time.
"Credit disappeared," he noted. "Probably it was a good thing they didn't go forward. It would have been a 'zombie' building."
NJPAC ultimately was forced to scale down the project, significantly reducing the height of the tower, cutting the retail space and taking as much as $90 million out of the projected price tag. With state and local support, NJPAC and its developer sought new state funding through the Urban Transit Tax Credit program in April 2013. EDA records, however, show the credits were denied because NJPAC and its developer still could not "provide a financial commitment for the debt part of the project's capital structure."
The state, though, gave the project another chance. Under a second round of funding approved that year, the EDA awarded One Theater Square up to $33 million in tax credits in November of 2013. The city of Newark also approved a long-term tax exemption and redevelopment area bond financing. And according to the project application, pre-construction was expected to start in June 2014 with a targeted completion date of 2016, the EDA documents reported.
NJPAC tax filings show the arts center has spent $3.16 million of real estate pre-development costs since 2010. Schreiber said not all of the costs represented in the tax filings can be attributed to Theater Square, "but we have invested over $2 million to advance the project."
He said Newark Mayor Ras Baraka, the municipal council, Essex County and the state of New Jersey "have all been supportive partners and advocates in the road to active construction."
Now, some 10 years after it was first proposed, the arts center project appears to remain in limbo and its tax credits are again in jeopardy.
Will the show go on?
According to EDA spokesman Virginia Pellerin, the capital investment for Theater Square must be made by April 26, 2017, with the tax credits paid out over ten years.
"If the project is completed after the deadline, the developer will lose eligibility for the equivalent of one year of tax credits for each year the project is delayed," she explained.
Development experts question whether Theater Square could be completed by 2017. Meanwhile, in an effort to keep those credits intact, state Sen. Teresa Ruiz (D-Essex) recently introduced a bill to delay the construction deadline by a year.
"John Schreiber and his team reached out to me," she said, calling the tax credits "a critical piece" in the financing.
NJPAC officials say without the tax credits, they would face a major hole in the project's financing. Anthony Coscia,the chairman of Amtrak and a former chairman of the Port Authority of New York and New Jersey who serves on NJPAC's council of trustees, said all the financing contingencies must be in place before construction can start.
"They have all their financing. The tax credit is a piece of the capital stack. But there is a question that construction will complete by the sunset date and both parties are not risk takers," he said of the tax credit extension.
Coscia's law firm, Windels Marx, represents NJPAC, providing legal support to the organization and negotiating the lease with Dranoff Properties.
"If getting the Legislature to extend the sunset by 12 months is going to make it less risky, it's good for the project," Coscia said.
Carl Dranoff, founder and CEO of the company that bears his name, said they are on track to targeting a start to the project in the fourth quarter 2015 or first quarter 2016.
"We believe that this will happen, and are making plans based on those targets," he said.
Ted Sherman may be reached at tsherman@njadvancemedia.com. Follow him on Twitter @TedShermanSL. Find NJ.com on Facebook.