Addressing confusion on 250M incentive

Jessica Perry//January 16, 2012

Addressing confusion on 250M incentive

Jessica Perry//January 16, 2012

The status of a $250.8 million tax credit award to Prudential Financial Inc. is unclear, as the insurance giant has publicly said it’s considering multiple sites in Newark to build a new headquarters property, though its application identifies a Center Street address near the New Jersey Performing Arts Center.

But the one site specified in a memo from the Economic Development Authority to its board “is more editorial than it is factual,” according to a Prudential spokesman, who said the insurer continues to do due diligence on several locations in the Essex County city. If Prudential changes its location, Erin Gold, a spokeswoman for the EDA, said it would be a first for the Urban Transit Hub program, which requires an applicant to identify a location before it’s considered for credits.

She said she couldn’t say what would happen to the tax credit if Prudential were to choose a site other than 3 Center St. for the new building. “The facts of the request would dictate EDA’s action, and without a request, we wouldn’t be able to make a determination,” Gold said.

Both the application, dated Sept. 22, and a Nov. 9 memo from Caren Franzini, chief executive of the EDA, indicate Prudential identified the Center Street proposal — which includes a 600,000-square-foot office tower and a parking structure near NJPAC, as well as upgrades to two other Prudential buildings in Newark, at 751 Broad St. and 213 Washington St. — as its focus, though the company had considered other options, including renewing its current lease in the Gateway complex or relocating to existing company sites. But Prudential determined both options would “create substantial operational disruption.” New construction was deemed most expensive, and not financially viable without incentives, the memo said.

“Although no final decision can be made until all aspects of a transaction are completed and the development and other city approvals are finalized, the company has decided to focus its attention on finalizing these matters on the NJPAC site,” the application reads. “The company has concluded that this development, in its totality, is best suited to fulfill Prudential’s specific needs for a mixed-use urban campus environment.” The application references NJPAC, Theater Square, a residential development planned for an adjacent site and other amenities as constituting elements that “offer Prudential the opportunity to complete the master plan vision that the state and city have had for this development since its inception 25 years ago.”

Franzini’s memo, which was presented to EDA board members at the November meeting where they approved the credits, also states Prudential was focusing on 3 Center St., and had concluded that site was best.

In the months since the credits were approved, however, Prudential has repeatedly said it is considering other sites in addition to 3 Center St. Spokesman Bob DeFillippo said last week the company is still “trying to determine whether we’ll build a building at all” as it completes due diligence on several Newark locations, which he would not disclose. Prudential said in its application it was “seeking to make a final decision confirming the viability of new construction” by end of 2011, because of the lead time needed to implement new construction.

“The application was submitted. At the time we were evaluating a number of different sites,” including 3 Center St., the property near NJPAC, DeFillippo said. “And we continue to go through those evaluations.” In a later e-mail, he said the company “filled out the EDA application with a specific site because that is what the application process required.”

Should Prudential walk away from the NJPAC site in favor of another Newark location, it will put the tax credits in unknown territory, with Gold saying last week no Urban Transit Hub applicant has submitted a project based on one site and amended its location. But the clock is ticking, both on Prudential’s $250 million in credits and the Urban Transit Hub incentive as a whole.

Prudential has a year from the approval date to meet three milestones to retain the award, which include site control, site plan approval and “other project specific items which may be added,” according to Franzini’s memo to the EDA board. Gold said site control includes either site ownership, the option to purchase the property or a lease agreement — none of which Prudential had met as of last week.

The company has a year to meet those milestones to maintain the project’s credit approval, but the deadline for other businesses to apply for credits under Urban Transit Hub is next January. If Prudential doesn’t meet its benchmarks, Gold said, that would leave only two months for the $250.8 million — the largest award under the program — to be considered for other applicants.

The EDA also is fending off a lawsuit by the owners of three Gateway properties who lease space to Prudential, who say losing the insurer as a tenant would be devastating to the owners and the city.

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