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Tight credit kills 70M project

//October 27, 2009//

Tight credit kills 70M project

//October 27, 2009//

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Area businesses hoped for Sandy Hook deal, but cautious investors wouldn’t commitAn arbitrator’s report that killed a $70 million redevelopment project on Sandy Hook underlined investors’ support for the venture, even as it cited insufficient financing commitments as a reason to cancel the deal.

The developer, Sandy Hook Partners Inc., has worked for 10 years on plans to rehabilitate 33 buildings at Fort Hancock into a marine research, education and training campus across 300,000 square feet. But the National Park Service announced last week that it had scrapped the 60-year lease, citing the assessment of “financial insufficiency” by the arbitrator, Maurice Robinson, of El Segundo, Calif.

Almost all the potential investors in the project were “very interested,” according to the arbitrator’s report obtained by NJBIZ. However, Robinson, who declined to be interviewed, said in his report that the investors that showed interest in Sandy Hook Partners’ project are “eminently qualified,” and that they were holding back because of the depressed state of the capital markets.

There is “virtually no capital being deployed into large-scale real estate projects,” Robinson said in his report, adding that Sandy Hook Partners “did not have enough time to produce the required commitments by the [Park Service’s] deadlines earlier this year.”

James Wassel, president of Sandy Hook Partners, complained that the National Park Service is scrapping the project even though “no private capital is being raised in this market.”

“Even he [the arbitrator] recommends we should be given more time,” Wassel said.

Mark Einstein, a principal at the accounting firm Reznick Group, in Bethesda, Md., said his clients including “large corporations and banks … were absolutely interested” in investing in the Fort Hancock project, “but the project was not certain enough.” Conservationists organized under the Middletown-based group called Save Sandy Hook have steadfastly opposed redevelopment at Fort Hancock.

Einstein’s specialties include structuring and raising money for projects that provide historic tax credits like the one at Fort Hancock. He said the investors he represents would have committed funds equivalent to the eligible federal tax credits of 20 percent of project costs, in return for those tax credits and some cash flow from the completed project.

Einstein said those institutional investors would continue to support the project, should Wassel submit a fresh bid if the National Park Service invites a fresh round of proposals.

Robinson’s report gave an assessment of other proposed investors:

• Capital One Bank: “Strong, bona-fide lender; very interested in providing a $4 million construction loan.” The bank did not complete its underwriting process before the June 25 deadline set by the National Park Service, and hence did not commit funds.

• Indus American Bank: “Very interested in providing a $2.5 million loan.” This bank also did not complete its underwriting process before the deadline.

• Sentry Hospitality: This hotel and conference center management company was “very interested in operating and also bringing in capital,” but did not complete its due diligence process before the June deadline. Sentry was interested in investing $24 million in equity and $35 million in debt along with other investors, but would have required a year to put the funds together.

The Park Service said in a release it would explore entering into “another lease agreement with a private entity for park-compatible uses to preserve, rehabilitate and adaptively reuse the historic buildings.”

The Park Service would also explore options to accommodate Rutgers University and Brookdale Community College, which had planned to lease about 5,500 square feet for a marine research institute in Fort Hancock. Michael DeLuca, senior associate director at Rutgers’ Institute of Marine and Coastal Sciences, said he would work with the Park Service on another building or facility at the site.

Amy Fitzgerald, Monmouth County’s director of economic and work force development, in Freehold, said she is “really interested to see what comes next” in terms of the National Park Service’s plans at Fort Hancock. She said the earlier development plan had a big academic component and would have brought construction jobs.

The rehabilitation of Fort Hancock would likely have boosted the fortunes of local businesses, said Tim McLoone, owner of McLoone’s Rum Runner, a dining establishment in Sea Bright, a mile away from Sandy Hook.

“It would have extended the Sandy Hook season into a year-round experience,” McLoone said. The park’s high season currently runs from Memorial Day to Labor Day.

The conventioneers, research professionals and vacationers that Wassel hoped

to attract could have brought business to benefit the region, including towns like Highlands and Sea Bright, McLoone said.

The conservationists’ cheer at the Fort Hancock lease cancelation is muted, because Wassel continues to have rights over three buildings there that are covered by a separate lease with the Park Service. “They still have the three buildings, which is absolutely wrong,” said James Coleman, secretary of Save Sandy Hook. “The fort is a place that has barbed wire around it; it says ‘Stay Out.’”

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