The success of Chester Township is born in the failure of Norristown’s Municipal Council to work together to attract a similar, successful project and developer to their municipality.
Read on to see the status of these two very similar projects that ended in two drastically different outcomes.
Sun Center, Aston:
CHESTER TOWNSHIP — Council has approved an ordinance amendment that will allow the owners of Sun Center Studios to construct a hotel on their property.
Council voted unanimously to amend the ordinance during their business meeting Thursday. The amendment had been previously reviewed and recommended for approval by the Delaware County and Chester Township planning commissions.
The amendment grants additional permitted uses for the site, sets height and parking restrictions, and sets signage regulations for the facility.
Council voted unanimously to amend the ordinance during their business meeting Thursday. The amendment had been previously reviewed and recommended for approval by the Delaware County and Chester Township planning commissions.
The amendment grants additional permitted uses for the site, sets height and parking restrictions, and sets signage regulations for the facility.
Source: DelcoTimes.com
What Sun Center is: Sun’s web site.
Norristown Centre, Norristown:
Norristown Centre reconstruction project ends in mortgage foreclosure
Montgomery County officials met with reporters Tuesday afternoon to explain why the county had agreed to an additional $24.5 million in government loans and grants for the Norristown Centre project (previously called “Studio Centre”) that required the public funds would be repaid after the private loans were satisfied.
Developer Charles Gallub, principal of Develcom of Bellmawr, N.J., purchased Logan Square in December 2007 with funds borrowed from a group of private investors and institutions called “Logan Lenders,” organized by Joseph Anania Jr. of Axis Advisors LP of Wayne. When Raleigh Studios backed out of a deal to manage the proposed movie studio, a $10 million state Redevelopment Assistance Capital Program (RACP) tax credit was withdrawn, according to a Montgomery County chronology by Jerry Nugent, executive director of the Montgomery County Redevelopment Authority (RDA) and Uri Monson, the chief financial officer of Montgomery County.
US Maintenance (USM) became the anchor tenant for an office campus built from the former Sears building. Pennsylvania officials made a $7 million RACP commitment for the office renovation. The county commissioners approved a $2 million Renaissance loan in July 2010 and a $6.2 million guaranteed revenue bond in November 2010. In 2011, the county guaranteed a $10 million loan through the federal HUD Section 108 low-interest loan program and Norristown guaranteed an additional $5 million HUD loan. Several smaller loans and grants totaled $5,440,000 for the project from the county.
A March 18, 2009 memo from the RDA staff and Glen Sweet, a financial analyst for the RDA, questioned why the private lenders would be repaid before the county loans were paid. The memo also questioned the “potential impact on community housing programs should the development not succeed.”
USM did not reach its projected job creation numbers when the project began and now employs about 400 workers. The former USM building at Norristown Centre remains vacant.
In March 2012, Gallub met with the private lenders and county officials asking for more than $11 million from the county to recruit additional tenants, pay off unsecured creditors and pay fees and interest to Logan Lenders. He claimed the “project was out of cash and could not recruit additional tenants,” the chronology said.
Logan Lenders said it did not have additional funds to put into the project and any new money would have to come from the county.
Montgomery County officials refused to put more money into the private development.
“It is clear from the review of even the most optimistic projections, that while the project overall could continue to function, benefits would accrue generously to the senior lender and the project developer, but rental revenues to the county would barely cover the current county debt on the project in the short term,” Monson said in an Aug. 6, 2012 letter to Anania and Axis Advisors.
“More disturbing, under the terms of the original inter creditor agreement, as the county guaranteed debt payments increase substantially in 2018 and beyond, several million dollars in additional monies will be directed annually to the senior lender, while the county shortfall will grow beyond $2 million a year. Additional investment by the county would serve primarily to increase cash flows for the senior lender and increase the marketable value of the asset which is under the control of the senior lender.”
While discussions with Logan Lenders continued, Montgomery County made three interest repayments for Norristown on the $5 million HUD loan totaling about $25,000, Monson said.
The county stopped making loan repayments in mid-2012, Monson said.
Montgomery County Commissioners’ Chairman Josh Shapiro said the foreclosure filed by Logan Lenders prevented the county from filing a mortgage foreclosure because the county has “second position” for repayment of the loans.
Shapiro said the mortgage foreclosure could hurt Montgomery County when it seeks new federal loans in the future. He said county officials would meet with HUD officials and U.S. Sen. Robert Casey Jr. in the next week to prevent further financial damage to the county.
“Under the terms of the HUD loan, if the project is unable to produce sufficient revenues to make the payments,” the chronology said, “the payments will be deducted from future Community Development Block Grant funds for the county and Norristown.”
“We have worked to renegotiate the terms of the senior lender,” Shapiro said. “We can’t in good conscience put up more public money for a project that is not viable.”
As part of the foreclosure proceedings, Gallub’s management of Norristown Centre was terminated and a new management company was put in charge, Shapiro said. The restructuring process is expected to take six to nine months.
Norristown Municipal Administrator Robert Glisson said in a statement that “Norristown is naturally distressed at the current turn of events which have forced the bankruptcy filing at Logan Square.”
“Current economic conditions have been a hindrance in the initial viability of the project,” Glisson said. “We firmly believe in the long-term success of Logan Square through our partnership with Montgomery County.”
As I worked with this project in the very beginning from an industry relations angle, I believe that Norristown’s project was first out of the gate. However, Aston received significant local support and local funding, whereas Norristown’s project was forced to find significant private funding and a package of RACP, TIF, county and other economic development.
Both Aston and Norristown suffered the same retraction of the very attractive and popular state funded movie production tax credits and the same tough economic times, yet only Aston survived.
Given the recent start of the Lafayette Street Corridor Project, PA Turnpike Ramps, and the Route 202 alignment and widening project through Norristown, all projects that I participated in at their inception as a Director of Public Works for Norristown, it only begs to question just how widely successful this single project could have been to the overall economic development of this community and our county given all of the river front mixed use development opportunities and access & egress enhancements being made. Additionally, what could we have done better as a government and community to successfully plan and execute this project?
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