Right Time to Invest in Commercial Properties in the U.S.?

Posted by on Apr 27, 2012 in Direct Investment from China, Real Estate |

By: Kun Zhao, Esq.

The second annual Chinese Investment in the U.S. Real Estate Forum is scheduled to be held on June 21, 2012 in Los Angeles, California. U.S. real estate professionals will gather there to address the latest trends and opportunities in China-U.S. real estate investments and transactions. Given the current drop in housing prices and a strong and rising RMB, Chinese investors have shown a greater than ever interest in the U.S. real estate market.

Chinese investors are increasingly targeting commercial properties in New York and New Jersey. According to a report, China’s HNA Group, which owns Hainan Airlines, acquired 1180 Avenue of the Americas, a 23-story office building in Manhattan for $265 million, and the luxury Cassa Hotel and Residences near Times Square for $126 million last year. Hong Kong billionaire Cheng Yu-tung’s family also invested in five U.S. luxury hotels in 2011, including Manhattan’s iconic Carlyle, for $570 million.

Chinese investments in New Jersey’s port area have been growing substantially as well. China is the largest source of goods imported through Newark, accounting for 27.8 percent of all goods entering the Port of New York and New Jersey. Chinese investments will continue to grow with the imminent widening of the Panama Canal, the expansion of the New Jersey Terminal, the dredging of New York Harbor and the raising of Bayonne Bridge. All these projects aim to substantially increase the New Jersey’s ports’ capacity to handle more containers. These projects will allow large cargo ships that currently anchor in California to sail directly to New Jersey, which would eliminate the need to deliver goods cross-country via trucking or railway. To Chinese companies, it means that a new distribution center in the east coast will be established.

Resonant with the port expansion in Newark, Chinese companies have invested substantially in in industrial properties near the Port of Newark. According to a real estate newsletter, last November, Sun Taiyang Co. signed a lease for a new 95,542-square-foot industrial facility in Moonachie. Early this year, Asian food distributor, Walong Marketing, renewed its 175,456-square-foot lease at 99 Caven Point Rd. in Jersey City. The facility has served as the company’s east coast distribution center for 10 years and Walong will stay in place for an additional 20 years. Currently, many Chinese companies are seeking to lease warehouses to handle their products. It is anticipated that these companies will need to acquire their own warehouses to accommodate their rapid growth.

The Real Estate Practice Group at Hill Wallack LLP stands ready to handle your real estate issues with the skill and sophistication necessary to achieve the desired results.

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Acting Governor Guadagno Signs Bill to Extend Moratorium on 2.5 Percent Non-Residential Development Fee

Posted by on Aug 24, 2011 in Real Estate |

By: Michael J. Lipari, Esq.

Today, Acting Governor Kim Guadagno signed a bill into law that extends a prior moratorium on the 2.5 percent non-residential development fee. This law (Legislative Bill S-2974) extends the moratorium for an additional two years, which should provide relief to commercial real estate developers.

Background on the 2.5 Percent Fee
On July 17, 2008 legislation known as “A-500” (otherwise referred to as the “Roberts Bill”) was signed into law, creating the “Statewide Non-residential Development Fee Act,” (the “Fee Act”), which set a statewide affordable housing development fee of 2.5 percent for non-residential development. The fee was calculated on the basis of the equalized assessed value of the project. As of July 17, 2008, municipalities were permitted to retain such fees in their own housing trust funds, and spend them, provided that they were before a court or under the jurisdiction of the Council on Affordable Housing (“COAH”) seeking approval of a fair share plan and a spending plan for affordable housing development fees.

As a result of the ongoing economic crisis and collapse of the real estate market, the New Jersey Legislature passed the New Jersey Economic Stimulus Act of 2009, which was signed into law on July 28, 2009. The Stimulus Act amended the Fee Act to suspend the 2.5 percent non-residential development fee until July 1, 2010, provided that non-residential developers obtain preliminary site plan or subdivision approval by that date, and subsequently obtain building permits by no later than January 1, 2013.

Extension of the Moratorium
Since July 1, 2010, qualifying projects have been subject to the 2.5 percent fee. The signing of S-2974 amends the Stimulus Act and extends the moratorium to July 1, 2013. Thus, projects which have or receive preliminary or final site plan approval prior to July 1, 2013 are again exempt from the 2.5 percent fee provided that building permits are obtained by December 31, 2015.

This law also extends the moratorium back to July 1, 2010, allowing for the reimbursement of fees paid in the interim, unless the fees have already been spent on an affordable housing project. If the 2.5 percent fee has already been paid, the developer has 120 days to claim a refund from the municipality, provided that the money has not been spent. If the money has already been spent, the developer is not entitled to any refund.

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New “Vertical GDP” Law Provides Options to Developers

Posted by on Jul 19, 2011 in Real Estate |

By: Michael J. Lipari, Esq.

In an effort to provide certainty to development projects in the urban and more developed areas of the State, legislation has been adopted that extends general development plan (GDP) protection to large development projects situated on smaller sites.

Since 1987, developers have had the option under the Municipal Land Use Law (MLUL) to seek GDP approval for developments on sites of 100 acres or more. Now, the same protections are afforded, though the adoption of what is being called “vertical GDP,” to projects with a nonresidential floor area of 150,000 square feet or more, or with 100 residential dwelling units or more, on sites of 100 acres or less. Mixed use projects may also qualify if the project consists of a combination of square feet of nonresidential floor area and residential dwelling units, which when proportionately aggregated at a rate of 1,500 square feet of nonresidential floor area to one residential dwelling unit, are equivalent to at least 150,000 square feet of nonresidential floor area or 100 residential dwelling units. This extends the vesting provisions to the more practical regions of our State such as urban enterprise zones, areas in need of redevelopment and transit hubs.

GDP approval is based upon submission of conceptual plans to the municipal planning board prior to any application for site plan or subdivision approval. Once GDP approval is granted the developer has the right to develop the property in accordance with the GDP regardless of any subsequent changes in local ordinances or other local requirements. This right can extend for as long as 20 years.

The Legislature provided for vertical GDP approvals recognizing the costly and time consuming process to engage in urban area development projects due to challenges such as land assemblage, environmental clean up, slower absorption rates and the difficulty to obtain project financing. Additionally, since the typical application process may extend over many years, it is possible that the views of elected officials or the planning board might change. The implementation of vertical GDP legislation now offers the additional protections to smaller sited projects. In this difficult economic climate, a GDP may be the key to demonstrating stability in the local market and could assist developers with obtaining project financing.

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