Economic Impact Study

The Monmouth Town Center Monmouth Mall Borough of Eatontown, Monmouth County

April 12, 2016

BENECKE ECONOMICS 55 WANAQUE AVENUE SUITE 135 POMPTON LAKES, NJ 07442 Monmouth Town Center Economic Impact Study BE

1. Introduction. This report examines the local area impact of the turnaround and proposed repurposing of the Monmouth Mall (the “Mall” or “Project”) located in the Borough of Eatontown, Monmouth County, New Jersey. This report includes a description of the positive impact the Project has on employment, commerce and the tax base of the Borough of Eatontown. The impact on municipal and school services will also be described. Local economies are impacted by shopping Malls which are experiencing a continual state of decline. The Monmouth Mall is experiencing such a decline. As an example, on August 10, 2015 the property value was reduced by the New Jersey State Tax Court in the amount of $7,400,000, a tax revenue loss of over $160,000 annually. This is the annual tax payment equivalent of approximately twenty (20) typical Eatontown residences. The entire loss of value, $7.4 million, was due to the reduction in the value of the buildings located at the Mall. If the deterioration of the Mall is not reversed the Borough of Eatontown will experience a significant reduction in the value of the Borough’s most significant property tax payer. The Mall currently pays over 10% of all property taxes in Eatontown. If the building values located at the Mall continue a downward trend the impact on existing residences would be dramatic. The Borough of Eatontown, Monmouth County, New Jersey had a population of 12,709 in 2010, down from 14,008 in 2000. The U.S. Census Bureau estimates the Borough’s population at 12,257 in 2014.1 As the population of a locality declines so does its economic activity. Median annual household income in Eatontown was an estimated $64,378 in 2014, with the New Jersey 2014 median annual household income estimated at $72,062, and Monmouth County having an estimated 2014 median annual household income of $85,605. Of the 5,274 occupied housing units in Eatontown 69.1% were occupied by one or two persons. This compares to 56.1% of households having one or two occupants in New Jersey. The average Eatontown household had an estimated 2.32 individuals in 2014, compared to 2.72 in New Jersey (a 15% lower rate of occupancy than statewide). Eatontown had a 2014 benchmark unemployment rate of 6.1%, higher than both the state and county averages. These numbers lead to the conclusion that the local economy of Eatontown is sluggish. The Monmouth Mall property pays more in taxes, $5,582,734 in 2014, than any other property in the Borough. To have this important property experience a decline, especially in the face of the retail headwinds most shopping Malls are experiencing (on-line retail activity as an example), will lead Eatontown from economic sluggishness to decline.

2. Summary of Study Findings. This report will demonstrate, in detail, the following: A-the Monmouth Mall currently generates approximately 12% of the local total property tax levy in Eatontown ($5,582,732/$46,701,409); B-if the status quo were to be maintained the existing Mall would experience a significant decline making the funding of local services, including schools, police and other public safety services, more difficult and reliant on the residential property taxpayer; C-the new Monmouth Town Center will generate estimated NEW net (of local services costs) tax revenues of approximately $6.0 million. When combined with the amount of existing tax payments a total of $11.5 million in property taxes will be paid on these properties, over 20% of the total property tax levy. This will provide real property tax relief to existing Borough property owners; D-the new Monmouth Town Center will create approximately 1,892 retail/office jobs and 2,985 construction jobs.

3. Retail Activity and the new proposed Monmouth Town Center. Local economies are impacted by shopping Malls which are experiencing a continual state of decline. According to Green Street Advisers, a real estate analytics firm, more than twenty (20) shopping Malls have closed in the past few years, such as Rolling Acres

1 The U.S. Census Bureau, American Community Survey, 2014.

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Mall in Akron . Another example is the closure of White Flint Mall in suburban , D.C. which is nearing demolition. Most retail experts agree that middle level Malls are slowly disappearing and the widespread difficulties of anchor stores such as Sears, J.C. Penney, and even Macy’s have made many Malls tenuous propositions.2 Monmouth Mall located in the Borough of Eatontown is one such middle level Mall. As previously mentioned, should the Monmouth Mall experience the downward spiral forecasted by Green Street and others it would be deleterious to Eatontown. In response to the decline of the forward thinking developers are investing in lifestyle centers where people live and visit to enjoy entertainment, shopping and other experiences. is embarking on such an investment by repurposing the Monmouth Mall into a unique lifestyle center. Retail centers are being built and repurposed nationwide to include mixed use concepts and visitor experiences beyond shopping. Examples to draw upon are the Kierland Commons (Phoenix-Scottsdale, Az.), Mercato Plaza (Naples, Fl.) and Coconut Point (Estero, Fl.). These experience destinations add foot traffic to a retail center and provide for a sustainable town center atmosphere as opposed to a tired shopping Mall experience.3 Monmouth Mall first opened on March 1, 1960 having retail space of 500,000 square feet. In 1976 JC Penney was built on its own site but is considered part of the Mall. The Mall underwent renovations in 1987 and then was expanded in 1995-1996 with the addition of a fifteen screen movie theater. In 2009 another expansion bought Barnes and Noble to the Mall. As the attached map indicates the Monmouth Mall is located off of , Exit 105 and Route 18, on the corner of the intersection of NJ 35/NJ 36 and Wyckoff Road (Route 547). The new Monmouth Mall, or Monmouth Town Center, will be an exciting destination for visitors from throughout the eastern United States which will include a hotel, office space, and residences combined with new and improved Class A retail and entertainment experiences.4 The proposed Project is known as the Monmouth Town Center and contains two distinctive yet integrated areas: Monmouth Gallery and the Streets of Monmouth. The Project is in the concept planning stage and the Project components described in this report and in the referenced conceptual site plan may change. These changes may be based on community feedback and market considerations. In addition, it is anticipated that the Project is an expensive undertaking and non-traditional financing options may be necessary to make the Project financially viable. The United States Army's Fort Monmouth operated in Eatontown from 1917 until its closure in September 2011, based on recommendations from the Base Realignment and Closure Commission. The base closure as well as the decline in the Borough’s population its persistent high unemployment rate and the recession of the past few years has left Eatontown in need of an economic infusion. As this report shows Kushner is proposing making such an infusion but headwinds to achieve success, such as construction costs, need to be addressed before the Project can proceed.

4. The Project. The existing Monmouth Mall includes approximately 1,554,900 square feet of retail space on one-hundred five (105) acres.5 The Mall features approximately 150 retail shops. The following figure provides is a breakdown of the existing properties making up the Mall and their assessed values and 2014 property tax payments.

2 Radio Shack is closing more than a quarter of its 4,000 Mall stores and Aeropostale has announced plans to close 240 of its Mall locations. Kohl’s is moving to shed up to 80 stores and Abercrombie has closed 180 stores since 2009. Delia's is closing all 92 of its stores as part of its liquidation. 3 We can also look to Montclair, Ridgewood, Morristown and other traditional town centers to demonstrate the town center concept and its success. 4 Please refer to the Project Concept Master Plan prepared by RTKL Associates, Washington DC, dated July 8, 2015. 5 The total square feet of space includes a 50,000 s.f. pad which is undeveloped.

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Land Improvement Total 2014 Taxes Block Lot Assessment $ Assessments $ Assessment $ $ Acres Notes 2201 1.01 6,700,000 17,112,600 23,812,600 537,212 2.0 2201 1.02 117,300,000 49,700,000 167,000,000 3,767,520 78.2 2 5,265,000 9,185,000 14,450,000 325,992 10.53 L+T 4 2,950,000 19,994,000 22,944,000 517,617 2.36 Macys 5 5,650,000 12,750,000 18,400,000 415,104 11.3 JC Penney 2202 1 855,000 140,000 995,000 19,289 0.38 Total 138,720,000 108,881,600 247,601,600 5,582,734 104.77 Less: 2015 Tax Ct. -7,400,000 240,201,600 -164,724 Decision Adjusted Total 138,720,000 101,481,600 240,201,600 5,418,010

In 2014 the Borough of Eatontown has an assessed to equalized (market) value ratio of approximately 100%. This means that the Borough considers the values in Figure 1 to be the approximate market value. The commercial properties in Eatontown have a total assessed value of $774,777,700 of which the Monmouth Mall pays over one-third of this amount. If the value of the Mall were to continue to decline the residential taxpayer will pay more in taxes. In 2015 the average residence in Eatontown paid $7,278 annually in taxes. If the Mall were to significantly deteriorate a 5% increase in residential taxes could be expected. This would deliver an average annual tax bill of over $7,600 to homes in Eatontown. The property improvements (buildings) in the Project area have a 2014 assessed value of $89.22 per square foot ($108,881,600/1,504,900). The land (property) has an assessed value of $1,324,043 per acre ($138,720,000/104.77). The property pays an annual tax of $3.71 per square foot ($5,582,734/1,504,900). The new Monmouth Town Center will generate additional retail and office space as well as provide a mix of interesting specific uses (a rehabilitated state of the art theater for example) which will increase the property value and increase tax assessments and tax payments to support municipal and school services. Moreover, employment opportunities will be provided which will enhance the local economy. The quality of the residences must be emphasized. The residences at the proposed Town Center will be well constructed condominium units with granite (or equivalent) counter tops, stainless steel appliances, built in microwave units, ample volume ceilings and quality flooring. The exteriors will be integrated with the retail/office uses to provide a lifestyle center which will be attractive and present a welcoming impression. The residences will be occupied by individuals and couples having annual incomes approaching $90,000. This income level will be necessary to afford the rents averaging $22,500 annually and higher. The occupants will be primarily of two categories. First, professionals in their mid-twenties to age thirty five or so. Second, empty nesters or “almost empty-nesters”, in their early fifties or older. These two categories of occupants do not tend to have school aged children (SAC).6

6 The rule of thumb is that household income should be greater than three times the average annual rent or mortgage payment. This would make the necessary income to occupy a home at the proposed Monmouth Town Center to be approximately $70,000.

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A word is in order about affordable housing requirements. While we separately report on the impact of affordable housing on public school services we note that on a preliminary basis forty (40) affordable units may be constructed on-site with a separate affordable housing component of at least ninety-three (93) affordable units being constructed off-site. Our rent estimate of $25 per square foot of living space has been discounted to take into account this 5% on site affordable housing obligation. However, if the number of on-site affordable units increase above the forty unit level a new residential project pro-forma would need to be prepared. It is important to indicate that this project will generate a significant number of additional jobs, a conservatively estimated 1,892. A portion of these employees of the new retail space and offices will live in the new residences. Perhaps as many as 20% or more will live at the new Monmouth Town Center. This is approximately forty units which will be occupied by Monmouth Town Center employees. The following figure shows the breakdown of the existing Mall retail space.

{Please see the next page.}

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Figure 2. The following chart shows the existing retail mix in square feet of the Monmouth Mall.

In‐line Macy's Barnes & Macy's Lord & JC Retail F&B AMC Old Navy (3 Levels) Noble Kids Taylor Penney Boscov's PAD A TOTAL Mid-Level 120,600 32,600 78,700 23,700 120,700 29,700 25,600 ‐ 431,600 Level 1 124,500 800 79,900 79,400 91,000 ‐ 375,600 Level 2 114,200 800 79,900 79,400 91,000 ‐ 365,300 Level 3 91,000 ‐ 91,000 78,700 23,700 362,100 29,700 25,600 159,800 158,800 273,000 50,000 TOTAL 359,300 34,200 1,161,400 1,554,900 Note: F&B means food and beverage.

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The following chart depicts the breakdown of the Borough of Eatontown annual 2014-2015 budget and tax levy as well as other financial information. 7 Figure 3. FCOA Municipal Appropriation % Change 2014 2015 Difference Current Fund (Source) Category 2014-2015 Budget Budget 20 General Government 4.47% $79,940 $1,790,307 $1,870,247 $1,573,607 21 Land-Use Administration 10.98% $18,400 $167,525 $185,925 $185,925 22 Uniform Construction Code 1.70% $7,408 $434,832 $442,240 $442,240 23 Insurance 0.72% $31,136 $4,308,660 $4,339,796 $4,339,796 25 Public Safety 2.23% $131,069 $5,869,532 $6,000,601 $6,000,601 26 Public Works 1.43% $33,840 $2,360,920 $2,394,760 $2,394,760 27 Health and Human Services 10.58% $1,868 $17,657 $19,525 $19,525 28 Parks and Recreation 2.89% $32,070 $1,110,350 $1,142,420 $1,142,420 29 Education-including Library -2.90% ($2,200) $75,804 $73,604 $73,604 30 Unclassified -76.98% ($678,836) $881,786 $202,950 $202,950 31 Utilities and Bulk Purchases -I.88% ($14,600) $774,600 $760,000 $760,000 32 Landfill / Solid Waste Disposal 3.35% $11,500 $343,300 $354,800 $354,800 35 Contingency 0.00% $0 $4,000 $4,000 $4,000 36 Statutory Expenditures 6.37% $113,816 $1,786,641 $1,900,457 $1,900,457 37 Judgments $0 $0 42 Shared Services 24.04% $25,000 $104,000 $129,000 $129,000 43 Court and Public Defender 36.85% $20,450 $55,500 $75,950 $75,950 44 Capital 34.05% $32,350 $95,000 $127,350 $127,350 45 Debt Service 13.91% $253,800 $1,824,700 $2,078,500 $2,078,500 46 Deferred Charges 43.51% $13,340 $30,660 $44,000 $44,000 48 Debt Type 1 School District DS $0 $0 50 Reserve for Uncollected Taxes .-6.44% ($116,880) $1,814,180 $1,697,300 $1,697,300 Totals ($6,529) $23,849,954 $23,843,425 $23,546,785 7 2015 Muni. Tax Levy (Includes $16,505,167 Library) 8 Surplus Budgeted Revenue $2,550,000 8, 9, 11, 15 Other Budgeted Revenue $4,491,618 Sub-total $23,546,785 10 Grants $296,640 UFB-Summary Total 2015 Budget $23,843,425 UFB- Tax 2014-2015 Tax Assessments $2,091,909,634 UFB- Tax 2015 Municipal Tax Rate $0.789 Tax Duplicate School and Regional School Tax $23,796,366 Tax Duplicate County Tax $6,401,915 UFB- Tax Est. Total 2015 Tax Levy $46,701,409 UFB- Tax Est. Total 2015 Tax Rate $2.226 BOE Budget Est. Per student tax levy $16,000

7 Reference: 2015 Eatontown User Friendly Budget (UFB) and the borough’s tax duplicate. The Board of Education numbers were verified to the school district budget. Note: FCOA represents the flexible chart of accounts.

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The data is in place to begin describing the economic impact of the Project on the Borough including school services, municipal services, and property taxes together with related impacts on employment and other economic factors. It is important to emphasize that the creation of new employment opportunities generates local household income breeding economic activity. The factors to be considered here are: 1-increased economic activity resulting from increased income due to new residences; 2-ithe increase in new retail, service and office jobs; 3-increased construction jobs; and, 4-the increase in property values and tax revenues net of new municipal and school costs.

5. The Impact of the Project.

A. The following figure depicts the land use scope of the new Monmouth Town Center.

Figure 4. Total Total Square Employees/1,000 Total SAC Employment Persons/Unit Estimated Description of Use Feet S.F. Persons Unit-Multipliers or Units SAC Monmouth Gallery Retail 1,202,648 3 3,608 0 0 0 0 Entertainment (SoM) 116,340 1.2 140 Streets of Monmouth Retail 241,760 3 725 0 0 0 0 Hotel (SoM) 36,369 0.66 25 0 0 0 0 Office (SoM) 131,400 3 394 0 0 0 0 Subtotal Nonresidential 1,728,511 2.8 4,892 0 0 0 0 Town Center 1 BR 560 1.603 898 0.051x.75 23 Town Center 2 BR 240 2.0-2.342 480-562 0.233x.25 33-43 Subtotal Residential (Gross) 891,118 800 1,378-1,460 56-66 Total 2,797,000 Notes: SAC: School Age Children. Also, please see the concept site plan for the building details. The amount of new retail space is estimated at 218,200 s.f. The amount of hotel space is estimated at 37,000 s.f. {+/-} with 131,400 s.f. of office space being planned. Source: Persons and SAC: Who Lives in New Jersey Housing? New Jersey Demographic Multipliers, by David Listokin, et al. Rutgers University Center for Urban Policy Research (CUPR), published November, 2006. This research also includes employees per s.f. Various Dun & Bradstreet studies (2012 and 2014) and our own research have been used to verify these results (our IMPLAN model and study covering the Koppers Seaboard project in Kearny, NJ, 2014 as an example). It should be noted that infants and toddlers aged 1 month to 5 years of age as well as college students and “live-in” adults (senior parents) are also included in the total persons count. The prospect that some SAC will attend parochial or private school is likely, but to be conservative we assume that all SAC will be public school students. The reality is at least two or three will attend non-public school(s). The trend of residential occupancy is for a certain number of two bedroom units to have less than two occupants.

B. Project Employment and Income. The above estimate of Project retail employment was increased from the New Jersey general standard of 1.71 per 1,000 square feet of space for independent retail shops to three (3) workers per 1,000 square feet to reflect the national and specialty retailers expected to occupy the Project.

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The employment numbers also reflect the proposed food and beverage uses (restaurants) which have higher numbers of workers per 1,000 square feet (shown in the CUPR study and other research with a median of .26 workers per 1,000 square feet).8 The number of estimated workers per 1,000 square feet is the same for both retail sections of the Project, Monmouth Gallery and the Streets of Monmouth, and reflects the balance between some large format stores and some smaller stores and restaurants. The estimated number of job generated by the proposed Project at full occupancy totals 4,892. We estimate that the Mall currently employees about 3,000 employees. This is an increase of an estimated 1,892 employees.9 Please note that this figure represents the number of full time equivalent positions, not the number of employees. Because retailers use seasonal and part time workers the number of persons employed will be higher. These additional employees will have significant incomes. In turn these new employees will frequent area establishments and will add to the local economy. The following figure depicts our estimate of this new income resulting from this Project.

Figure 5. New Retail Employee Income $52,430,000 New Office Employee Income $17,730,000 Total New Employee Income $70,160,000 Note: Retail/Hotel Employee income is estimated at $35,000 annually per employee and office employees have an estimated annual income of $45,000 per employee. Both are conservative numbers.

Because the Monmouth Town Center will have amenities and recreation uses such as a climbing wall and possibly a bowling alley the Project will have a constant influx of shoppers and visitors. The hotel will also generate visitors with demand for rooms coming from shore travelers as well as visitors to the Monmouth Town Center. The Project will also include approximately 131,400 square feet of office space which will employ an estimated 394 persons in higher paying jobs. This employment number is based on three (3) employees per 1,000 square feet of office space, a conservative number. Many of these individuals, as well as employees of the retail establishments, will live at the residences to be built as part of the town center. The number of persons estimated to reside in the proposed development at full occupancy totals 1,378 (Figure 4). This is significant because these new 800 households will develop a sense of place in Eatontown and will have significant disposable income to spend at local businesses. These new households are a powerful commerce generator.10 The following figure shows the impact of the residential Project on the local tax base.

Figure 6. Number of New Households 800 Est. Total Household Annual Income $60,000,000 Est. Disposable Income $15,000,000 S.F. of Retail Supported by New Households 37,500 s.f.

Combining the estimated incomes in Figure 5 with Figure 6 a combined new total annual income of

8 The formula for national retail space includes up to 3.5 employees per 1,000 s.f. while independent or regional retail space includes somewhat less than 2.0 employees per 1,000 s.f. See the City of San Francisco Formula Retail Economic Analysis, January 2014. 9 Retail employment per store and 1,000 s.f. of building area significantly varies among retail categories. 10 This income generates indirect and induced economic benefits such as spending at gas stations and other non-Mall establishments.

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$130,160,000 circulating in Eatontown.

C. New Construction Jobs. The number of new construction jobs varies with the type of use or construction. We rely on our own research using United States Bureau of Labor Statistics and the pertinent work of Gilbane Building Company, “Construction Economics”, December 2013. The number of construction jobs generated by a new project (or a repurposed project area) ranges from one job for each $100,000 spent on construction to one job per $150,000 spent. The following figure represents our estimated cost to construct the Project.

Figure 7. Estimated Total Project Component Square Ft. $ Per SF Construction Cost-$ New Retail Space 173,611 225 39,060,000 Office Space 131,400 200 26,200,000 Hotel Space 36,369 250 9,092,250 Residential Space 891,118 190 169,312,420 Special Conditions 8,500,000 Total 1,292,100 207 252,164,670 Parking 58,075,00011 Total New Construction 310,239,670 Retail Renovation 62,914,390 Fountain and Canopy Site work for area disturbed Total Project Costs 1,292,100 373,154,060 Notes: Special conditions include utility and existing parking improvements. The parking component cost above includes 2,323 parking spaces in newly constructed parking decks at Buildings A, B, C, D and E. Other parking decks may be constructed please see footnote #10. The existing surface parking has 5,488 spaces. The cost of the fountain and canopy areas are subject to final design. To the extent that the cost of construction of the new and renovated buildings include only typical site work additional costs may be incurred for exceptional work.

It is conservatively estimated that one construction job will be created for each $125,000 spent on the Project. This means that 2,985 construction jobs will be created or opportunities for ongoing employment of construction trade employees will be experienced as the Project is built ($373,154,060/$125,000). At an average of $50,000 per average employee a total income of $149,250,000 will be generated by the Project from construction employment. The labor costs represents approximately 40% of total project costs. The Project may take five years or more to construct, accordingly, the construction jobs will be created over the course of the Project.

6. The Project Impact on Local Property Taxes. This section begins with an estimate of Project value and the amount of annual property taxes estimated to be generated by the Project. An estimate of the residential Project value, additional property taxes and local service costs are provided.

11 The total number of parking spaces is preliminarily estimated at 7,811. Up to 4,807 structured parking spaces may be built. The Mall currently has 1,032 structured parking spaces. This could potentially be replaced with a repurposed or new parking deck.

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Figure 8 provides the estimate of annual property taxes generated by the residential component of the Project.

Figure 8. Total Annual Estimated Rent Per Unit $22,500 Total Annual Estimated Net Rent Per Unit $15,750 Est. Value Per Unit (7% Cap Rate)12 $225,000 Annual Property Tax Per Unit $5,009 Total Gross Property Tax Payments $4,006,800 Total Estimated Residential Value $180,000,000 Note: rents are conservatively estimated at $25 per square foot.

Public school aged children attend the Eatontown Public Schools for grade pre-K through grade eight. Students in grade nine through twelve attend Monmouth Regional High School. The residential component of the Project will generate public school aged students anticipated to reside in the proposed development at full occupancy (Figure 5). The number of SAC generated by the Project is estimated at between fifty six (56) and sixty-six (66). The 66 students who are expected to live in the proposed Project are likely to be concentrated in the early grades with a few in the later high school grades. At the current estimated average annual tax cost of $16,000 per student the cost to educate these new students is an estimated $1,056,000 annually. However, using the average cost per student may be misleading and result in a significantly higher cost estimate than the actual cost. If classroom capacity exists then the marginal cost of educating a new or additional student is only a fraction of the average cost. We noted previously that the population of the borough declined by approximately 1,300 from 2000 to 2010. Therefore, the increased population arising from the Project will simply replace “lost” population. Limited marginal, or new, municipal costs will result from this Mall repurposing.13 Examples include: 1- garbage collection which will be disposed of by Mall tenants and the residential management company; 2- construction code fees and fire safety fees will be paid by the Project owners; and, 3- the Monmouth Mall property is located in an existing police patrol sector. Because the residences and proposed active recreation uses may generate added public safety services a proportional 11.5% increase in the borough’s public safety budget may be required to provide these services. This proportional percentage, 11.5%, is the percent increase in the population generated by the Project (1,460/12,709). The proportional public safety service increase is $690,070 annually in 2015 dollars ($6,000,601x11.5%). Some added overhead costs may also be incurred by the borough. These costs are classified as general government costs which may be incurred by the borough to mail tax bills and handle other administrative functions. A proportional 11.5% increase in general government costs may also be

12 Capitalization rates are an indirect measure of how fast an investment will pay for itself. In the example above, the rented units will be fully capitalized (pay for itself) after fifteen years (100% divided by 7%). If the capitalization rate were 10%, the payback period would be ten years. The standard is to use net operating income (NOI) in the computation; where NOI is earnings before interest taxes depreciation and amortization (Ebitda). Where sufficiently detailed information is not available, the capitalization rate will be estimated from net operating income to determine cost, value or required annual income. 13 Marginal cost (MC) is defined as the incremental cost of providing a service. In other words the cost of hiring one additional police officer, as an example. Proportional cost increase is defined as the percentage increase of providing a service based upon a related growth factor. In other words if population of a new, unserved service area increased the population of a town by 5% the cost of providing services may increase by 5%.

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required as well, amounting to $215,079 annually ($1,870,247x11.5%).

The combined estimated local government service costs generated the Project is $905,149 annually ($690,070+215,079). This amount will be subtracted from the amount of estimated total annual property taxes generated by the residential component of the Project. Figure 9 which follows recaps the Project’s estimated school and municipal service costs.

Figure 9. School Aged Children $1,056,000 Public Safety $690,070 General Government $215,079 Total New Public Service Costs $1,961,149 Note: These are probably high estimates.

The results from Figure 8 and Figure 9 show the amount of new total and net additional property tax revenues generated by the residential component of the Project. Figure 10 summarizes this result.

Figure 10. Total Annual New Property Taxes $4,006,800 Less: Annual New Service Costs $1,961,149 Total Annual New Net Property Taxes $2,045,651 Note: These results are for the residential component.

The remaining Project components can now be valued so that their respective property tax impacts can be described. First an estimated value of each non-residential component is given based on 200% of the construction cost per square foot of new space.

Figure 11. Component Square Feet Est. Value Per S.F.-$ Est. Total Value-$ New Retail Space 173,611 450 78,125,000 Office Space 131,400 400 52,600,000 Hotel Space 36,369 500 18,200,000 Special Conditions-Amenities 31,500,000 Totals 341,380 529 180,425,000 Total Annual New Property Taxes 4,016,261 Note: The special condition(s) improvements will increase property value. Retail rents need to be In excess of $40 per square foot for the above values to be achieved.

When the current assessed value of the Project is added to the estimated value of the non-residential Project value the total property value is estimated at $460,391,600, approximately $248 per square foot.14 ($247,601,600+$180,425,000=$428,026,600 and $428,026,600/1,728,511=$248.) Using the above estimated new value of $180,425,000 the non-residential components of the Project will generate an estimated $4,016,261 in new annual property taxes ($180,425,000 x 2.226 {per $100 of assessed value}). Limited new municipal service costs or school service costs will be generated by the non- residential Project components. The annual property tax payment by the residential component of the Project

14 The land values is included in the existing assessed value.

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will pay for any additional municipal service costs attributed to any marginal cost associated with the non- residential Project components.

We now can put together the property tax impact of the residential and non-residential components of the Project.15 Figure 12 shows the estimated positive net property tax impact of the Monmouth Town Center when it is built out.

Figure 12. New Residential Net Property Taxes $2,045,651 Non-Residential Property Taxes $4,016,261 Total Net Additional Property Taxes $6,061,912 Percent of Total Est. 2015 Tax Levy 20%

7. A Preliminary Project Financial Pro Forma. In this report the level of private investment in the Monmouth Town Center has been estimated at $373,154,060. This level of private investment assumes that sufficient income (or value) exists to make viable such as investment. Figure 13 shows how “thin” the investment, in terms of cost margin, is of this Project. This illustrates two points: 1-the repurposing and value of the existing Mall space is critical to the success of the Monmouth Town Center (and vice-versa), and 2-the rental income must exceed the conservative amounts estimated in this report for the project to generate a reasonable profit.

Figure 13. Description Value/Cost Estimated New Residential Value $180,000,000 Estimated New Non-Residential Value $180,425,000 Estimated New Total Project Value $360,425,000 Total Estimated Cost of Construction $373,154,600

So as to make the Project financially viable the developer will be investing their own capita, and phasing the Project as the market progresses. However, as the Project progresses the Borough will realize significant annual property tax revenue from this Project. It is important to reiterate that over $6.0 million in estimated new taxes, net of local service cost increases, could potentially be generated by this proposed Project. However, the Project is difficult to embark upon because the estimated Project value may not provide a sufficient return on investment. Keep in mind that $5,410,810 in annual property taxes is currently being generated by the Monmouth Mall properties (Figure 1). Upon completion of this Project the Monmouth Town Center could potentially pay 23% of the total estimated Eatontown 2015 tax levy ($11,000,000/$46,701,409).

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15 The tax rate and tax levy are stated in 2015 estimated numbers per the borough’s 2015 User Friendly Budget.

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Report Summary

The foregoing Economic Impact Study was commissioned by the Kushner Companies to be presented to the Borough of Eatontown Planning Board and Borough Council. The purpose of the report is to provide a “Study of the Local Economic Impact including Property Tax Impacts and Job Creation Resulting from this Proposed Project”. The project is located at Monmouth Mall in Eatontown, Monmouth County, New Jersey. The project is known as the Monmouth Town Center.

Shopping Malls are becoming underutilized properties throughout the nation as on-line shopping and financial difficulties of retailers take hold of these properties. The Monmouth Mall is deteriorating as evidenced by a decline in property value of $7.4 million as determined by the New Jersey courts.

The Monmouth Town Center (“Project”) will transform the Monmouth Mall into an experience retail, office destination and town center. This will be the most significant town center located in north-central New Jersey in close proximity to the . The proposed property use is clearly the highest and best use of the property. The Project will create a new residential neighborhood and office complex creating jobs.

Kushner Companies will be investing $373,154,600 to create this new and exciting economic engine. A proposed conceptual plan has been prepared and is referenced in this report. However, the final plan is subject to change and may be modified based on market conditions and financing considerations. The numbers included in this report are realistic and represent a buildable project provided the profit margin is sufficient to provide an adequate return to cover the investment.

The proposed Monmouth Town Center (town center) will create approximately 1,892 retail/office jobs and 2,985 construction jobs. The construction jobs will be created (spread) over the project time frame (up to five years). The new permanent jobs created by the Monmouth Town Center will add $130,160,000 in new annual income circulating in the Eatontown area economy. Construction jobs are anticipated to generate another $149,250,000 annually during the course of construction.

Over 20%, $11.0 million, of the borough’s total estimated 2015 tax levy may potentially be paid by the Project. This will reduce the Borough of Eatontown’s residential property tax burden.

The new Monmouth Town Center will have an estimated value $600,000,000 at full occupancy. This includes a value of $420,000,000 attributed to the non-residential components and $180,000,000 attributed to the residential component. However, the success of the non-residential component is dependent on the success of the residential component of the project.

An affordable housing component will be added to the Project including approximately 40 units on-site and 93 units off-site, a total of 133 units. We have prepared a separate report indicating the impact on the local school district as a result of the state mandated affordable housing obligation.

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Monmouth Town Center Economic Impact Study BE

Attachment General Location Map. (Please refer to the site plan for a detailed map.)

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