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| Commitments And Contingencies |
13. COMMITMENTS AND CONTINGENCIES
TAX ABATEMENT AGREEMENTS
Pursuant to agreements with certain municipalities, the Company is required to make payments in lieu of property taxes (“PILOT”) on certain of its properties and has tax abatement agreements on other properties, as follows:
The Harborside Plaza 4-A agreement with the City of Jersey City, as amended, which commenced in 2002, is for a term of 20 years. The annual PILOT is equal to two percent of Total Project Costs, as defined. Total Project Costs are $49.5 million. The PILOT totaled $264,000 and $226,000 for the three months ended September 30, 2020 and 2019, respectively, and $792,000 and $766,000 for the nine months ended September 30, 2020 and 2019, respectively.
The Harborside Plaza 5 agreement, also with the City of Jersey City, as amended, which commenced in 2002, is for a term of 20 years. The annual PILOT is equal to two percent of Total Project Costs, as defined. Total Project Costs are $170.9 million. The PILOT totaled $1.1 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively and $3.2 million and $3.2 million for the nine months ended September 30, 2020 and 2019, respectively.
The Port Imperial South 1/3 Garage development project agreement with the City of Weehawken has a term of five years beginning when the project is substantially complete, which occurred in the fourth quarter of 2015. The agreement provides that real estate taxes be paid at 100 percent on the land value of the project only over the five year period and allows for a phase in of real estate taxes on the building improvement value at zero percent in year one and 95 percent in years two through five.
The Port Imperial Hotel development project agreement with the City of Weehawken is for a term of 15 years following substantial completion, which occurred in December 2018. The annual PILOT is equal to two percent of Total Project Costs, as defined therein. The PILOT totaled $0.5 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively and $1.6 million and $0.6 million for the nine months ended September 30, 2020 and 2019, respectively.
The Port Imperial South 11 development project agreement with the City of Weehawken is for a term of 15 years following substantial completion, which occurred in August 2018. The annual PILOT is equal to 10 percent of Gross Revenues, as defined therein. The PILOT totaled $0.3 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively and $0.9 million and $0.7 million for the nine months ended September 30, 2020 and 2019, respectively.
The 111 River Realty agreement with the City of Hoboken, which commenced on October 1, 2001 expires in April 2022. The PILOT payment equaled $1.2 million annually through April 2017 and then increased to $1.4 million annually until expiration. The PILOT totaled $0.4 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively and $1.1 million and $1.0 million for the nine months ended September 30, 2020 and 2019, respectively.
The Monaco Towers agreement with the City of Jersey City, which commenced in 2011, is for a term of 10 years. The annual PILOT is equal to 10 percent of gross revenues, as defined. The PILOT totaled $0.3 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively and $1.4 million and $1.6 million for the nine months ended September 30, 2020 and 2019, respectively.
The Marbella II agreement with the City of Jersey City, which commenced in 2016, is for a term of 10 years. The annual PILOT is equal to 10 percent of gross revenues for years 1-4, 12 percent of gross revenues for years 5-8 and 14 percent of gross revenue for years 9-10, as defined therein. The PILOT totaled $0.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively and $0.8 million and $1 million for the nine months ended September 30, 2020 and for the period from acquisition (January 31, 2019) through September 30, 2019, respectively.
The Port Imperial South Parcel 9 development project agreement with the City of Weehawken is for a term of 25 years following substantial completion, which is anticipated to occur in the first quarter 2021. The annual PILOT is equal to 11 percent of gross revenue for years 1-10, 12.5 percent for years 11-18 and 14 percent for years 19-25, as defined therein.
The Port Imperial South Park Parcel development project agreement with the Township of Weehawken is for a term of 25 years following substantial completion. The annual PILOT is equal to 10 percent of Gross Revenues, as defined therein.
At the conclusion of the above-referenced agreements, it is expected that the properties will be assessed by the municipality and be subject to real estate taxes at the then prevailing rates.
LITIGATION
The Company is a defendant in litigation arising in the normal course of its business activities. Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Company’s financial condition taken as whole.
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground leases under which the Company is the lessee, as of September 30, 2020 and December 31, 2019, are as follows (dollars in thousands):
Ground lease expense incurred by the Company amounted to $473,000 and $640,000 for the three months ended September 30, 2020 and 2019, respectively, and $1.8 million and $1.2 million for the nine months ended September 30, 2020 and 2019, respectively.
In conjunction with the adoption of ASU 2016-02 (Topic 842), starting on January 1, 2019, the Company capitalized operating leases, which had a balance of $22.6 million at September 30, 2020 for five ground leases. Such amount represents the net present value (“NPV”) of future payments detailed above. The incremental borrowing rates used to arrive at the NPV ranged from 5.637 percent to 7.618 percent for the remaining ground lease terms ranging from 6.25 years to 82.58 years. These rates were arrived at by adjusting the fixed rates of the Company’s mortgage debt with debt having terms approximating the remaining lease term of the Company’s ground leases and calculating notional rates for fully-collateralized loans.
CONSTRUCTION PROJECTS
The Company is developing a 313-unit multi-family project known as Port Imperial South 9 at Port Imperial in Weehawken, New Jersey, which began construction in third quarter 2018. The construction project, which is estimated to cost $142.9 million, of which construction costs of $90.8 million have been incurred through September 30, 2020, is expected to be ready for occupancy in first quarter 2021. The Company has funded $50.9 million as of September 30, 2020, and the remaining construction costs are expected to be funded from a $92 million construction loan (of which $39.9 million was drawn as of September 30, 2020).
The Company is developing a 198-unit multi-family project known as the Upton at Short Hills located in Short Hills, New Jersey, which began construction in fourth quarter 2018. The construction project, which is estimated to cost $99.4 million, of which $68.5 million has been incurred through September 30, 2020, is expected to be ready for occupancy in first quarter 2021. The Company has funded $35.4 million of the construction costs, and the remaining construction costs are expected to be funded from a $64 million construction loan (of which $33.1 million was drawn as of September 30, 2020).
The Company is developing a 750-unit multi-family project at 25 Christopher Columbus in Jersey City, New Jersey, which began construction in first quarter 2019. The construction project, which is estimated to cost $469.5 million, of which $296.1 million has been incurred through September 30, 2020, is expected to be ready for occupancy in first quarter 2022. The Company has funded $169.5 million of the construction costs, and the remaining construction costs are expected to be funded from a $300 million construction loan (of which $126.6 million was drawn as of September 30, 2020).
MANAGEMENT CHANGES
On July 24, 2020, the Company terminated Michael J. DeMarco as its Chief Executive Officer without cause, pursuant to his employment agreement and the associated equity award agreements he has with the Company. On August 8, 2020, the Company entered into a Consulting and Cooperating Agreement with Mr. DeMarco (the “Consulting Agreement”). Pursuant to the Consulting Agreement, in exchange for Mr. DeMarco’s providing certain consulting, cooperation, and transition services to the Company through December 31, 2020, Mr. DeMarco will be considered to have remained employed with the Company through the term of the Consulting Agreement solely for purposes of calculating the prorated vesting of outstanding time-based long-term incentive partnership units to which Mr. DeMarco is entitled upon his termination of employment with the Company. Mr. DeMarco is eligible to receive the severance payments and benefits upon such a termination without cause (outside of a change in control) described under the heading “Employment Contracts; Potential Payments Upon Termination or Change in Control—Michael J. DeMarco Employment Agreement,” “—Michael J. DeMarco Class AO LTIP Award Agreement,” and “—Long-Term Incentive Plan Award Agreements,” each as set forth in the Company’s definitive revised proxy statement filed with the Securities and Exchange Commission on June 16, 2020, which description is incorporated by reference herein, and taking into account Mr. DeMarco’s target bonus percentage of 175% of base salary established for the year 2020. Effective as of July 25, 2020, the Board of Directors appointed MaryAnne Gilmartin, the Chair of the Company’s Board of Directors, as interim Chief Executive Officer of the Company. Ms. Gilmartin will continue to serve as Chair of the Board, but has resigned as a member of the Nominating & Corporate Governance Committee of the Board. Tammy K. Jones, a current director, has been appointed to serve as the lead independent director on the Board. In connection with Ms. Gilmartin’s appointment, the Company has entered into a letter agreement (the “Letter Agreement”) with MAG Partners 2.0 LLC (“MAG Partners”), an entity wholly owned by Ms. Gilmartin. Pursuant to the Letter Agreement, MAG Partners has agreed to make Ms. Gilmartin’s services available to the Company to serve as its interim Chief Executive Officer. The term of this arrangement and Ms. Gilmartin’s appointment as interim Chief Executive Officer (the “Term”) will continue until the earliest to occur of (i) the commencement of employment of a permanent Chief Executive Officer of the Company, (ii) a period of six months has elapsed, or an earlier or later date selected by the Board, and (iii) Ms. Gilmartin’s death or disability, or the termination of the arrangement by MAG Partners (including a resignation by Ms. Gilmartin of her appointment as interim Chief Executive Officer). Pursuant to the Letter Agreement, during the Term the Company will pay to MAG Partners a monthly fee of $150,000, subject to proration for any partial month (but continuing for a minimum of three months following commencement of the Term if the Term is ended by the Board for any reason other than for “cause”). MAG Partners is also eligible to receive a one-time cash sign-on bonus of $300,000 and, unless the Term is ended by the Board for “cause,” a one-time completion bonus of $200,000 at the end of the Term (but no later than March 12, 2021). In addition, the Company has granted to MAG Partners fully vested stock options to purchase up to 230,000 shares of common stock with an exercise price of $14.39 per share, and up to 100,000 shares of common stock with an exercise price of $20.00 per share, pursuant to a Stock Option Agreement by and between MAG Partners and the Company (the “Option Agreement”). However, the options, and any shares received upon exercise, will terminate and be forfeited if the Board ends the Term for “cause” or MAG Partners terminates its arrangement with the Company (including a resignation by Ms. Gilmartin of her appointment as interim Chief Executive Officer, but excluding a termination because of a material breach of the arrangement by the Company or because Ms. Gilmartin has been appointed as the permanent Chief Executive Officer of the Company) before six months have elapsed, or if MAG Partners fails to comply with certain covenants in the Letter Agreement. 157,505 of the options have been granted subject to shareholder approval at the Company’s 2021 Annual Meeting of Stockholders; however, if a “change in control” transaction occurs before the date of such 2021 Annual Meeting, then such options would instead be canceled and cashed out upon such transaction for a value equal to their “spread value,” if any. During the Term, Ms. Gilmartin will not receive any additional fees or other compensation for her service (excluding equity previously granted) as a director on the Company’s Board or on the Roseland Residential Trust board of directors. However, the Company will reimburse MAG Partners for up to $10,000 in legal fees incurred in connection with negotiating the arrangements described above. In September 2020, the Company terminated without cause Nicholas Hilton, its Executive Vice President of Leasing, and Deidre Crockett, its Chief Administrative Officer, pursuant to their respective employment agreements and associated equity award agreements with the Company.
During the third quarter 2020, the Company’s total costs incurred, net of LTIP forfeitures, related to the management restructuring activities discussed above, including the severance, separation and related costs for the departure of the Company’s former chief executive officer and other executive officers, as well as other terminated employees, amounted to $8.9 million ($8.2 million included in general and administrative expense, and $0.7 million included in the operating services).
OTHER
Through February 2016, the Company could not dispose of or distribute certain of its properties, which were originally contributed by certain unrelated common unitholders of the Operating Partnership, without the express written consent of such common unitholders, as applicable, except in a manner which did not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimbursed the appropriate specific common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the “Property Lock-Ups”). Upon the expiration in February 2016 of the Property Lock-Ups, the Company is generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the specific common unitholders, which include members of the Mack Group (which includes William L. Mack, a former director; David S. Mack, a former director; and Earle I. Mack, a former director), the Robert Martin Group, and the Cali Group (which includes John R. Cali, a former director). As of September 30, 2020, after the effects of tax-free exchanges on certain of the originally contributed properties, either wholly or partially, over time, 18 of the Company’s properties, as well as certain land and development projects, including properties classified as held for sale as of September 30, 2020, with an aggregate carrying value of approximately $1.6 billion, are subject to these conditions.
In September 2020, the Company provided stay-on award agreements to 39 select employees, which provides them with the potential to receive compensation, in cash or Company stock, contingent upon remaining with the Company in good standing until the occurrence of certain corporate transactions, which have not been identified. The total potential cost of such awards is currently estimated to be up to approximately $5 million, including the potential issuance of 116,043 shares of the Company’s common stock. Such cash or stock awards would only be earned and payable if such transaction was identified and communicated to the employee within seven years of the agreement date, and all other conditions were satisfied.
In September 2020, the General Partner's Board of Directors approved a discretionary reimbursement of approximately $6.1 million in fees and expenses incurred by Bow Street LLC in connection with its proxy solicitations in 2019 and 2020 that resulted in the election of Bow Street's nominees as directors of the General Partner at the 2019 and 2020 annual meetings of stockholders of the General Partner. The Board of Directors determined that the reimbursement was appropriate in light of the benefit to the General Partner and its stockholders of the refreshment of the Board of Directors that resulted from the proxy contests. The Company intends to reimburse this amount to Bow Street in three substantially equal payments in November 2020, January 2021 and April 2021, which the Company has recorded the $6.1 million as general and administrative expense for the three and nine months periods ended September 30, 2020. Bow Street is an affiliate of A. Akiva Katz, a director of the General Partner, who is a co-founder and managing partner of Bow Street.
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| Commitments And Contingencies |
13. COMMITMENTS AND CONTINGENCIES
TAX ABATEMENT AGREEMENTS
Pursuant to agreements with certain municipalities, the Company is required to make payments in lieu of property taxes (“PILOT”) on certain of its properties and has tax abatement agreements on other properties, as follows:
The Harborside Plaza 4-A agreement with the City of Jersey City, as amended, which commenced in 2002, is for a term of 20 years. The annual PILOT is equal to two percent of Total Project Costs, as defined. Total Project Costs are $49.5 million. The PILOT totaled $264,000 and $226,000 for the three months ended September 30, 2020 and 2019, respectively, and $792,000 and $766,000 for the nine months ended September 30, 2020 and 2019, respectively.
The Harborside Plaza 5 agreement, also with the City of Jersey City, as amended, which commenced in 2002, is for a term of 20 years. The annual PILOT is equal to two percent of Total Project Costs, as defined. Total Project Costs are $170.9 million. The PILOT totaled $1.1 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively and $3.2 million and $3.2 million for the nine months ended September 30, 2020 and 2019, respectively.
The Port Imperial South 1/3 Garage development project agreement with the City of Weehawken has a term of five years beginning when the project is substantially complete, which occurred in the fourth quarter of 2015. The agreement provides that real estate taxes be paid at 100 percent on the land value of the project only over the five year period and allows for a phase in of real estate taxes on the building improvement value at zero percent in year one and 95 percent in years two through five.
The Port Imperial Hotel development project agreement with the City of Weehawken is for a term of 15 years following substantial completion, which occurred in December 2018. The annual PILOT is equal to two percent of Total Project Costs, as defined therein. The PILOT totaled $0.5 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively and $1.6 million and $0.6 million for the nine months ended September 30, 2020 and 2019, respectively.
The Port Imperial South 11 development project agreement with the City of Weehawken is for a term of 15 years following substantial completion, which occurred in August 2018. The annual PILOT is equal to 10 percent of Gross Revenues, as defined therein. The PILOT totaled $0.3 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively and $0.9 million and $0.7 million for the nine months ended September 30, 2020 and 2019, respectively.
The 111 River Realty agreement with the City of Hoboken, which commenced on October 1, 2001 expires in April 2022. The PILOT payment equaled $1.2 million annually through April 2017 and then increased to $1.4 million annually until expiration. The PILOT totaled $0.4 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively and $1.1 million and $1.0 million for the nine months ended September 30, 2020 and 2019, respectively.
The Monaco Towers agreement with the City of Jersey City, which commenced in 2011, is for a term of 10 years. The annual PILOT is equal to 10 percent of gross revenues, as defined. The PILOT totaled $0.3 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively and $1.4 million and $1.6 million for the nine months ended September 30, 2020 and 2019, respectively.
The Marbella II agreement with the City of Jersey City, which commenced in 2016, is for a term of 10 years. The annual PILOT is equal to 10 percent of gross revenues for years 1-4, 12 percent of gross revenues for years 5-8 and 14 percent of gross revenue for years 9-10, as defined therein. The PILOT totaled $0.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively and $0.8 million and $1 million for the nine months ended September 30, 2020 and for the period from acquisition (January 31, 2019) through September 30, 2019, respectively.
The Port Imperial South Parcel 9 development project agreement with the City of Weehawken is for a term of 25 years following substantial completion, which is anticipated to occur in the first quarter 2021. The annual PILOT is equal to 11 percent of gross revenue for years 1-10, 12.5 percent for years 11-18 and 14 percent for years 19-25, as defined therein.
The Port Imperial South Park Parcel development project agreement with the Township of Weehawken is for a term of 25 years following substantial completion. The annual PILOT is equal to 10 percent of Gross Revenues, as defined therein.
At the conclusion of the above-referenced agreements, it is expected that the properties will be assessed by the municipality and be subject to real estate taxes at the then prevailing rates.
LITIGATION
The Company is a defendant in litigation arising in the normal course of its business activities. Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Company’s financial condition taken as whole.
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground leases under which the Company is the lessee, as of September 30, 2020 and December 31, 2019, are as follows (dollars in thousands):
Ground lease expense incurred by the Company amounted to $473,000 and $640,000 for the three months ended September 30, 2020 and 2019, respectively, and $1.8 million and $1.2 million for the nine months ended September 30, 2020 and 2019, respectively.
In conjunction with the adoption of ASU 2016-02 (Topic 842), starting on January 1, 2019, the Company capitalized operating leases, which had a balance of $22.6 million at September 30, 2020 for five ground leases. Such amount represents the net present value (“NPV”) of future payments detailed above. The incremental borrowing rates used to arrive at the NPV ranged from 5.637 percent to 7.618 percent for the remaining ground lease terms ranging from 6.25 years to 82.58 years. These rates were arrived at by adjusting the fixed rates of the Company’s mortgage debt with debt having terms approximating the remaining lease term of the Company’s ground leases and calculating notional rates for fully-collateralized loans.
CONSTRUCTION PROJECTS
The Company is developing a 313-unit multi-family project known as Port Imperial South 9 at Port Imperial in Weehawken, New Jersey, which began construction in third quarter 2018. The construction project, which is estimated to cost $142.9 million, of which construction costs of $90.8 million have been incurred through September 30, 2020, is expected to be ready for occupancy in first quarter 2021. The Company has funded $50.9 million as of September 30, 2020, and the remaining construction costs are expected to be funded from a $92 million construction loan (of which $39.9 million was drawn as of September 30, 2020).
The Company is developing a 198-unit multi-family project known as the Upton at Short Hills located in Short Hills, New Jersey, which began construction in fourth quarter 2018. The construction project, which is estimated to cost $99.4 million, of which $68.5 million has been incurred through September 30, 2020, is expected to be ready for occupancy in first quarter 2021. The Company has funded $35.4 million of the construction costs, and the remaining construction costs are expected to be funded from a $64 million construction loan (of which $33.1 million was drawn as of September 30, 2020).
The Company is developing a 750-unit multi-family project at 25 Christopher Columbus in Jersey City, New Jersey, which began construction in first quarter 2019. The construction project, which is estimated to cost $469.5 million, of which $296.1 million has been incurred through September 30, 2020, is expected to be ready for occupancy in first quarter 2022. The Company has funded $169.5 million of the construction costs, and the remaining construction costs are expected to be funded from a $300 million construction loan (of which $126.6 million was drawn as of September 30, 2020).
MANAGEMENT CHANGES
On July 24, 2020, the Company terminated Michael J. DeMarco as its Chief Executive Officer without cause, pursuant to his employment agreement and the associated equity award agreements he has with the Company. On August 8, 2020, the Company entered into a Consulting and Cooperating Agreement with Mr. DeMarco (the “Consulting Agreement”). Pursuant to the Consulting Agreement, in exchange for Mr. DeMarco’s providing certain consulting, cooperation, and transition services to the Company through December 31, 2020, Mr. DeMarco will be considered to have remained employed with the Company through the term of the Consulting Agreement solely for purposes of calculating the prorated vesting of outstanding time-based long-term incentive partnership units to which Mr. DeMarco is entitled upon his termination of employment with the Company. Mr. DeMarco is eligible to receive the severance payments and benefits upon such a termination without cause (outside of a change in control) described under the heading “Employment Contracts; Potential Payments Upon Termination or Change in Control—Michael J. DeMarco Employment Agreement,” “—Michael J. DeMarco Class AO LTIP Award Agreement,” and “—Long-Term Incentive Plan Award Agreements,” each as set forth in the Company’s definitive revised proxy statement filed with the Securities and Exchange Commission on June 16, 2020, which description is incorporated by reference herein, and taking into account Mr. DeMarco’s target bonus percentage of 175% of base salary established for the year 2020. Effective as of July 25, 2020, the Board of Directors appointed MaryAnne Gilmartin, the Chair of the Company’s Board of Directors, as interim Chief Executive Officer of the Company. Ms. Gilmartin will continue to serve as Chair of the Board, but has resigned as a member of the Nominating & Corporate Governance Committee of the Board. Tammy K. Jones, a current director, has been appointed to serve as the lead independent director on the Board. In connection with Ms. Gilmartin’s appointment, the Company has entered into a letter agreement (the “Letter Agreement”) with MAG Partners 2.0 LLC (“MAG Partners”), an entity wholly owned by Ms. Gilmartin. Pursuant to the Letter Agreement, MAG Partners has agreed to make Ms. Gilmartin’s services available to the Company to serve as its interim Chief Executive Officer. The term of this arrangement and Ms. Gilmartin’s appointment as interim Chief Executive Officer (the “Term”) will continue until the earliest to occur of (i) the commencement of employment of a permanent Chief Executive Officer of the Company, (ii) a period of six months has elapsed, or an earlier or later date selected by the Board, and (iii) Ms. Gilmartin’s death or disability, or the termination of the arrangement by MAG Partners (including a resignation by Ms. Gilmartin of her appointment as interim Chief Executive Officer). Pursuant to the Letter Agreement, during the Term the Company will pay to MAG Partners a monthly fee of $150,000, subject to proration for any partial month (but continuing for a minimum of three months following commencement of the Term if the Term is ended by the Board for any reason other than for “cause”). MAG Partners is also eligible to receive a one-time cash sign-on bonus of $300,000 and, unless the Term is ended by the Board for “cause,” a one-time completion bonus of $200,000 at the end of the Term (but no later than March 12, 2021). In addition, the Company has granted to MAG Partners fully vested stock options to purchase up to 230,000 shares of common stock with an exercise price of $14.39 per share, and up to 100,000 shares of common stock with an exercise price of $20.00 per share, pursuant to a Stock Option Agreement by and between MAG Partners and the Company (the “Option Agreement”). However, the options, and any shares received upon exercise, will terminate and be forfeited if the Board ends the Term for “cause” or MAG Partners terminates its arrangement with the Company (including a resignation by Ms. Gilmartin of her appointment as interim Chief Executive Officer, but excluding a termination because of a material breach of the arrangement by the Company or because Ms. Gilmartin has been appointed as the permanent Chief Executive Officer of the Company) before six months have elapsed, or if MAG Partners fails to comply with certain covenants in the Letter Agreement. 157,505 of the options have been granted subject to shareholder approval at the Company’s 2021 Annual Meeting of Stockholders; however, if a “change in control” transaction occurs before the date of such 2021 Annual Meeting, then such options would instead be canceled and cashed out upon such transaction for a value equal to their “spread value,” if any. During the Term, Ms. Gilmartin will not receive any additional fees or other compensation for her service (excluding equity previously granted) as a director on the Company’s Board or on the Roseland Residential Trust board of directors. However, the Company will reimburse MAG Partners for up to $10,000 in legal fees incurred in connection with negotiating the arrangements described above. In September 2020, the Company terminated without cause Nicholas Hilton, its Executive Vice President of Leasing, and Deidre Crockett, its Chief Administrative Officer, pursuant to their respective employment agreements and associated equity award agreements with the Company.
During the third quarter 2020, the Company’s total costs incurred, net of LTIP forfeitures, related to the management restructuring activities discussed above, including the severance, separation and related costs for the departure of the Company’s former chief executive officer and other executive officers, as well as other terminated employees, amounted to $8.9 million ($8.2 million included in general and administrative expense, and $0.7 million included in the operating services).
OTHER
Through February 2016, the Company could not dispose of or distribute certain of its properties, which were originally contributed by certain unrelated common unitholders of the Operating Partnership, without the express written consent of such common unitholders, as applicable, except in a manner which did not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimbursed the appropriate specific common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the “Property Lock-Ups”). Upon the expiration in February 2016 of the Property Lock-Ups, the Company is generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the specific common unitholders, which include members of the Mack Group (which includes William L. Mack, a former director; David S. Mack, a former director; and Earle I. Mack, a former director), the Robert Martin Group, and the Cali Group (which includes John R. Cali, a former director). As of September 30, 2020, after the effects of tax-free exchanges on certain of the originally contributed properties, either wholly or partially, over time, 18 of the Company’s properties, as well as certain land and development projects, including properties classified as held for sale as of September 30, 2020, with an aggregate carrying value of approximately $1.6 billion, are subject to these conditions.
In September 2020, the Company provided stay-on award agreements to 39 select employees, which provides them with the potential to receive compensation, in cash or Company stock, contingent upon remaining with the Company in good standing until the occurrence of certain corporate transactions, which have not been identified. The total potential cost of such awards is currently estimated to be up to approximately $5 million, including the potential issuance of 116,043 shares of the Company’s common stock. Such cash or stock awards would only be earned and payable if such transaction was identified and communicated to the employee within seven years of the agreement date, and all other conditions were satisfied.
In September 2020, the General Partner's Board of Directors approved a discretionary reimbursement of approximately $6.1 million in fees and expenses incurred by Bow Street LLC in connection with its proxy solicitations in 2019 and 2020 that resulted in the election of Bow Street's nominees as directors of the General Partner at the 2019 and 2020 annual meetings of stockholders of the General Partner. The Board of Directors determined that the reimbursement was appropriate in light of the benefit to the General Partner and its stockholders of the refreshment of the Board of Directors that resulted from the proxy contests. The Company intends to reimburse this amount to Bow Street in three substantially equal payments in November 2020, January 2021 and April 2021, which the Company has recorded the $6.1 million as general and administrative expense for the three and nine months periods ended September 30, 2020. Bow Street is an affiliate of A. Akiva Katz, a director of the General Partner, who is a co-founder and managing partner of Bow Street.
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