Quarterly report pursuant to Section 13 or 15(d)

COMMITMENTS AND CONTINGENCIES

v3.23.1
COMMITMENTS AND CONTINGENCIES
 3 Months Ended
Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES 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:
PILOT Payments
Property Name Location Asset Type PILOT
Expiration Dates		 Three Months Ended
March 31,
2023 2022
(Dollars in Thousands)
111 River Street (a) Hoboken, NJ Office 4/2022 $ — $ 85
Harborside Plaza 4A (b) Jersey City, NJ Office 2/2022 — 218
Harborside Plaza 5 (c) Jersey City, NJ Office 6/2022 — 1,109
BLVD 401 (Marbella 2) (d) Jersey City, NJ Multifamily 4/2026 403 359
RiverHouse 11 at Port Imperial (e) Weehawken, NJ Multifamily 7/2033 374 350
Port Imperial 4/5 Hotel (f) Weehawken, NJ Hotel 12/2033 224 733
RiverHouse 9 at Port Imperial (g) Weehawken, NJ Multifamily 6/2046 382 322
Haus25 (h) Jersey City, NJ Mixed-Use 3/2047 574 —
The James (i) Park Ridge, NJ Multifamily 6/2051 143 —
Total Pilot taxes $ 2,100 $ 3,176
(a)The property was disposed of in the first quarter of 2022.
(b)The annual PILOT is equal to two percent of Total Project Costs, as defined. The total Project Costs are $49.5 million.
(c)The annual PILOT is equal to two percent of Total Project Costs, as defined. The total Project Costs are $170.9 million.
(d)The annual PILOT is equal to ten percent of Gross Revenues for years 1-4, 12 percent for years 5-8 and 14 percent for years 9-10, as defined.
(e)The annual PILOT is equal to 12 percent of Gross Revenues for years 1-5, 13 percent for years 6-10 and 14 percent for years 11-15, as defined.
(f)The annual PILOT is equal to two percent of Total Project Costs, as defined. The property was disposed of during the first quarter of 2023.
(g)The annual PILOT is equal to 11 percent of Gross Revenues for years 1-10, 12.5 percent for years 11-18 and 14 percent for years 19-25, as defined.
(h)For a term of 25 years following substantial completion, which occurred in April 2022. The annual PILOT is equal to seven percent of Gross Revenues, as defined.
(i)The property was acquired in July 2022. For a term of 30 years following substantial completion which occurred in June 2021. The annual PILOT is equal to 10 percent of Gross Revenues for years 1-10, 11.5 percent for years 11-21 and 12.5 percent for years 22-30, as defined.
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 March 31, 2023 and December 31, 2022, are as follows (dollars in thousands):
Year
As of March 31, 2023
Amount
April 1 through December 31, 2023 $ 144
2024 192
2025 199
2026 199
2027 200
2028 through 2101 31,664
Total lease payments 32,598
Less: imputed interest (29,357)
Total $ 3,241
Year
As of December 31, 2022
Amount
2023 $ 192
2024 192
2025 199
2026 199
2027 200
2028 through 2101 31,664
Total lease payments 32,646
Less: imputed interest (29,418)
Total $ 3,228
Ground lease expense incurred by the Company amounted to $265 thousand and $348 thousand for the three months ended March 31, 2023 and 2022, respectively.
In accordance with ASU 2016-02 (Topic 842), the Company capitalized operating leases for two ground leases, which had a balance of $2.9 million at March 31, 2023. Such amount represents the net present value (“NPV”) of future payments detailed above. The incremental borrowing rate used to arrive at the NPV was 7.618 percent for the ground lease terms of 82.58 years each. 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.
OTHER
As of March 31, 2023, the Company has outstanding stay-on award agreements with 24 employees, which provides them with the potential to receive compensation, in cash or Company stock at the employees’ option, 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 $3.0 million, including the potential future issuance of up to 33,866 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 dates, all of which were signed in late 2020 and early 2021, and all other conditions were satisfied.