Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
 12 Months Ended
Dec. 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
PILOT 2023 2022 2021
Property Name Location Asset Type Expiration Dates (Dollars in Thousands)
BLVD 475 (Monaco) (a) Jersey City, NJ Multifamily 2/2021 —  —  443 
111 River Street (b) Hoboken, NJ Office 4/2022 —  —  1,470 
Harborside Plaza 4A (c) Jersey City, NJ Office 2/2022 —  —  1,057 
Harborside Plaza 5 (d) Jersey City, NJ Office 6/2022 —  —  4,324 
BLVD 401 (Marbella 2) (e) Jersey City, NJ Multifamily 4/2026 1,754  1,692  1,277 
RiverHouse 11 at Port Imperial (f) Weehawken, NJ Multifamily 7/2033 1,735  1,514  1,369 
Port Imperial 4/5 Hotel (g) Weehawken, NJ Hotel 12/2033 224  2,925  2,925 
RiverHouse 9 at Port Imperial (h) Weehawken, NJ Multifamily 6/2046 1,608  1,295  350 
Haus25 (i) Jersey City, NJ Mixed-Use 3/2047 2,619  975  — 
The James (j) Park Ridge, NJ Multifamily 6/2051 714  318  — 
Total Pilot taxes $ 8,654  $ 8,719  $ 13,215 
(a)The annual PILOT is equal to ten percent of Gross Revenues, as defined.
(b)The property was disposed of in the first quarter of 2022.
(c)The property was disposed of in the third quarter of 2023.
(d)The annual PILOT is equal to two percent of Total Project Costs, as defined. The total Project Costs are $170.9 million.
(e)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.
(f)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.
(g)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.
(h)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.
(i)The annual PILOT is equal to seven percent of Gross Revenues, as defined, for a term of 25 years following the substantial completion which occurred in April 2022.
(j)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.
OFFICE AND GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable office and ground leases under which the Company is the lessee, as of December 31, 2023, are as follows (dollars in thousands):
As of December 31, 2023
Year Amount
2024 $ 1,272
2025 1,279
2026 1,279
2027 1,280
2028 494
2029 through 2101 31,447
Total lease payments 37,051
Less: imputed interest (29,700)
Total $ 7,351
As of December 31, 2022
Year 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
Office and ground lease expense incurred by the Company for the years ended December 31, 2023, 2022 and 2021 amounted to $2.0 million, $0.9 million and $1.8 million, respectively.
The Company had classified operating leases for one office and two ground leases, which had balances of $4.1 million and $2.1 million, respectively, at December 31, 2023. Such amounts represent the net present value (“NPV”) of future payments detailed above. The office and two ground leases used incremental borrowing rates of 6.0 percent and 7.6 percent, respectively, to arrive at the NPV and have weighted average remaining lease terms of 4.3 years and 77.6 years, respectively. 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 office and ground leases and calculating notional rates for fully-collateralized loans.
The initial recognition of a lease liability and right-of-use asset in an amount of $4.7 million for the office lease is a noncash activity during the year ended December 31, 2023.
OTHER
As of December 31, 2023, the Company has outstanding stay-on award agreements with 20 select 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 $2.8 million, including the potential future issuance of up to 42,095 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.