Holmdel Library : Who Donated to whom?

Under the Bell property “Redevelopment Agreement” no less than 20,000 square feet was to be provided to Holmdel, rent free, for purposes of a Public Library. There is no lease term constraint specified in the language of the “Redevelopment Agreement” hence this rent free condition is for life. (Reference page 6 of the “Redevelopment Agreement” paragraph titled “Public Library”).

The township signed a lease agreement for 17,759 square feet for the library for zero rent but it stipulates a 30year term. Why the 30 year term when the “Redevelopment Agreement” is for life???

Is the value of a 30 year lease at zero rent very different from a zero rent for life lease? Well, very much so. Let’s do some numbers.

Bell Works is currently marketing space at $27.5 per square foot per year (Reference Loopnet).

So current market annual rent for the library space is 17,759*$27.5= $488,000. Very conservatively assuming this annual fee will remain the same for years 31 through to 100 and discounting these future Holmdel rent outlays at today’s 30 year AA Municipal debt yield of 4.17%, we get a present value of $3.2 million (Holmdel’s General Obligation bonds are rated Aa1 by Moody’s, referenced municipal yield is obtained from Fidelity’s website).

If we more reasonably assume that rents will increase at the current long term CPI of 2.11% we get a present value of $10 million (30 year Treasury currently yields 3.01% and 30 year TIPS yield 0.90%, the difference is 2.11% which is the market’s assessment of expected long term inflation).

So it looks like we got a $1 million donation from the developer but it very conservatively cost the town $3.2 million and more reasonably cost the town $10 million!!!!!

A glimmer of hope: I am not a lawyer but nowhere in the Lease Agreement do I see language that supersedes the “Redevelopment Agreement”. I strongly recommend that our Township Committee clearly reinstate in the Lease Agreement that there is no expiration date to the lease.

Sincerely,

Pradeep Jhanjee

Holmdel Resident

Update Jan 16th, 2017

Some feedback has expressed doubt regarding the 30 year lease term since only in November Eric Hinds sent out a flyer which touted a 99 year lease. So as to avoid any confusion and doubt I have taken the effort to provide all the links and attachments to make this issue as real as possible.

At the Dec 13th Township Committee (TC) meeting, TC unanimously agreed to sign a 30yr lease Library Lease.

- Link to meeting announcement, look for Item 21.

http://www.holmdeltownship-nj.com/AgendaCenter/ViewFile/Agenda/12132016-292

- The lease itself was only physically available by going to the Township Office and collecting it, which is what I did. I have attached the pertinent extract, the Expiration Date says 30th anniversary.

The original "Redevelopment Agreement" can be found at the attached link. Please look at page 6 paragraph titled "Public Library", there is NO mention of lease term, effectively a rent free library space in perpetuity.

http://www.holmdeltownship-nj.com/DocumentCenter/Home/View/339