Waxwood development in Witherspoon Jackson neighborhood was sold in leaseback deal
Developer J. Robert Hillier sold the Waxwood residential development on Quarry Street in a leaseback deal, according to documents.
In a sale-leaseback deal, the owner sells an asset and leases it back for the long term. The seller continues to be able to use the asset but no longer owns it. Leaseback arrangements are done for financing, accounting or taxation benefits.
According to the terms of the original developer’s agreement for the Waxwood, Hiller would sell three affordable units and five “foundation” units earmarked for long-time residents of the historif neighborhood. He is now requesting that he be released from that agreement and be allowed to operate the units as rentals permanently.
An anonymous resident at the Waxwood sent Planet Princeton and the governing body of Princeton letters pointing out that the building has been sold. Councilwoman Jenny Crumiller has pushed the issue, asking for more information. In an Aug. 10 letter to the governing body, Hillier addresses the issue. The letter was included in the agenda packet for an 8 a.m. council meeting today where the governing body will discuss Hillier’s request. The Waxwood is the only item on the agenda. The meeting is billed as a work session, but the mayor often asks the Princeton Council what direction the town should go in on the issue at such sessions. Oddly, there was no agenda packet with any information on the municipal website yesterday morning even though the meeting information had been posted online. Some residents complained and the Waxwood documents were added in the afternoon.
“I do want to clear up one issue. Mrs. Crumiller has asked, and others have suggested, through an anonymous mailing, that I do not own the building. In order to finance the rejuvenation of my other properties on Witherspoon Street, I recently completed a sale-leaseback,” Hiller wrote in the Aug. 10 letter. “I sold the Waxwood, but simultaneously leased it back for 15 years, thus maintaining the responsibility for all the management, maintenance, tax payments and operations of the building. This is a standard financing device…a mortgage. I still have all the responsibility and incentives to make the Waxwood the best that it can be.”
Hillier said in his recent letter to the council that he “sincerely believes there are no takers” to purchase the affordable and foundation units and that other options would better serve the Witherspoon-Jackson community.
He lists three options for the governing body to consider, with his preference being that seven of the eight units in question be converted to COAH-qualified affordable rental units. The eighth unit would be converted to a market rate unit. The neighborhood resident requirement would be removed and it would be up to the governing body to decide whether the units allow for a Princeton preference or are COAH units. For COAH units, preference can’t be given to anyone based on residency.
Hillier says the foundation units always have been difficult to fill and are now two are empty. He also says in the letter that the market has been bad for small condominium units for the last 16 years. “It therefore makes no sense to try to sell the foundation or the affordable units,” he wrote. “However, there remains a very strong demand in the Witherspoon-Jackson neighborhood for both market rate and affordable units which the Waxwood provides.”
In a May 25, 2010 letter when Hillier previously asked for the sale of the Waxwood units to be postponed again, Hiller said the real estate market was bad and he would not be able to sell the market rate units at a quick enough pace, and therefore would not be able to subsidize the affordable and foundation units. He also wrote that his bank wanted the rental period extended as part of his financing arrangement. At the time he requested a 10-year extension.
“It would certainly not be my wish to wait the full ten years before starting sales at the Waxwood,” he wrote. “On the contrary, we would start a sales program once market circumstances improve to the point where sales have a likelihood of occurring at a pace that would ensure a smooth transition from a rental property to a condominium property…the Waxwood continues to be a successful property. Our eight affordable and foundation units are all rented to income-appropriate tenants, as they have been since the Waxwood was put into service, and these tenants are all either long-term residents of the John Witherspoon neighborhood, or descendants of the same.”