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Prism again delinquent on property taxes — late on more than $200,000

Prism Capital Partners, the designated downtown redeveloper, is delinquent on property taxes for at least the fourth consecutive quarter. It is late in paying more than $200,000 in taxes.

Prism Capital Partners, the designated downtown redeveloper, is delinquent in its February property taxes for at least the fourth quarter in a row as of this morning, Tuesday, February 13, 2013. Tax delinquency is an event of default under the 2006 Redevelopment Agreement between the town and Prism.

Prism has not paid $108,211 in quarterly taxes on its 175 Main Street property, the former Edison Storage Battery Factory site. The company is planning a mixed-use luxury residential rental and retail project. Its property at 55 Lakeside Avenue, recently acquired at the conclusion of a foreclosure proceeding by its lender, is also delinquent on $108,190 in taxes. The company also owns several other parcels in the downtown redevelopment area.

The town provides a 10-day “grace period” following the tax due date, which expired Monday.

The 2006 Redevelopment agreement with Prism specifies that tax delinquency is an event of default which could lead to the town’s withdrawal of Prism’s exclusive right to redevelop. The township administration filed a notice of default to Prism last year on a previous delinquency. Prism promptly paid approximately $135,000 in back taxes and interest penalty to cure that default.

Prism is also appealing its tax assessment on 175 Main and other township properties.

I’m a West Orange Township councilman since 2010 and can be reached at jkrakoviak@westorange.org. A former financial journalist, I am a business communications consultant in my spare time.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Julian Simon February 19, 2013 at 03:33 PM
Gary Englert wrote: "Prism has provided certified financial statements that attest to its solvency and ability to proceed, which it plans to do in short order." That statement is factually incorrect. The audited (not certified and not prepared in accordance with Generally Accepted Accounting Principles) financial statements make it clear that substantial additional financing is necessary for Prism to proceed. The statements also disclose there are environmental problems with the CVS property, that Prism will have to clear up if an undisclosed third party cannot, and that Wells Fargo was convinced that Prism's financial situation justified what amounted to a short sale of the 55 Lakeside mortgage they held.
Bert Peronilla February 19, 2013 at 03:52 PM
Mr. Simon, I am a bit confused. By definition, a company's audited financial statement has been prepared and certified by a Certified Public Accountant (the auditor). In the U.S., the auditor certifies that the financial statements meet the requirements of the U.S. GAAP. An auditor can have an unqualified opinion, in which he or she agrees with how the company prepared the statements, or a qualified opinion, in which he or she states which aspects of the company's statements he or she does not agree with. In extreme cases, the auditor may express no opinion on financial statements at all, in the case that the scope of the audit was insufficient. Are you privy to what type of opinion was expressed by the auditor in this case, whether unqualified, qualified, or something else?
Julian Simon February 19, 2013 at 04:10 PM
Concerned-Read the auditors opinion. They say they AUDITED the statements; nowhere in their opinion do they use the word certified. Their opinion also states that Prism's statements have not been prepared in accordance with "Generally Accepted Accounting Principles"
Bert Peronilla February 19, 2013 at 04:38 PM
Mr. Simon, since you have read the statement, and the auditors stated that the requirements of the US GAAP have not been met, then Prism will have to correct the shortcomings and have the statement re-audited until the GAAP requirements are met. I am surprised if Councilman Guarino deemed this statement to be acceptable. I am basing my conclusions on the veracity of your statements in your posting here.
Gary Englert February 19, 2013 at 05:14 PM
Julian Simon: If you've actually read the FY2011 audited financials submitted by Prism, and can provided a link at which they can be accessed, please share with the group. My awareness as to their being received, and as to what they contain, is based solely on a conversation I had with Councilman Guarino, at last week's meeting of the Downtown Alliance. As he is a finan cial analyst by trade, I accept his overview and summary. Should you have comparable professional credentials, perhaps you'd like to share these, as well. All that said, arguing semantics is pointless: aduited financial statements are generally "certified" as such by the CPA/firm conducting the audit...with the prefacing auditor's statement speaking for itself. That said, I rather doubt this year old document sheds much light at all on the Barton Press matter, as it was only concluded in January...and the fact that it...or any other parcel in what was formerly Edison Industries...has/might have environmental remediation issue is hardly anything new; necessary DEP/EPA site rmediation is a fundamental reason the site was declared a redevelopment zone in the first place. The statements probably make no reference to the fact that four major financial institutuion are now interested in financing the balance necessary, pending receipt of final approvals from the state's historic preservation bureacracy.
Gary Englert February 19, 2013 at 05:48 PM
If Prism's FY2011 financial statement are available on-line, please share a link with the group. I, for one, can't find it anywhere.
Bert Peronilla February 19, 2013 at 06:12 PM
Hopefully the council meeting tonight will touch on these financial statements, starting with Councilman Guarino.
Gary Englert February 20, 2013 at 05:43 AM
As clarified at tonight's Council Meeting: Though CPA prepared, the FY2011 financial statemements provided by Prism are not audited; rather, they are what was compiled to file federal corporate tax returns. As confirmed by even Councilman Krakoviak, nothing nefarious or lacking should be infered by the wording of the auditor's staement. Councilman Guarino committed to forwarding a copy and I may have more comments if warranted.
Julian Simon February 20, 2013 at 01:35 PM
Be sure to read the auditor's opinion letter carefully. The statements were prepared by Prism, NOT the Auditors. However, they were audited. What that means is explained in the same letter.
Gary Englert February 20, 2013 at 05:08 PM
Julian Simon: In the final analysis, this too is all much ado about nothing as the only opinion of Prism Capital Partners LLC's financial condition that truly matters is that of whoever winds up providing the financing. If they are satisfied with Prism's solvency and ability to perform (and I truly believe that will be the case), nothing else matters.
Tom February 20, 2013 at 08:05 PM
Gary I think we all know "Nothing else matters"... To you
Bert Peronilla February 20, 2013 at 08:07 PM
Correction: By definition, a company's audited financial statement has been REVIEWED and certified by a CPA (the auditor.) Replace the word PREPARED with REVIEWED.
Gary Englert February 20, 2013 at 09:20 PM
Tom: OK, let's look at this another way; why should I, or anyone else, care whether or not you qualify to take out a second mortgage on your house, in order that you may build an addition to it? It really doesn't have any material effect on anyone, does it and can I effect your situation one way or the other by reviewing your financial statements? Nope. Accordingly, the matter is between you and your lending institution and nobody else.
Bert Peronilla February 21, 2013 at 01:07 AM
Lending institutions interested in Prism will most probably require the audited statements to also be certified to meet GAAP standards which are more demanding than non-GAAP-certified which are satisfactory for IRS reporting purposes. GAAP requires supplements depending on the accounting method used, i.e., accrual, cash basis, percentage completion, etc., which are not required by the IRS; but important to the bank to project the financial performance of Prism during the life of the project.
Gary Englert February 21, 2013 at 02:09 AM
Concerned: It's just an educated guess but, I tend to think the financial disclosure requirements for a typical going corporation looking for financing, and real estate development enterprise with no income, are two entirely different kettles of fish. I'm also fairly confident that, having been down this road numerous times given the nature of its business, Prism is poised to provide precisely what will be required by the institutions interested and that they're courting.
Bert Peronilla February 21, 2013 at 11:57 AM
Mr. Englert, as the cliche' goes, let's cross the bridge when we get there.
Gary Englert February 21, 2013 at 02:17 PM
Concerned: It's actually not a bridge that "we" have to cross as it's totally Prism's purview and something they're apparently in the middle of as we speak. The fact that they've been carrying this poject for six years with no income being generated by it, and that they are doing so with revenues from other endeavors is manifest...and the curiosity about their financial condition is really immaterial. They need to secure a final piece of the financial puzzle that they couldn't do without the requisite approval in hand and are involved in doing just that now.
Bert Peronilla February 21, 2013 at 02:44 PM
Mr. Englert, I think we have discussed Prism's financial statements enough for now, so if I can pick your brains regarding a related topic. You have mentioned several times that because of the 2008 economic downturn, there are so many redevelopment projects that are left hanging or abandoned. Are you familiar with one specific example and knowledgeable about what happened to the redeveloper, the bank who provided the financing, and the town involved with the redevelopment?
Gary Englert February 21, 2013 at 03:26 PM
Concerned: It's been a few months since I've done so but, doing a google search for "Construction Projects Abandoned Since 2008" will provide news articles and pictures of a slew of them; Las Vegas being among those places particularly hard hit. The stories are pretty much the same; funding withdrawn by banks in extremis and builders-developers lacking the resources to weather the storm. Read a few of those stories and you'll have a far better appreciation for Prism...and understanding of what could have happened in West Orange and hasn't.
Paul P February 21, 2013 at 03:47 PM
I have 2 examples. Both in West Orange. The condo's at Crystal lake. The original project and property went through various owners and sat idle for years. The original project was advertised in the New York Times Sunday edition, million dollar homes with free dock privileged for boating at the lake. In the end it turned into just another average condo development. The other one, the condos in the Quarry at Eagle Rock. It eventually was built but sat empty for a long time. Well not empty, their was one tenant for at least 7 years.
Gary Englert February 21, 2013 at 04:03 PM
Paul P: I fail to see either examples of "what" you're trying to illustrate or the point you are trying to make. Crownview (the development in what was once the Eagle Rock Quarry) has been completed and fully occupied for 20 years. The Pointe at Crystal Lake (formerly a swim club) is a stellar example of the McKeon Administration's positively mitigating the impact of development, as what what was approved for the site was three office buildings equal in size to the one that exists. Had that plan gone through, it would have added another 1,000 vehicles on Prospect Avenue during peak morning and afternoon drive times. What was negotiated was the mixed-use, commercial/residential scheme that currently exists that served to reduce traffice volume and minimal impact on schools and municipal services. It also resulted in the developer building OSPAC and gifting it, the land on which it sits and Crystal Lake to the Township as publix amenities. If any of that is a bad thing, I fail to see where.
Paul P February 21, 2013 at 04:29 PM
Those were examples of 2 projects that sat idle during a recession. And fyi, The Pointe At Crystal Lake is a shining example of a project West Orange originally planned as an enclave for the wealthy. During the build it and they will flock to West Orange, and we will be awash in rateables and wealth. Then the recession and it was idle. For years. Changed owners at least 4 times. And I am correct that the Crownview was an empty building with one tenant for at least 7 years, until the recession ended and people started buying them, at way below market value. Another enclave build for and advertised as place for the wealthier tenants, and sold for a pittance per unit. Sound familiar?
Gary Englert February 21, 2013 at 05:03 PM
Paul P: I'm still not at all sure what point you are trying to make and how it is relevant to this discussion. Do, as a general rule, housing starts and construction projects tend to slow/stall during recessions? Yes...no big news there! The Pointe at Crystal Lake, however, moved rapidly to completion of construction (circa 2000-1) after having been acquired and developed by Millenium Homes. A gated community that gives way to some of the most exclusive homes in West Orange (overlooking NYC on Eagle Ridge Way), the complex has luxury amenities (gym, pool, public rooms) and price points from $400-700K: luxury by most any standard. Your characterization of Crownview (also developed by Millenium, as is Vizcaya), if it was ever true (which I sincerely doubt), is certainly not the case now.
Bert Peronilla February 21, 2013 at 05:55 PM
Mr. Englert, the thrust of my question is: in the case of a redevelopment project where there are three parties involved - the redeveloper, the bank, and the town, if tne project is halted in the middle of contruction due to economic hardship on the part of the developer, who is/are caught "holding the bag?" I assume the bank already loaned some money at this point. What recourse can the bank take to recover its money? Is the town insulated from any liability, other than having an eyesore of an unfinished structure? I am looking for answers from an actual case, not something which we used to get from Harvard Management Case Studies. I googled the internet as you suggested, but could not find one that had the details of what the bank actually did, did the developer declare bankruptcy, what action did the town take, etc. Maybe it is next to impossible to find these answers, and I am fine with that. I am with you in hoping that this will not happen with Prism, but God forbid, what happens if it did?
Gary Englert February 21, 2013 at 06:57 PM
Concerned: In the unlikely event that Prism were to abandon the downtown redevelopment project, the Township is in essentially no worse position than when any other property in West Orange is foreclosed upon by a mortgage holder. To maintain its rights, the foreclosing lender generally continues to pay property taxes and, hopefully, to maintain the property. Should they not pay the taxes, the Township has an absolute first lien on the property which must be satisifed before it is sold. The same would apply to the property no being maintained; if the Township has to cut the grass, or whatever, a lien for the services rendered is placed on the property and it must be satisfied before the property is sold. The bank would, of course, seek to recover its investment and/or minimize its losses by selling the property; a course of action that is standard operating procedure whether we are talking about a commercial property or a single family home...and the Township has no liability exposure in the process. In such a worst case scenario, West Orange would be left with the ever deteriorating eyesore that is the Edison Battery Factory (albeit with the property taxes likely being paid), until such time as a new player were to step in and pick up the pieces. As to the specific of was happens to the companies who spearheaded failed projects, an educated guess is that most...having essentially be corporate shells to begin with...declare bankruptcy and take their losses.
Joe Krakoviak February 21, 2013 at 08:57 PM
My latest blog post covering the February 19 council meeting and Prism's 2011-2010 financial statements is here at http://bit.ly/11Y4T0m. Thanks, Joe
Bert Peronilla February 21, 2013 at 10:08 PM
Councilman Krakoviak, the above URL points to your Feb. 19 council meeting blog, but this blog still points to the 2013 Budget documents, NOT Prism's 2010-2011 financial statements. Mr. Englert, I posted my response to you under Councilman Krakoviak's Feb. 19 council meeting blog.
Joe Krakoviak February 22, 2013 at 03:05 AM
@Concerned - Apologies for unclear language. I posted further information from Prism's financials in my blog covering the February 19 council meeting, not the financials themselves. Sorry for the confusion. Regards, Joe
Paul Eggers February 22, 2013 at 03:45 AM
Are the financial statements a matter of public record at this point? Can the Township post them on the website? I would assume that they're "confidential".
Michelle Cadeau February 27, 2013 at 04:04 PM
I totally agree Lisa. If he posted all updates that would be OK but it is mostly just one sided I feel.

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