Sale of building a no-go as council seeks more $
Monday, October 02, 2006
By KEN THORBOURNE
JOURNAL STAFF WRITER

The Jersey City Council put the brakes this week on the sale of a Heights building for $550,000 less than what the city paid for it 18 years ago.

The three-story structure at 325 Palisade Ave. fetched $1.85 million at an auction sale held last month. But the city paid $2.4 million for the property in 1988.

According to Business Administrator Brian O'Reilly, the city was prepared to take a bath on the sale because the building is a wreck, needing among other repairs, a new roof and heating and air-conditioning systems.

At Wednesday's council meeting, Ward D Councilman Bill Gaughan convinced the administration to withdraw a resolution accepting the winning bid.

Gaughan wants to redo the property's "area in need of redevelopment plan" to allow more floors to be added. With that change, he's confident the building would attract more dough at a future auction.

"It (the building) needs a new roof anyway," Gaughan said last Friday. "Why not allow someone to take off the roof and add a couple of floors?"

But adding floors would "change the historic character" of the property, Planning Director Bob Cotter said.

The reporter is an idiot. Doing a rough, 5 minute calculation, and the information in the article, the NPV of the city's investment was approxiamately -$1.9M, while the NPV of renting is -$4.1M. This assumes an 8% cost of capital (high for a government, further penalizing the purchase) and 3% inflation. I didn't assume any investment income from the renting scenario, as I would with a private renter, since the government is more likely to spend the original purchase price rather than invest it. Optimally, if the building had been maintained (1% of purchase price per year, adjusted for inflation) then the city's NPV would have been approxiamately -$1M. Overall, I don't think they did too bad on this deal. Comparing purchase and selling prices over a long period in real estate is like comparing apples to oranges, there are too many other factors to consider.

"A rising tide lifts all boats," Healy said

NOT WORTH $2.4M NOW
Jersey City 'loses' $550G on building
Wednesday, September 27, 2006
By KEN THORBOURNE
JOURNAL STAFF WRITER

In the can't-miss real estate market of Jersey City, the city of Jersey City, well - missed.

Eighteen years ago, the city purchased 325 Palisade Ave., a three-story building that city employees worked out of until about a year ago, for $2.4 million.

Last month, the city auctioned it off for $1.85 million, taking a $550,000 bath.

City officials attributed the financial soaking to dilapidated conditions.

"It needs a new roof, it's not handicap compliant, the HVAC (heating and air conditioning) system needs to be replaced, it's a wreck," said Business Administrator Brian O'Reilly. "We'd have to vacate the building for a year (to repair it)."

The sale became an issue Monday night's City Council caucus, when a stunned Councilman Bill Gaughan, who represents the Heights neighborhood where the building is, noted the difference between the purchase and the sale price.

In order for the transaction to be considered final, the council has to pass a resolution tonight confirming the sale. Gaughan asked O'Reilly to provide more information about the sale.

"I didn't expect to get much more," O'Reilly said.

He did estimate that the property saved the city roughly $8 million in rent over the past 18 years.

He acknowledged that the city over the years allowed the property to go downhill.

"The city is the worst landlord," he said. "Money was tight in the '90s."

The city purchased the building from Secaucus-based T.M.M. Realty in September 1988. At the auction, held Sept. 12, it was sold to Due Vecchio, LLC, of West Caldwell. O'Reilly's office set the minimum bid price at $1.75 million.

Nearby lots the city owned were also auctioned to DRG Realty of Jersey City for $755,000 - representing a $500,000 profit from the original purchase price, O'Reilly said

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