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EDA’s tax credit to Prudential ‘corporate welfare at its worst,’ landlords charge
If Prudential vacates nearly 1 million square feet of office space at the Gateway Complex in Newark in favor of a new building, it could take 10 years for the citys commercial real estate market to recover, Gateways landlords charged yesterday.
The insurance giant has said it is considering its options before its leases there expire in 2014, including constructing a new tower elsewhere in the city or staying at Gateway. In November, the state Economic Development Authority said it would award a $250.8 million Urban Transit Hub tax credit to the company for its proposed $369 million, 600,000-square-foot office tower on land across the street from the New Jersey Performing Arts Center.
Calling the decision “corporate welfare at its worst,” the owners of Gateway 2, 3 and 4 have filed a lawsuit with the state appellate court, arguing the EDA failed to consider the “devastating financial impact” its decision would have on the city and state, and it approved the award without notice to or consultation with the landlords. The building owners also said Prudential did not meet the eligibility criteria for the award. The financial services company currently occupies 922,000 square feet in three of Gateways four towers, according to the lawsuit, which was filed on Dec. 23. The landlords are 2 Gateway Center Partners, TPE Gateway III and Lichter Gateway IV.
“If Prudential vacates its 922,00 square feet at Gateway in favor of a smaller total in newly built facilities, it will have a devastating effect on Gateway and, indeed, on Newarks entire commercial real estate market,” the landlords wrote in a statement released through a spokesman, David Grant.
“Where is the demand for that space to come from in the current economy? It would take up to 10 years to absorb that much space,” they said.
An EDA spokeswoman, Erin Gold, said the agency does not comment on pending litigation.
In a statement, Prudential spokesman Bob DeFillippo said, “We cant comment on any litigation, but we do have tremendous confidence in the thoroughness and integrity of the process that the EDA went through.”
DeFillippo said Prudential continues to do its “due diligence” at a number of Newark sites, including Gateway. In its tax credit application to the EDA, filed in September, Prudential said it was considering an environmentally friendly office tower and separate 1,600-car parking deck project.
This appeal isnt the first time EDA has faced criticism over its awards. In March, Hartz Mountain Industries and the town of Secaucus appealed the EDAs decision that Panasonic would receive $102.4 million in urban transit hub tax credits to move to Newark from Secaucus. Hartz, which was Panasonics landlord, argued the incentives intent was not to lure a company from one New Jersey town to another. Hartz dropped its suit six months later, citing concerns it would have been “costly and time-consuming,” according to a statement at the time by Hartz President Emanuel Stern.
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