Redevelopers have always struggled to make the numbers work on their proposed projects due to the unique added expenses of redevelopment not typically encountered on “greenfield” new construction projects—costs of land assemblage, environmental remediation, and structured parking, to name a few. Project financing-gaps only widened during and following COVID, as inflation drove up the cost of labor and materials and the Federal Reserve launched a rapid series of interest rate hikes. Adding to the challenge, local incentives—specifically, long-term tax exemptions (PILOTs), even when coupled with redevelopment area bond (RAB) sale proceeds—have generally not been generous enough to make the numbers work. As a result, even proposed redevelopment projects in tested, primary New Jersey cities have not always penciled-out.
Enter the “NJ Aspire” (“Aspire”), a financial incentive program administered by the New Jersey Economic Development Authority (“NJEDA”) that was designed to address project financing gaps through the awarding of transferable, pledgeable state tax credits to eligible proposed redevelopment projects. Unfortunately, since its launch in 2021, Aspire has not been the deal-closing fund that redevelopers have so desperately needed. The program has been inadequate for closing, or even meaningfully narrowing, financing gaps on most proposed redevelopment projects. Legislation enacted last year improved the program and slightly increased award amounts, but virtually none of the stuck projects were able to move forward.
Perhaps the third time is the charm…
Earlier today, both houses of the State Legislature gave final approval to a bill (S1323/A2076) that now awaits Governor Phil Murphy’s signature. As we detail below, the revisions to Aspire contained in this legislation are likely to provide the deal-closing incentive necessary to spur equity investments and debt financings that have been hanging in the balance for months and years (as carrying costs and nonrefundable deposits have piled-up).