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Foreclosure Sale Will Not Affect Edison Village Redevelopment
December 24, 2016
Original Article

The mortgage holder that foreclosed on one of Prism Capital Partners' West Orange properties last year purchased the land in a Dec. 13 foreclosure sale.

Lender entity LBUBS 2001-C3 Retail 217 LLC bought 217-219 Main St. for $100, according to the Essex County Sheriff's Department sales listing detail. The entity had been owed $3,714,438.52 in mortgage payments for the parcel, which is currently the site of a CVS and a few empty storefronts. Buying back the property means it did not recoup those monies, but it does now have full control over the land.

Peter Duhig, the attorney who handled the sale for LBUBS, told the West Orange Chronicle he could not comment on the situation. Prism Principal Partner Eugene Diaz did not respond to request for comment before press time Dec. 19.

The change of ownership will have no bearing on the ongoing Edison Village redevelopment project, Mayor Robert Parisi told the Chronicle in a Dec. 16 statement. Parisi explained that Prism-controlled entity GP 217 Main LLC bought the parcel in 2007 with the thought that it could become part of the project. But as redevelopment moved forward, he said the property was never actually included in any official plans for Phases 1, 2 or 3.

"The transfer of this parcel will not compromise the developer's ability to comply with the current township redevelopment agreement," Parisi said. "Additionally, this event will also have zero impact on Phase 1 because it is a separate developmental entity. It is quite clear to this administration that there will not be a negative impact, financially or otherwise, on any phase of the approved downtown redevelopment no matter who owns 217 Main St."

Parisi added that the sale came amid an ongoing "business dispute" between Prism and LBUBS, and the administration will continue communicating with both parties in the hope of reaching an "amicable solution that meets the needs of everyone involved." If LBUBS ends up selling the land to someone else, however, he said the new owner would be obligated to follow the terms of the redevelopment area. And the township would remain committed to ensuring that the downtown district is redeveloped, the mayor said.

Whoever becomes the owner will have to deal with the complication that the land is part of the Orange Valley Regional Groundwater Contamination site. According to Prism's 2010-2011 financial reports, the prior owner of the property was deemed responsible for completing ongoing environmental remediation as part of a court-determined settlement agreement between GP 217 Main and the former owner. But in a Nov. 9 statement to the Chronicle, Diaz said the owner refused to complete additional work.

Diaz also said the remediation solution involves knocking down half the CVS property to access the contamination underneath the building, but LBUBS did not permit that. Additionally, he said having tenants occupy the vacant stores would make the necessary demolition impossible.

Overall, Diaz said the contamination situation limits the feasibility of redeveloping the property.

Councilman Joe Krakoviak, a longtime critic of Prism, acknowledged the situation could impact what happens to the property. Still, Krakoviak said he would love to see someone buy 217-219 Main St. for a commercial development. But as the councilman pointed out, LBUBS does not have to sell the parcel to put it to use.

"We have a row of stores down there that have been intentionally closed and sitting vacant for years and years," Krakoviak told the Chronicle in a Dec. 15 phone interview. "I hope in the short term (LBUBS) can find somebody to market that and maybe open up those stores again to generate more economic activity downtown and provide more services and employment opportunities for the folks in that neighborhood."

Council President Victor Cirilo was unable to comment before press time.

Meanwhile, Phase 1 of Edison Village continues to progress. During the Dec. 6 Township Council meeting, business administrator Jack Sayers said workers were finishing up the garage and that the footings were in place for the residential-over-retail building that is to go in front of it. Sayers said the penthouse suites were also starting to be built, while the plumbing, electrical and framing work was continuing in the Battery building. He said he would look into obtaining a full construction schedule after Krakoviak requested one.

Even with all this work done, Sayers said Prism had not started to use the $6.3 million in bonds the township issued for Phase 1 infrastructure work. He said that financing will likely come into play once Prism receives permits related to constructing the residential-over-retail building.

Sayers added that no discussions about Phases 2 or 3 have taken place yet. This prompted Krakoviak to ask about the possibility of including council members in that planning process, saying that he found it very helpful when he and former Councilman Sal Anderton were involved the last time the redevelopment agreement and other governing documents were reviewed several years ago. Sayers responded that he would bring the idea to Parisi.

The sale marks the second time Prism has lost one of its West Orange properties to foreclosure. The first occurred after Wells Fargo filed a foreclosure action on 55 Lakeside Ave. in December 2011, though Prism eventually bought the site back at the subsequent auction.

At the time though, Prism did not inform the township administration of the situation as it was supposed to do — the redevelopment agreement requires Prism to alert the township about any negative financial actions in which it is involved — so the administration demanded and received financial and legal information from the company after Krakoviak discovered the foreclosure. This included the 2010-2011 financial reports, which is how the township initially learned that Prism's mortgage for 217-219 Main St. was in default, and that the redeveloper had attempted to sell the property for $5,200,000.