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In re Prudential Financial Inc.'S Urban Transit Hub Tax Credit Program Application

Superior Court of New Jersey, Appellate Division

August 22, 2013

IN THE MATTER OF PRUDENTIAL FINANCIAL INC.'S URBAN TRANSIT HUB TAX CREDIT PROGRAM APPLICATION.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 21, 2013

On appeal from the New Jersey Economic Development Authority, Application No. 204145.

Paul P. Josephson argued the cause for appellants 2 Gateway Center Partners, LLC, TPE Gateway III, LLC and Lichter Gateway IV, LLC (Duane Morris and Hill Wallack, LLP, attorneys; Mr. Josephson, of counsel and on the brief; Eric I. Abraham, Christina L. Saveriano, and Lisa Chapland, on the brief).

Kevin J. Coakley argued the cause for respondent Prudential Financial, Inc. (Connell Foley, LLP, attorneys; Mr. Coakley, on the brief).

Kevin R. Jespersen, Assistant Attorney General, argued the cause for respondent New Jersey Economic Development Authority (Jeffrey S. Chiesa, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Mr. Jespersen, on the briefs).

Before Judges Fisher, Alvarez and St. John.

PER CURIAM

This is an appeal from the June 1, 2012 decision of the New Jersey Economic Development Authority (the Authority), to grant an urban transit hub tax credit (hub tax credit) in the amount of $210, 828, 357 to Prudential Financial, Inc. (Prudential) with respect to its construction of an office building in Newark. Following our review of the arguments advanced on appeal, in light of the record and applicable law, we affirm.

I.

The record discloses the following facts and procedural history leading to the administrative determination under review.

Prudential currently leases approximately 900, 000 square feet of office space in three of the four buildings that comprise the commercial complex known as the Gateway Center, located near Pennsylvania Station in downtown Newark. This space is leased from 2 Gateway Center Partners, LLC, TPE Gateway III, LLC, and Lichter Gateway IV, LLC (collectively Gateway). Prudential occupies 724, 969 square feet and sublets the balance pursuant to sub-leases. Prudential's leases expire in December 2014. Prudential and Gateway have not reached a renewal agreement.

In May 2011, Prudential hired Jones Lang LaSalle (JLL) to provide real estate brokerage consulting services in evaluating its Newark real estate. JLL's real estate team participated in renewal discussions with Gateway and, as Prudential's authorized agent, JLL submitted a request for proposal (RFP) to Gateway. JLL also performed work for the Authority, helping to develop and implement the net benefit model that the Authority uses for programs requiring a net benefit analysis. According to a JLL Managing Director, JLL entered into confidentiality agreements and maintained a wall between the real estate team working for Prudential and the team supporting the Authority, thus no information passed between the teams.

Instead of continuing to lease space in the Gateway Center, Prudential now intends to relocate its Gateway Center operations to a $444 million, 650, 000 square foot office tower it plans to construct on Broad Street in Newark, a site in an area designated by the City as in need of redevelopment. The Broad Street tower will accommodate all of Prudential's employees currently working in the Gateway Center, as well as 400 new employees who will be hired by Prudential.[1] In New Jersey Prudential employs approximately 7435 people, including a total of 4740 at various locations in Newark, 2000 of which are in the Gateway Center.

On September 22, 2011, Prudential submitted an application to the Authority for a hub tax credit, pursuant to the Urban Transit Hub Tax Credit Act (the Act), N.J.S.A. 34:1B-207 to -209.4. Hub tax credits are granted by the Authority when a business makes a capital investment of at least $50 million in a facility located within a half-mile radius of an urban transit hub rail station. In order to qualify for the credit, the business must employ at least 250 full-time employees at the facility, and must demonstrate that the capital investment will yield a "net positive benefit" to both the State and the eligible municipality. N.J.S.A. 34:1B-209(a). Newark is an eligible municipality.

Prudential originally intended to construct a Leadership in Energy and Environmental Design (LEED) certified 600, 000 square foot office tower and parking deck at 3 Center Street, Newark. A critical component in the decision to build the office tower was the availability of the hub tax credit. Prudential's projected capital investment was $368, 887, 738. Upon approval of the hub tax credit, a business is allowed a tax credit of up to one hundred percent of its capital investment, applied over a ten-year period, against its corporate business tax and insurance premiums tax.

The Authority, using a model it had formally adopted in 2009, ran multiple net benefit analyses for Prudential using different figures for jobs, job categories, and property tax rates, to enable Prudential to evaluate alternative project parameters and assist its deliberations regarding construction of a new office building. Gateway claims that JLL assisted in preparing the model runs for the Authority that were provided to Prudential. However, Prudential retained a different consultant, Biggins Lacy Shapiro & Co., LLC, to assist it with its hub tax credit application, and later disclosed to the Authority the role JLL had in its negotiations with Gateway.

In November 2011, the Authority adopted a resolution approving Prudential's application for a hub tax credit for the Center Street project, and awarded Prudential up to $250, 785, 077, as calculated under the ...


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