Saturday, May 9, 2015

The Lingering Effects Of Corporate HQ Pull-Outs: Merck, Legacy S-P And Dozens Of Others

I think the below letter to the local Hunterdon County editor in New Jersey deserves nation-wide attention. [So I'll oblige. International, too. Smile.] A little over two weeks ago, we were encouraged by the news that Whitehouse Station had a buyer under contract.

At the time we noted our local tax base concerns (ones we voiced four years ago, about the legacy Schering-Plough HQ -- before Merck decided to move back in there) -- and cautions. It is important, nationally, to well consider the lingering effects -- of a large corporate citizen's "pull-out", from any given township, city, village or county. This advice cuts across all industries in the United States (and would broadly apply to many EU-style Western locations, as well).

The fine author is one Bob Fasinski. His below letter -- reprinted nearly in full -- makes very clear why we all should be concerned -- and keep an eye on this dance:

. . . .Hopefully, at some point in the future, there will be reason for the apparent optimism for the Merck property that the Mayor seems to have. Until more information is known, I for one am going to refrain from any level of rejoicing.

There are a couple of reasons for my cautious optimism.

1. Since the mayor is soliciting ideas, I assume that the potential buyer is not a "white knight" corporation looking to use the facility in the same fashion as Merck (i.e. a corporate headquarters campus).

2. The buyer's purchase is likely at a significant discount to what the property may have been assessed/valued. The following facts help underscore my concern:

A. In 2014, the assessed value of the subject property was $213 million

B. Merck had the property appraised at a value of $89 million

C. The negotiated assessed value for 2015 was $153 million

D. Merck reserved the right for further tax assessment/relief for 2016. Presumably the prospective buyer will exercise the same right.

3. It would be reasonable to assume that such a tax adjustment/assessed value could be close to or lower than the $89 million. Such a valuation would reduce taxes from the Merck property by approximately $1.8 million – on top of the $1.8 million reduction in 2015.

4. The purchase price could be well below the $89 million appraised value.

5. Whomever the purchaser may be, it will likely take several years to realize the improvements, rehabilitation and occupancy necessary to begin increasing the assessed value.

6. The above scenario and the long term valuation of the Merck property and impact on Readington's tax base is reasonably likely regardless of whom the buyer might be.

7. Moreover, until the buyer's identity and intentions are known, the public – and the mayor – should contain their enthusiasm.

Bob Fasinski | Readington, NJ

Even so, the property ought to be put back to some fruitful use -- taxes or no (if held in charity). Here's to hoping. Onward!


Anonymous said...

It is a beautiful piece of real estate and really should be put to good use, either by a responsible purchaser, the state, the county, or the town.

Condor said...

Agreed, Anon.!

Anonymous said...

Corporate welfare ~again!