Is Another Costly Mistake About to be Made with the Verizon Building

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September 30th, 2013 | By Marc Garabedian

In 2007, the Borough purchased the Verizon Building for $3.25 million.  Within a year, it had recouped $610,000 through the continued lease of the building by Verizon.  Since Verizon moved out in 2008, it has sat empty and is now full of mold.

While the proposal from Keystone Property Group (KPG) recently accepted by Borough Council promises to return the Borough’s investment in the Verizon Building, is it a good deal?

Consider:

  • The Borough doesn’t get free rent at the all new Verizon Building.  KPG proposes that the Borough pay either $24.57 or $17.00 per square foot depending on the ability of the Borough to secure state or federal grant money that will benefit KPG’s redevelopment efforts. KPG proposes a 30 year lease.
  • This means that the Borough, over 30 years, will be paying Keystone $491,556 or $340,000 per year for renting the space that it formally owned.  The totals over 30 years are $14,746,680 or $10,200,000.
  • Currently the Borough pays just under $10,000 a month to lease space at West First and Fayette.  That total over 30 years is $3,600,000.

Before we compare the numbers, we need to acknowledge that the KPG proposal enables the borough offices and police stations to be merged at a single address.  The police station is now located at West 8th and Fayette in a building that the Borough owns outright.

So this raises a few questions:

  • At the current rate, the space the Borough is renting now will cost less than $4 million over 30 years.  Moving into the rehabbed Verizon Building is going to cost $10 to $14 million over 30 years.  Yes we realize this includes additional space for the police department.  Is it worth minimally $7,000,000 to have a unified borough hall and police station?
  • Wouldn’t it have been more cost effective to fix the roof of the Verizon Building when the problem was discovered?  One of the estimates to fix the roof was $408,000. If the roof had been fixed, the Borough would be in a position to take the $3 million it is to make from the sale of the properties at West Elm and Fayette, along with the $3 or $4 million in grant money Keystone is seeking, and invest it back into the Verizon Building itself.  This option has passed since the roof wasn’t fixed and now the building is full of mold and needs to be stripped down to the steel.  However, even though it probably isn’t enough money to rehab the Verizon Building, the Borough could still investigate taking that $7 million and rehabbing old Borough Hall and the police station.

Seems hard to believe the Borough can’t figure out a home for itself with $7 million.  So what does Conshy think?  Are we looking at this wrong?  Let us know in the comments.