Zoning Board Opts To Hire Expert For Opinion On Viability Of Single-Family Homes On Cedar Grove Lane Tract

Real Estate expert Chris Otteau was grilled Jan. 19 by a skeptical Zoning Board over his analysis of the single-family home construction market.

The Zoning Board of Adjustment will hire an independent real estate consultant to vet a developer’s claims that a Cedar Grove Lane tract is only economically viable for a townhouse development.

The decision was made at the end of the Jan. 19 hearing, after board members grilled a real estate consultant proffered by the developer, Levin Properties.

The consultant, Chris Otteau, told the board that the proposed 50-unit townhouse development is the only financially feasible project for the approximately 11-acre tract, located on the north side of Cedar Grove Lane, near Easton Avenue.

Levin plans to build 38 3-bedroom units and 12 2-bedroom units.

Otteau made the same claims at the board’s Dec. 1 meeting, after which the board asked for more clarification on his analysis of the area’s real estate market.

The board also wanted more information from Scott Kennel, the applicant’s traffic engineer, which prompted the adjournment to the January meeting.

But if the developer had any thoughts of getting a vote Jan. 19, they were dashed when the board, at the prompting of member Robert Shepherd, voted unanimously to hire an outside expert to review Otteau’s assertions.

Levin is initially looking for a use variance for the project. The property lies in an R-40 zone, which allows only single family housing.

Should they win the variance, Levin will return to the board for site plan approval.

As they did during the December meeting, board members had a hard time accepting Otteau’s explanation of why the property could not be developed as per the zone into 10 single family homes.

Basically, Otteau said, the numbers don’t add up for that type of development.

In fact, Otteau said, he couldn’t find any single family home development going on in the township with which he could do a price analysis, so he had to use existing stock.

“It’s not a product that’s being built anymore because it’s not viable,” he said.

Otteau said that even if the cost of the land was removed from the equation – which he conservatively estimated at $64,000 – “there’s not enough value returned to make it developable.”

He said the developer’s cost to build a 3,000-square-foot home, including land costs and all the other infrastructure, marketing and legal costs, is about $650,000.

“You’d essentially be building for hobby at that point,” he said.

Add in the usual developer’s return rate of 15 percent, he said, and the sales price increases to nearly $750,000.

“At 2,500 square feet, it doesn’t work, either,” he said. “This is why were not seeing that many single-family home developments and are having such a hard time pushing them forward. I’m working on two other projects in Franklin Township, and no matter how we slice it and dice it, we just can’t make it work.”

“You have single-family homes developed in the last 12 to 14 years on Cedar Grove Lane, why can’t this be,” asked board chairman Robert Thomas.

“Because of rising costs,” Otteau said. “This project had single-family home viability in the past. In today’s market, it doesn’t.”

Shepherd suggested that if the economy improves under the new presidential administration, the market might be more friendly to single-family homes.

“It might,” Otteau said. “A ‘Trump Bump’ could occur, but it’s not going to affect single family housing to make it viable, we’re seeing just the opposite.”

“I don’t anticipate a ‘Trump Bump’ having anything to do with the increased viability of these homes,” he said. “To make them viable, they would have to sell for $747,000. The price trends aren’t going there. The inventory of single family homes across most townships, you see inventory numbers climb the higher the price goes. Nobody’s transitioning to the higher-price homes.”

“A single family home developed on this site wold have no traction,” Otteau said. “If that were the only use for this site, this site would not be developed in the foreseeable future, in my opinion.”

“Aren’t builders building houses today that people can buy for $450,000?” board member Ray Betterbid asked.

“Yes, they are, but they are few and far between,” Otteau said.

“So the single-family home is gong away,” Betterbid said.

“For new product demands, it is going away,” Otteau replied.

Thomas noted that single-family homes are being built and sold along Churchill Avenue in the $550,000 to $600,000 range.

Otteau said that homes that are built and sold one at a time are usually heavily discounted because, for whatever reason, they are distressed properties.

Board member Gary Rosenthal said he did not agree with Otteau’s analysis of the single-family home situation.

“I was a banker, and I used to handle a lot of those loans,” he said. “Sometimes a developer can get along by putting up one or two houses at a time. What you haven’t really answered, on Cedar Grove Lane in the last five or six years, there have been a lot of single-family houses go up for $600,000, and they have sold.”

“I’m having a rough time with your analysis, I really am,” Rosenthal said.

Otteau said that banks are pulling away from lending money for single-family homes, so the financing is getting more expensive.

Otteau said that town homes generally cost less to build than single-family homes – because they have shared elements – and they can sell for more.

“The developer has a far larger build-out cost” with single-family homes, he said.

Fred Coco, the project’s engineer, said the property could hold as many as 80 units.

“We didn’t want to have it over-developed, so we stuck with the density that would be the lowest and still be acceptable,” he said.

Coco noted that 10 of the 50 town homes will be targeted to low- and moderate-income buyers.

At that point, Shepherd made his pitch for the board to hire a real estate consultant.

“I think the board would benefit from hiring our own expert on this real estate issue, so we could hear from someone who is not an advocate of the applicant,” he said.

Shepherd said he’d like to hire a real estate appraiser who has a background in constriction costs.

“We have presented you with expert testimony,” said Jason Hawrylak, Levin’s attorney. “Mr. Otteau has even worked for the township in the past.”

“I found a lot of what he said to be not consistent with what I believe to be the case about certain things, and I would like to have someone who’s not an advocate for the applicant because even if Mr. Otteau has worked for the township before, that’s not the jersey he’s wearing tonight, right, Mr. Otteau?” Shepherd asked.

“As a licensed professional, I do not take a side,” Otteau said. “I state truth, I do not take a side.”

“I still want to hear from someone who has an independent position,” Shepherd said.

Thomas agreed with Shepherd.

“I’d like to hear a point of view from another source and one that’s not involved at this point,” he said.

Board members voted unanimously to hire the expert.

“We simply want an outside point of view,” Thomas said. “There’s no intent to make this become a more hostile situation.”

The bard seemed more inclined to accept testimony from Kennel, who said that there would be no problem with cars leaving and entering the development during peak rush hour times.

Kennel said the townshouse development would generate less traffic than three alternate uses, a church, school or hospital.

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