Is Costco Project Dead? Developer Needs to 'Regroup'

The Lehigh County Commissioners dealt a potentially fatal blow to the much-anticipated Costco project in Lower Macungie Township this week, rejecting the controversial TIF plan created to help fund the $140-million Hamilton Crossings shopping mall.

In reaction to the county vote, which killed the TIF and possibly the Lehigh Valley’s chances of getting its first Costco, developer Jeremy Fogel, executive vice president of The Goldenberg Group, said: “We are disappointed with the vote and will have to regroup and discuss with the various stakeholders how to move forward.”

Prior to the county vote, Fogel said, in a Patch Q&A, that without the TIF he and his partners would not be able to make the retail complex along Krocks Road a reality, (The Goldenberg Group of Montgomery County has been working on the Hamilton Crossings project along with Tim Harrison of Staten Island, N.Y.) They say that development of the 63-acre parcel is cost-prohibitive, largely due to costly geologic work needed to reclaim land severely damaged by past mining activities.

The TIF, if approved, would have diverted about $7 million in tax dollars from Lehigh County and East Penn School District over a 20-year period to help pay for project costs. East Penn approved the TIF last month. Approval from the county board was needed for the TIF to move forward.

Some of the arguments that have been made against the need for the TIF include the fact that other commercial developers – in particular Cedar Reality, which owns two other retail malls, Trexler Mall and Trexlertown Plaza, on Hamilton Boulevard -- would be willing to develop the Krocks Road property without the TIF. Cedar has already made such claims publicly.

Fogel discussed this issue during a Patch interview earlier this week prior to the county commissioners vote. 

The following is what Fogel had to say on Tuesday when asked about the others waiting in the wings to develop the property without the TIF:

"Once Route 222 was built and the land was zoned for commercial, the Diocese of Allentown sought to sell their land. At least one major development firm contracted with the Diocese before Tim Harrison was even involved, and Tim had to replace his joint venture development partner three different times during his effort to develop the property. Each partner was a very significant development firm that specialized in retail shopping centers - each time the firms identified issues with the project, terminated their interest and walked away. 

"In 2011 Tim looked to find another partner. He did not call his contacts at various firms directly. He did not quietly court a few small firms. Tim hired Metro Commercial Real Estate, one of the region’s largest retail brokerage firms to market the project and identify a new joint venture partner. It was at this time that The Goldenberg Group competed with two other firms and came to terms with Tim.

"During this entire period, Cedar was the most likely buyer - they own the two most significant shopping centers in the market and are a public real estate company.  

"During this entire period Cedar could have stepped in and indicated their interest in developing the property.

"Cedar NEVER expressed an interest in the project. 

"Now, all of a sudden, after the development team identifies the last piece of the puzzle that will allow Hamilton Crossings to move forward, Cedar steps forward and claims they can develop the project without any support.  They don't know the project income or expenses. They can't be familiar with the storm water design, neighbor requirements, tenant requirements, Lower Macungie Township's requirements or anything else related to the project because, other than sending their attorney to protest the TIF, they have not attended a single meeting with anyone involved in the project. 

"Have they offered a guaranty that they will close and develop the project? Have they offered a sizable non-refundable deposit that backs up their statement? 

"How many ground-up development projects is Cedar working on right now? We do not think there are any. We believe Cedar has actually halted their ground-up development program. If you check on the public documents/filings provided by Cedar, they consistently state that Cedar is not going to pursue any ground-up development projects or acquisitions for the foreseeable future. Their current claim is completely inconsistent with those statements. 

"We suggest their statements are baseless and offered only to create doubt among the County Commissioners, but they have offered nothing to back up their claims. They are simply cooperating with their anchor tenant, Giant, trying to stop competition from entering the marketplace. 

"And that effort is disappointing - although we obviously feel a program like a TIF is a good tool for economic development when used appropriately, both Cedar and Giant must feel the same way. Giant has been involved in several projects that benefited from a TIF and Cedar received over $20 million for a project using a similar program (ERG in Egg Harbor, N.J.). 

"Please don't accept baseless comments and pass judgment on the Hamilton Crossings development team. It does not matter which developer is looking at the income and expenses - the project is truly inundated with extraordinary costs that will prevent it from moving forward unless the TIF helps to defray a portion of those costs."