Hartz Mountain seeks to trim tax break after struggling to lease LI warehouse

Hartz Mountain Industries wants to alter the terms of a tax break it received to build a Long Island warehouse as it struggles to lease the property and fulfill a pledge to bring 500 jobs to Suffolk County.

The New Jersey-based developer has asked the Suffolk County Industrial Development Agency to reduce the incentives it received for the 669,000-square-foot facility at 235 Pinelawn Road in Melville in exchange for cutting that job creation promise in half, Newsday reported. 

The warehouse is one of two that Hartz Mountain developed on the site of Newsday’s former headquarters. One of them, at 90 Ruland Road, is fully leased to Amazon. The larger one on Pinelawn Road is hardly leased at all.

Hartz Mountain hasn’t found a tenant that can both fill the space and honor the job creation requirement, forcing it to subdivide the property. Only one tenant is on board so far, a pharmaceutical company that leased 95,000 square feet and promised to create 40 jobs.

The Suffolk County IDA provided the project with more than $3 million in property tax savings for 20 years, conditioned on the 500 promised jobs. Hartz Mountain has proposed allowing those savings to drop by more than $500,000 and for the term of those savings to be reduced by five years; Hartz did not propose any adjustments to a separate construction equipment sales tax break worth up to $4.6 million or a mortgage recording tax incentive worth up to $663,000.

The IDA board has tabled the decision until next month.

The dilemma at the property is a symptom of a broader problem now facing industrial landlords and developers as the sector, which boomed early in the pandemic, has since cooled considerably. On Tuesday, a WARN notice submitted by industrial tenant N-Quad Logistics revealed plans to cease operations at a 975,000-square-foot single-tenant warehouse it occupied in Staten Island and lay off 136 employees. 

Another challenge for Hartz Mountain is the jobs themselves. Warehouse’s tend to be leased by companies whose operations lend themselves well to automation. While not specifically mentioned in this case, warehouses are increasingly operating with more machines and fewer people.

Specific to this development is the presence of Amazon next door. The e-commerce giant leased the adjacent property in 2020, but tax incentives issued there by the IDA were later rescinded because Amazon wasn’t sure it could meet the job requirement. That prompted Hartz Mountain to up its commitment at the 235 Pinelawn Road warehouse next door by another 75 jobs.

That’s led to some grumbling from the IDA as to why one warehouse can succeed without the tax incentives while the other can’t. Board member Joshua Slaughter told Newsday that Hartz Mountain “has already shown us that they’re capable of creating jobs.”

— Holden Walter-Warner