HOBOKEN, NJ - The future of a major redevelopment effort in the Hudson County city is now in question, following the Chapter 11 bankruptcy filing earlier this month of one of the developers involved, real estate experts said. Tarragon Corp., a New York-based residential real estate developer and a multifamily investor that has built extensively on New Jersey's Hudson waterfront, filed for Chapter 11 bankruptcy protection on Jan. 12, aiming to implement a comprehensive reorganization that would include seeking additional outside financing and participation of a new investor or investor group.
The Chapter 11 filing caps a period of financial losses Tarragon had sustained as a result of falling prices and slowing sales in the company's homebuilding division, a lack of available financing, and declining real estate values. At the time of the filing, Tarragon, in partnership with Hoboken-based URSA Development, was in the process of redeveloping approximately 32 acres in the Mile Square City.
Initially, the restructuring "is going to slow down our activities in Hoboken," said William Friedman, Tarragon chief executive officer. The company, which completed its last Hoboken building, 800 Madison, in late 2008, does not anticipate it will break ground on its next project in the city until a year from now, he said: "For the first time in six years, we don't actually have anything under construction in Hoboken."
In the meantime, Tarragon will go through a six to 12-month reorganization process, while also working on plans and approvals for proposed projects in the city, he said. The primary financing for the company's reorganization is expected to come from larger creditors, which will convert their debt into equity, Friedman said.
To date, the joint venture had built six condominium and apartment buildings on approximately 10 acres; it had proposed nine other projects for the remaining acres, according to Tarragon. But "the Tarragon filing is not good," said URSA partner Michael Sciarra. Still, "it's too early for us to tell what impact it's going to have. We're analyzing it ourselves and trying to figure it out."
In its bankruptcy papers, Tarragon said it will work with investment bank Lazard Freres Co. LLC to advise on restructuring, sale of assets and raising capital. The developer disclosed in its bankruptcy petition that it had between 5,001 and 10,000 estimated creditors, and had estimated assets and liabilities that were both between $500 million and $1 billion.
"Depending on their liquidity, the projects may briefly be stalled while they're exploring these options," said Patricia Celano, a partner at the Teaneck office of law firm DeCotiis, FitzPatrick, Cole and Wisler, which is not involved in the bankruptcy case. In the long term, Celano said, Lazar would need to determine the best course of action for the developer to take in its bankruptcy, which could take up to six months. Then, Tarragon "would have a better idea as to whether the project is going to actually be continued to be developed, by them or someone else."
Should Tarragon's bankruptcy cause a prolonged development delay, "the city would be concerned," said Fred Bado, director of community development in Hoboken. "You don't get new revenues, you don't get new taxes." Bado, the city's main contact with Tarragon and URSA, said he had not been in contact with the developers since the summer.
The Tarragon and URSA projects are the latest developments in Hoboken to be affected by bankruptcy in recent months. In November, Monroe Center II Urban Renewal Co. LLC filed for Chapter 11 after a mezzanine lender foreclosed on a loan issued to the developer; in late December, the company's request to stop the sale of its membership interests in the Monroe Center, a mixed-use redevelopment of the former Levelor blinds factory, was denied by a bankruptcy court judge.
Source: NJbiz.com