Bankruptcy Could Doom Development in Hoboken, Elizabeth

Dil Hoda, one of two members of the Monroe Center II Urban Renewal Co. LLC, announced last week that his company would apply for an order to impose an automatic stay to stop the sale of its membership interests in the Monroe Center. The company filed for Chapter 11 bankruptcy protection on Nov. 15; a meeting of creditors has been scheduled for the morning of Dec. 17.

In the filing, Hoda said the sale would doom the entire Monroe Center project, and requested the court allow the company more time to obtain a No Further Action Letter relating to environmental contamination on the site, and resolve other issues relating to the project, before such a sale would take place.

Plans for Monroe Center include residential, retail and public space. Hoda and his partner, Gerard Saddel, purchased the five-acre site — the former Levelor blinds factory — in 1990 for $3.43 million.

In recent years, environmental issues have plagued the project, as site investigations revealed significant contamination. Remediation efforts worsened the problem, according to Hoda, whose firm has spent about $4 million in cleanup costs for the site.

In bankruptcy papers, Hoda blamed the environmental problems, along with the real estate slowdown and credit crunch, for the company’s inability to raise sufficient funds to pay Strategic Performance Fund-II Inc.

Strategic is a mezzanine lender that has foreclosed on the loan issued to the developer. According to a representative for Hoda, the fund is holding the partners’ personal equity in the project as collateral and is planning to sell their interest.

Monroe Center II Urban Renewal Co. submitted a new Remediation Action Work plan to the New Jersey Department of Environmental Protection, which is expected to be approved within the next 30 days, according to Hoda, who said the approval would put the company in a more favorable position to raise funds to make payments to Strategic.

In its bankruptcy petition, the company listed estimated assets between $0 and $50,000, and estimated liabilities between $10,000,001 and $50 million. The 19 creditors holding the largest unsecured claims include Montroy Anderson, a New York-based architecture firm, which is owed $197,305.54, and Sadat Associates, a Trenton-based environmental consulting company, which is owed $172,468.26.

The city of Hoboken and attorneys involved with the case declined to comment on the bankruptcy proceedings or the impact of the filing on the Monroe Center project.

Tern Group LLC, of which Hoda is a principal shareholder, said the bankruptcy filing had no impact on its $2 billion Celadon project, an 8 million-square-foot, mixed-use development planned for the Elizabeth waterfront.

“The two projects are completely separate,” said Michael Turner, spokesman for Tern Group, which is also based in Hoboken. The Celadon project “is moving ahead.”

Monroe Center II Urban Renewal Co.’s bankruptcy filing doesn’t necessarily have an impact on Tern Group, since they are separate legal entities, said Richard Dressel, a shareholder at Flaster Greenberg, a Cherry Hill law firm not involved with the bankruptcy case. Still, Hoda’s “failures with the first project could spill over and affect the second one,” he said. If Hoda has personally guaranteed debts for both the Monroe Center and Celadon, then Monroe Center II Urban Renewal Co.’s bankruptcy filing could trigger defaults on the personal guarantees for the Hoboken project and lead to default for any obligations that he has with the Elizabeth project, according to Dressel.

“It could snowball into having to file a bankruptcy for [Tern Group] as well, because of the defaults,” he said.

At this point, it is difficult to determine whether Hoda made any personal guarantees, since the developer filed an emergency petition and did not disclose all of the necessary documents, including its list of co-debtors, Dressel said. The company has until Dec. 1 to file the additional papers, he said.

Tern Group is waiting to receive the second of two waterfront development permits from the Department of Environmental Protection, which would allow the developer to begin negotiating a redevelopment agreement with the city of Elizabeth, he said.

Once permits are secured, the firm could have shovels in the ground within six months, according to Turner. To date, Tern Group has invested more than $40 million in planning and design, but has not secured any financing, he says. The company expects to announce by the end of the year a joint venture partnership for the retail portion of the first phase of the project, and is in talks with other potential partners for the remaining phases of the project, he said.