New Brunswick Devco Defaults to Repay a Loan Due to its Low Revenue Generation

In January 2016, the Middlesex County failed to disburse $1 million in principal and interest to the Casino Reinvestment Development Authority on a $20 million loan it had received earlier. The article was posted in February on Press of Atlantic City. The Improvement Authority had previously been in arrears for five years, accumulating almost $7 million missed payments.
The loan which was taken in 20005financed the construction of The Heldrich, a New Brunswick hotel and conference center developed by a non-profit referred to as the New Brunswick Development Corp. The state Senate President, Stephen Sweeney has touted the corporation as a paragon of what can be accomplished when public money is funneled through private organizations to execute large scale construction.

The New Brunswick setup is also the model for the Atlantic City Development Corp., a sister firm which expects to oversee over $200 million in private and public financing, including a$19.5 million in New CRDA funds to put up the Gateway scheme in the City’s Chelsea section. Attorney Christopher Paladino heads the two corporations and is the individual who organized the $20 million loan. Paladino said that CRDA loan would be paid, but it would take a few more years.

The Heldrich has 235 rooms and was launched in 2007 as the economic downtown was setting in. It has been struggling to attract many clients. In 2015, the occupancy rate was 63.5%. Johnson & Johnson, whose administrators sit on the New Brunswick Development Corporation’s board of directors, was the largest account. The hotel is very cash-strapped such that the corporation has to step in and tap its own money to fund basic capital expenses. The hotel has performed anemically, despite the huge sum of money that was invested in it.

The Atlantic County Improvement Authority was to give $120 million in bonds for a Gateway project. The money was to construct a Stockton University satellite campus and was to be repaid with the dorm-room revenue as well as the sale of tax credits. The bond for Atlantic County Improvement Authority said that the Gateway project would not experience the same shortfalls.

Devco is a private non-profit township real estate development firm. It was established in 1970 to act as a catalyst for the city’s renaissance. The organization has overseen many investments in New Brunswick since its inception.

References
http://www.pressofatlanticcity.com/news/breaking/unpaid-million-crda-loan-raises-questions-about-new-brunswick-devco/article_a03318e2-dcdb-11e5-a563-67611bc7b7bc.html

 

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