In an article published by Press of Atlantic City, http://www.pressofatlanticcity.com/news/breaking/unpaid-million-crda-loan-raises-questions-about-new-brunswick-devco/article_a03318e2-dcdb-11e5-a563-67611bc7b7bc.html, Middlesex County Improvement Authority intends to pay back $20 million loan it borrowed in 2005 from Casino Reinvestment Development Authority to finance development of a hotel-cum-conference center, The Heldrich, which it owns. The Authority’s spokesperson, Maria Prato stated that the project, though cash-strapped, has promising economics that will finance the loan.
The loan, plus $70M in municipal bonds issued by the Authority constitutes part of $107M financing package that was needed for the project. Since opening in 2007, the 235-room hotel has barely attracted guests with a mere record of 63.5% occupancy in 2015. The revenues are too low to finance debts that New Brunswick Development Corporation DEVCO has had to tap its own money to fund basic capital expenses
Nevertheless, attorney Christopher Paladino, head of Devco is optimistic about the project’s stability. DEVCO is a private nonprofit urban real-estate development company that was created by Johnson&Johnson in 1975. It utilizes public-private investment partnership model to finance state-of-the-art real-estate projects in New Brunswick.
CRDA’s Executive Director John Palmieri acknowledged the risk in becoming subordinate lenders and as thus expected to be among the last to be paid.
Meanwhile Atlantic County Improvement Authority is issuing $120 million in bonds come May, for the Gateway Project, a construction of Stockton University satellite campus, with repayment expected from dorm-room revenue and sale of tax credits. Atlantic City Development Corporation, a sister firm of DEVCO will spearhead the project. This comes after Governor Chris Christie signed a law in December barring all state agencies from giving loans, grants and subsidies to businesses and nonprofits that have defaulted on state-issued loans and bonds.