LONG BRANCH — The owners of the Ocean Place Resort and Spa bought some needed time to rearrange finances last week.
The hotel owners appeared in U.S. Bankruptcy Court in Trenton on March 9 where Judge Michael Kaplan gave them time to develop a plan for reorganization, according to John K. Sherwood, attorney for Ocean Place Development LLC.
“We have as much time as we need, provided we continue to operate the way we have,” Sherwood said in an interview this week. “There is no hard deadline.
“You don’t stay in Chapter 11 forever; you get adequate time to restructure your balance sheet, andwe intend to take advantage of that.”
Sherwood said that there is a tentative court date scheduled for July so that the hotel group can show progress.
“When you are in Chapter 11, there are many court dates. You have to check in with the court here and there,” he said, “just so the court and the parties can monitor our progress.
“It’s going to be business as usual. We are looking forward to a great season,” he added.
City Attorney James Aaron said that he would be speaking with the mayor and City Council about what options the city has.
“From my perspective on the testimony I’ve heard, the city certainly has options that we will be discussing with the mayor and council and see if we can get instructions on how to proceed,” he said.
Last month, Ocean Place Development filed for Chapter 11 bankruptcy and now will have to show that the owners can get the hotel finances in order and pay back their debt.
Ocean Place Development, a joint venture of Orr Partners and Tiburon Capitol Corp., filed notice in bankruptcy court on Feb. 15, just a week before a scheduled sheriff’s foreclosure sale was supposed to take place for the Ocean Place mortgage, valued at just over $58 million.
At that time, Sherwood explained the filing in a press release.
“Although the resort had generated and is expected to generate substantial net income based on operations, the company determined that a formal financial restructuring process was necessary in order to modify and extend the terms of its obligations to its secured lenderAFP-104 Corp., which holds a claim for $57 million. The company was unable to refinance its secured debt in 2009 and 2010 due to the adverse lending environment,” the release states .
United Capital Corp., a New Yorkbased real estate investment and management company that purchased a $60 million mortgage note from Barclays Capital, the mortgage holder, in October, is challenging the bankruptcy.
At the City Council’s March 8 workshop meeting, Aaron briefed the council on the proceedings and said the banks didn’t think the hotel would get its finances in order.
“I submitted to you an analysis filed by the bank indicating that they did not believe there could be a reorganization and that the bankruptcy was filed for purposes of a delay in hindering a state process, that they have no viable way to come up with a plan,” Aaron said.
The city remains in litigation with Ocean Place Development over roughly $3 million in payments from the conveying of various city-owned parcels on Abbottsford Avenue to the developer for the planned expansion of the site. In 2007 the city approved a $500 million expansion and renovation project at the hotel.
Aaron said that hotel management has indicated that they are not going to pay the city and that if the city has to approve another redevelopment agreement, they should put that in the contract.
At the workshop meeting, Councilman John Pallone asked whether the Ocean Place owners could simply be trying to delay the foreclosure action until after summer.
“Is it possible, with the summer season coming up, are they able to reap the benefits of that summer season instead of getting out right now?” he asked.
Aaron responded that there is a mechanism in place to prevent that from happening.
“They would try, but right now all the funds that are received by the facility go into a lockbox and get turned over to the mortgagee because there is an assignment of proceeds, which is defined as an assignment of revenue,” he said.
“It is governed by United Capital, and they then approve what is allowed to be taken out of that by the management company,” he added. “They are now in control, so unless they get that arrangement broken by the court, the answer is no.”
Long Branch Administrator Howard Woolley Jr. said there are some residents and employees who are concerned that the hotel is going out of business, but he assured them that it is not.
“Their plan is to continue operation until this thing gets resolved,” he said. “They are not going out of business.”
The hotel is located within the city’s Hotel Campus redevelopment zone.
City Assessor John Butow previously said that the hotel itself is assessed at just under $55.4 million and there is currently no tax abatement on the property, with the hotel paying over $1 million a year in city taxes.
Ocean Place Resort and Spa is located on 17 acres with approximately 1,000 feet of ocean frontage and has 254 rooms.
Contact Kenny Walter at [email protected].