Blumenfeld Bargaining To Avert Foreclosures On 2 Sites

Posted: January 30, 1989

Philadelphia developer Jack W. Blumenfeld is facing foreclosure on two properties, the 40-story apartment building at 1500 Locust St. and the Shelburne Hotel site in Atlantic City, where he hopes to build a casino.

Chrysler First Business Credit Corp. of Allentown has filed foreclosure suits against Blumenfeld on the two properties, and both are scheduled to be auctioned at sheriffs' sales in February. Another bank, which holds the first mortgage on 1500 Locust, plans to put the Center City property on the block at a federal foreclosure sale.

Blumenfeld insisted last week that the foreclosures were routine filings and that he was negotiating with the banks to maintain the financing.

The foreclosure suits are among several of Blumenfeld's disputes with lenders that have been made public in court records.

"We've had an ongoing battle with (Chrysler First), which often happens in our industry," said Blumenfeld, who has been in the development business in Philadelphia for 30 years. "I can say unequivocally there will be no sheriff's sale."

Blumenfeld said he had arranged for new financing of the Shelburne site that would allow him to pay off Chrysler First this summer. He said the financing for the entire $320 million casino project would come from a California-based company that has assembled a loan package from a group of pension funds. He declined to name the company.

He said he expected either to find a new lender for 1500 Locust or to sell the building, headquarters of Blumenfeld & Co., to pay off his loans.

Both properties were to be sold at foreclosure sales last month, but Chrysler First extended Blumenfeld's agreement until February.

Last year, Blumenfeld was able to avoid foreclosure on his Abbotts Square residential development on the site of the former Abbotts Dairy at Second and South Streets.

In May the Bank of New York began foreclosure proceedings against Abbotts Square Associates, a partnership headed by Blumenfeld, demanding payment of $31 million in principal and interest on the project.

The bank, however, reached a new agreement with Blumenfeld and dropped the suit in August.

Blumenfeld said BRT Realty Trust of New York had since become his lender for the 162-unit Abbotts Square.

Last summer, Blumenfeld had rented about 97 unsold units under a lease- purchase agreement that allows Abbotts Square tenants to become buyers. His plan to include a sports bar in the project was dropped after neighborhood residents objected, but Blumenfeld's lawyer, Howard Rubin, said the company is negotiating with the TGI Friday's restaurant chain.

Meanwhile, Blumenfeld has filed for protection from creditors of his Executive House apartment building at City Avenue and Drexel Road in Philadelphia under Chapter 11 of the U.S. Bankruptcy Code.

Executive House Associates, a limited partnership of which Blumenfeld & Co. is the general partner, filed the bankruptcy petition in January 1988 after the U.S. Department of Housing and Urban Development, which holds the mortgage on the 20-story building, tried to foreclose.

HUD contended that Blumenfeld is in default on $22.5 million in principal and interest on the mortgage for the 310-unit luxury apartment building built five years ago.

Blumenfeld said the bankruptcy petition resulted from disagreements with HUD rather than from any failure on his part to make mortgage payments. The Executive House case is pending.

In U.S. District Court, Goldome Savings Bank, a Buffalo, N.Y.-based bank that holds the first mortgage on the apartment building at 1500 Locust, has won a foreclosure judgment against Blumenfeld, and the property is scheduled to be put up for bid when the next federal foreclosure sale is scheduled.

According to Goldome's suit, the bank in 1982 gave Blumenfeld a $12 million loan and took over an $18 million mortgage held by Continental Bank. Continental had lent Blumenfeld $17 million in 1970 to begin construction and an additional $1.3 million in 1974.

In court papers, Goldome argued that Blumenfeld had violated the terms of his agreement by allowing repeated mortgage liens to third parties without the bank's permission.

In January 1988, Blumenfeld agreed to a new loan structure, but defaulted the next month, Goldome said. On Feb. 26, Goldome began foreclosure proceedings for a total of $32 million due in principal, interest and fees.

On the Atlantic City property, Chrysler First lent the Blumenfeld Development Corp. $17 million in September 1984. The loan agreement was amended four times with various partners in the project, including Blumenfeld's longtime business partner Alan Feingold, and a partnership called Carousel Equities.

The bank states in federal court documents that Blumenfeld went into default on Dec. 30, 1987. Two months later, the bank agreed to extend the agreement to July, but Blumenfeld again failed to make payment, the bank said.

Finally, last October, the bank began a foreclosure suit, contending that Blumenfeld and his partners owed a total of $23.9 million and additional interest of $7,243 a day since Oct. 25.

Blumenfeld has said he will build a 22-story casino resort, the Carousel Club Casino Hotel, featuring a carnival midway, on the 3.5-acre lot at Michigan Avenue and the Boardwalk.

Blumenfeld Development Corp., a unit of Blumenfeld & Co., bought the Shelburne in 1984 for $17 million from National Inns Ltd. of Atlantic City. Blumenfeld then demolished the hotel, one of the last of the Boardwalk's turn- of-the-century resorts.

In October 1986, Blumenfeld staged a groundbreaking ceremony during which a backhoe dug a huge hole in the lot. The hole was filled in the next day, and Blumenfeld began scouting for financing for the proposed 650-room hotel.

But while some of his properties may be troubled, Blumenfeld has embarked on one of the largest residential developments in the region.

Locust Grove Farms, a development of 2,150 houses and commercial units, is under construction on 750 acres in Deptford Township. Nearly half of the property is zoned for commercial use. Blumenfeld is also building a 400-home development in Perkiomen, Montgomery County.

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