DEVCO is a private non-profit urban real estate development firm. It was founded in mid-1970’s. The company has acted as the catalyst for the city’s revitalization. The New York Times described it as a “powerful engine for economic growth.”
An article posted on Press of Atlantic City reported that in the month of January 2016, the Middlesex County Improvement Authority failed to pay a principal amount of $1 million and interest summing up to $20 million on a loan that they received from the Casino Reinvestment Development Authority (CRDA). The Middlesex County Improvement Authority had been in debt for the past five years.
The loan was made in 2005 to finance the construction of The Heldrich, a New Brunswick hotel and conference center. The New Brunswick is also the company modeling the Atlantic City Development Corp. Attorney Christopher Paladino heads the two firms. He was the one who arranged the $20 million loan. He said that the loan would be repaid in a few years.
The Heldrich was opened in 2007. Since then, it has faced an economic and financial struggle. The hotel has found it difficult to attract customers. It had an occupancy rate of 63.5 percent in 2015. The financial struggles of the hotel forced it to tap around $776,000 of its money to fund capital expenses.
The Atlantic County Improvement Authority was planning on issuing bonds worth $120 million in May. The bond was to be used in the construction of Stockton University satellite campus. Repayments of the bonds will come from boarding fees and sale of tax credits.
CRDA Executive Director, Mr. John Palmieri, said that reimbursement of the loan had not gone as planned. He acknowledges the fact that they made a risky loan, and there were tangible economic impacts that were measurable.
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