From the Asbury Park Press:
Judge allows auction of Kara project
Amboy National Bank, which started foreclosing on Horizons at Birch Hill in Old Bridge, instead can try to sell the development at an auction scheduled for Sept. 5, a bankruptcy judge ruled Monday.
The decision could jump-start development at the Kara Homes project, but it also could cause dozens of buyers to lose their deposits.
Nonetheless, “we prefer this route” to foreclosure, said Damon M. Kress, a New Brunswick-based lawyer who represents the Birch Hill Home Owners Association. “It’s the quicker route to getting the same result.”
The decision by U.S. Bankruptcy Judge Michael B. Kaplan was part of a flurry of activity in the Kara bankruptcy case. The East Brunswick-based home builder filed for Chapter 11 protection last October after the housing market began to tumble. The builder reported $350 million in assets and $227 million in liabilities.
Kaplan is awaiting creditors’ approval of a reorganization plan in which Kara would emerge with an infusion of capital from Plainfield Specialty Holdings II Inc., a Greenwich, Conn.-based hedge fund, and Glen Fishman, a Lakewood developer.
Much of the focus Monday, however, was on Birch Hill, a 228-unit development with villas, townhouses and a high-rise building. Of those, only 74 units have been completed and occupied.
Amboy is owed $26 million for the project. It began foreclosing in June, starting a process that could have taken as long as two years. Instead, the bank paid Kara $100,000 to hold an auction. Bids would be submitted by Sept. 4, an auction would take place Sept. 5 and the court could approve the results Sept. 10.
Attorneys involved in the case said they don’t expect anyone to bid more than what Amboy is owed, which would leave Amboy with the property and free to find a builder to complete it.
“The economics (of Birch Hill) are so upside down,” said Warren Usatine, an attorney representing the official committee of unsecured creditors.
The decision drew a protest from Barry Frost, an attorney who represents 11 Birch Hill buyers. In all, his clients deposited as much as $700,000. If the property went through foreclosure, they could argue their case in state Superior Court.
A buyer at an auction — in this case, Amboy — could walk away with the property and no obligation to honor customers’ contracts. Birch Hill buyers could only recoup their deposits if they were insured by a bond, Frost said.