Camden developer delays repaying DRPA loan

The developer of the Victor Lofts apartment building on the Camden waterfront has put off repayment of a $3 million loan to the Delaware River Port Authority because he's short on cash.

The agency lent $3 million to Victor Associates in 2003, interest-free until 2009. The money was part of a $52 million financing package assembled by developer Carl E. Dranoff to convert the historic RCA Victor "Nipper Building" into 341 upscale apartments overlooking the Delaware River and the Philadelphia skyline.

Dranoff, a prominent property developer in Philadelphia and its suburbs, was to start repaying the DRPA in 2009, with monthly installments of $23,259 until the end of 2014, at which time the $2.5 million loan balance would be paid in a lump sum, according to the DRPA loan agreement with Dranoff.

Payments more than 15 days late would put the loan into default, according to the contract. But the agreement also says that Dranoff's obligation to make payments is limited to Victor's "available cash flow."

And cash flow has not been available, Dranoff said Tuesday.

"I'd like to say we're making money hand over fist at the Victor . . . but the property wasn't generating sufficient cash flow to pay this," Dranoff said.

Interest will accrue at 7 percent a year on the loan, which Dranoff said would be repaid in 2014.

"They will get whatever is due at that time," he said. "We've never missed a payment. We're not in default. We're pretty conservative, and we play by the rules."

Dranoff Properties owns and operates nearly a dozen commercial properties in the Philadelphia region and elsewhere, including Victor Lofts; Symphony House, a 31-story condominium building on South Broad Street; Venice Lofts in Manayunk; the Left Bank apartment building in University City; 777 South Broad apartments and retail three blocks south of Symphony House; and the planned Ardmore Station residential and retail development on the Main Line.

DRPA chief counsel Richard Brown said the port authority was looking into whether Dranoff could put off repayment of the loan.

The DRPA said in a statement Wednesday that it had "followed the process set forth in the loan agreement in seeking repayment of the loan. Victor Associates has advised us that they are not currently obligated to make loan payments under the terms of the loan due to a lack of cash flow and that therefore they are not in default under the loan agreement. DRPA is taking steps to verify the information provided by Victor Associates."

The DRPA, which operates four toll bridges and the PATCO commuter rail line, has been a major financier of redevelopment on the Camden waterfront. It has contributed scores of millions of dollars to projects in the city, including the minor-league baseball park Campbell's Field, Adventure Aquarium, the Battleship New Jersey, environmental cleanup of the Nipper Building, demolition of the state Riverfront Prison, the ongoing demolition of the derelict Parkade Building, a proposed transit hub and planned transit-oriented development downtown, and an unbuilt tram over the Delaware.

Unlike most of those payments, though, the money for the Victor Lofts development was a loan.

The DRPA board approved the loan in June 2002. An agreement signed in October of that year by Dranoff and Paul Drayton, then chief executive officer of the DRPA, called for the DRPA to provide six $500,000 monthly payments to the developer in 2003. The DRPA was the third major lender, after Fleet National Bank ($30 million) and New Jersey's Casino Reinvestment Development Authority ($8.7 million). Dranoff also had $10.8 million from investors.

The DRPA loan was interest-free through 2008, and Dranoff was to pay 7 percent interest starting in 2009.

Victor Lofts, a 525,000-square-foot factory-turned-apartment-building, opened in 2004 with one- to three-bedroom units that rented for $995 to $2,500 a month. Within a year, Dranoff Properties announced the building was 100 percent leased.

Rents for one-bedroom apartments currently range from $1,090 to $1,650 a month, and two-bedroom units run $1,495 to $2,250.

Dranoff said the Victor was about 90 percent occupied now, and he declared the venture a success.

"It has brought the middle-class back to Camden," he said. "The Victor was a symbol of the deterioration of Camden and the waterfront, and now it's a symbol of the renaissance."

But he said rents were about 33 percent below Center City rates, and "cash flow is not where we want it to be."

Nevertheless, Dranoff said, he remains bullish on Camden real estate and is proceeding with stalled plans for another former RCA factory building in the city that is to be reborn as 86 condominiums known as Radio Lofts.

A second round of environmental cleanup is required at the 60,000-square-foot former RCA Building 8, Dranoff said, and that is likely to take a year. Renovation will take 12 to 15 months, he said. He now hopes to have units ready to occupy by April 2013.

"I'm in it for the long haul," Dranoff said. "I think Camden will be the next Hoboken."