DRPA portfolio shows easy lending terms

CORRECTION: An article in Sunday's Inquirer about outstanding loans by the Delaware River Port Authority misstated the status of one loan. The former Home Life Furniture, a manufacturer in Northeast Philadelphia, is now on schedule with its payments after having them deferred for a year. The error was the result of incorrect information supplied by the DRPA.

With more than $20 million in outstanding loans to public and private ventures, the Delaware River Port Authority's economic-development pot is a gift that keeps on giving.

Though the DRPA board last year doled out the last of nearly $500 million in economic-development grants, five loans with generous terms remain on the books, and two have gone years without payments, according to documents recently obtained by The Inquirer through open-records requests.

Developer Carl Dranoff, who converted the historic RCA Victor "Nipper Building" in Camden into upscale apartments, has paid only $23,000 on the $3 million loan he got in 2003. His loan, interest-free until 2009, allows him to put off payments if he lacks "available cash flow," and so far, Dranoff says, cash flow hasn't been available.

Adventure Aquarium, on the Camden waterfront, is the recipient of the largest loan. In addition to a $3 million grant, the aquarium received a $15 million loan in 2003, on which it owes $14.87 million. It is meeting its payment schedule, which calls for the loan to be paid off in 2030.

LEAP (Leadership, Education, and Partnership) Academy, a Camden charter school, owes $1.77 million on a $7 million DRPA loan that was partially forgiven in 2002, cutting the school's obligation at that time to $3.4 million. The loan is to be paid off in 2019.

Cooper River Boathouse, a boating and banquet facility owned by the Camden County Improvement Authority, owes almost $800,000 on a $1 million loan it received eight years ago. The county improvement authority also got a $1 million grant from the DRPA for the $6 million boathouse.

The DRPA, which gets its money primarily from tolls on four bridges that link Philadelphia and South Jersey, gave away nearly $500 million over 14 years for projects such as stadiums, concert halls, and museums.

Spending on non-transportation projects has long been a source of controversy for the DRPA. Many motorists complain their tolls shouldn't go for development projects, while some political leaders on both sides of the Delaware River have defended the projects as efforts to boost the region's economy.

Unlike the $500 million in grants, the DRPA's loans were made with the expectation they would be repaid.

Adventure Aquarium, a for-profit venture, inherited a $15 million loan the DRPA made to its predecessor, New Jersey State Aquarium, in August 2003 to help with a $60 million expansion and renovation. The aquarium also received a $3 million DRPA grant.

The loan, with an interest rate of 5.8 percent, required no payments until June 1, 2005.

Since 2005, the aquarium has made quarterly payments of $250,000, with almost all of it going toward interest. Only about $140,000 in principal has been paid.

In September, the quarterly payments are scheduled to jump to $350,000. They are set to rise again, to $450,000, in 2022. The loan is to be retired in 2030.

Kevin Keppel, executive director of the aquarium, said "there is no risk against that loan" going unpaid because the aquarium and its parent company, Herschend Family Entertainment Corp., of Norcross, Ga., are well-financed.

A $3 million loan to convert the old RCA building, just upriver from the aquarium, was made in 2003 to Victor Associates. The money was part of $52 million in financing assembled by developer Dranoff to transform the factory into 341 upscale apartments that overlook the Delaware River with a view of the Philadelphia skyline.

He was to make monthly payments of $23,259 from 2009 until the end of 2014, when he would retire the balance in a lump $2.5 million payment, according to the loan agreement.

But the agreement provided that Dranoff's obligation to make payments was contingent on "available cash flow," and cash flow has been insufficient, Dranoff said last week.

The loan will be repaid by its 2014 due date, he has said.

The DRPA is in "ongoing legal negotiations" with Dranoff over the loan, DRPA spokesman Tim Ireland said.

Dranoff Properties owns and operates nearly a dozen commercial projects in the Philadelphia region and elsewhere, including Victor Lofts; Symphony House, a 31-story condominium building in Center City; 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.

It will break ground next year on a $110 million, 25-story retail-and-residential building near the New Jersey Center for the Performing Arts in Newark.

The loan to LEAP Academy was in addition to a grant of $2 million from DRPA in 2002. The agency forgave half of a 1998 loan to LEAP, cutting that obligation to $3.4 million. The DRPA also lent LEAP Academy $8.5 million through issuance of special-project bonds guaranteed by Rutgers University.

"We are current - and always have been - on the DRPA loan, which goes back to [1998] and will be paid off by August 2019," LEAP Academy chief academic officer Janice Strigh said.

The $6 million Cooper River Boathouse was opened by Camden County in 2006, partially funded by a $1 million grant and a $1 million DRPA loan. The interest rate on the loan is 2 percent, and no payments were required for 3 1/2 years, until May 2008.

The county improvement authority, which is making payments on schedule, owes the DRPA $797,286. The last is due in 2028.

Under the current DRPA board, economic-development loans and grants are a thing of the past, Ireland said.

"As a matter of current and future DRPA policy, 'economic development' means investing exclusively in capital assets owned and controlled by the DRPA and PATCO," he said.

"When the last of the grant money has been spent and the books have been closed on all outstanding loans and loan guarantees, the DRPA will be completely out of the loan and grant business, both in practice and as a matter of policy."