Metro Homes Halts Major Project

12/21/2007 Update:

Geibel and Company declared “in default”

Pressure is growing on Hoboken developer Metro Homes. When Dean Geibel first told Asbury Park officials he would have to halt construction on the Esperanza high-rise condo tower they expressed sympathy for his plight. Now that they know Geibel is not shutting down any of his other projects, they’ve changed their tune. The Asbury Park Press reports the city notified Metro Homes it is now in default in violation of their legal redevelopment agreement. The APP quoted Mayor Kevin Sanders:

“If the reason for Metro Homes’ decision was the slowdown in the national real estate market, then why are they building in other towns? I know that this administration has kept its commitment to Metro Homes and done everything possible to make this project a success.”

hoboken-metro-homes-esperanza-dean-geibel.jpg

The Mayor is annoyed that Geibel pulled the plug on the Esperanza, but continues to build the MetroStop in Hoboken, Trump Plaza Jersey City, and other projects.

No performance bond

One reason why Geibel is able to stop work so quickly is because he did not have to put up a performance bond to protect the city in the event of his default. Had Asbury Park forced Metro Homes to put up millions to ensure he would follow through on the project some say he may have though twice about halting construction. This is particularly noteworthy considering the decision the Hoboken City Council made last week to accept a bid from S. Hekemian Group to purchase and develop the Municipal Garage.

While Trammel Crow Residential offered slightly more money for a smaller building, it did not put up the required $2.6 million bid bond to protect the interests of city taxpayers. S. Hekemian did post the bid bond in strict accordance with the city’s request for proposals. Now if they walk away from Hoboken, the taxpayers get to keep their $2.55 million dollar deposit.

In light of Geibel’s move, Asbury Park Councilman Ed Johnson said that he is going to insist that performance bonds be posted for future projects that would offset the city’s losses if development falls through.

30-day Deadline to revive project

The APP reported:

According to the letter Geibel received Wednesday, the city said Metro Homes was in default because it stopped work unilaterally and taking that step showed it is unable to finance and construct the Esperanza, where work on the lower three stories was in progress. The builder will now fail to meet deadlines and time frames to complete the building, and was obligated to make its best effort to construct the project, the city said. It also asserted that the redeveloper failed to inform the city of a change in its financial condition or its capacity to construct the project until Dec. 7.

“It is apparent from the timing and the course of these events that (the) redeveloper has, for a period of time, had information regarding its inability to proceed,” the letter said, yet did not share that information with city officials until moments before the stop work order was given.

There is more to the story in this article from the Asbury Park Press.

12/11/2007:

One of Hoboken’s biggest developers is getting hit by the credit crunch. Dean Geibel’s Metro Homes is shutting down all construction at the 224-unit Esperanza high rise condo tower in Asbury Park. The Asbury Park Press reports Geibel said Metro Homes is halting sales “Until such time market conditions allow us to move forward and successfully complete this important luxury beachfront development.” Geibel told the paper he is “convinced that the national mortgage crisis now impacting real estate markets around the country represents a temporary setback.”

A former bond trader, Geibel started Metro Homes with Paul Fried and made a name for the company building several mid-rise infill projects in Hoboken, including The Oz at Newark and Adams and The Belmont at 711 Clinton. A few years ago Metro started to take on much larger projects, including the controversial Metrostop high rise, as well as Gulls Cove in Jersey City and the Esperanza. The largest of these projects is Trump Plaza in Jersey City. With one tower under construction and rumors it could be years before a planned second tower is built. Trump’s name is on it for marketing purposes, but Metro is the builder of what will be New Jersey’s tallest residential building.

hoboken-metro-homes-esperanza-dean-geibel.jpg

Pictures of the somewhat odd, boat-shaped Esperanza (designed by Hoboken architect Dean Marchetto) are in the windows of many Washington Street real estate offices, so if you or someone you know may be one of about 70 people who signed sales contracts. Geibel told the Asbury Park Press deposits will be held in escrow, though people may start demanding their money back if this project ends up going the way of the failed C-8 condo project that preceded it. Esperanza was to be built on the site of the infamous steel skeleton that haunted Asbury Park for 17 years after the last real estate boom went bust. They say those who ignore history are doomed to repeat it.

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38 Comments on "Metro Homes Halts Major Project"

moe
Member

Just to clarify – a performance bond is not a bid bond similar to the hoboken garage.

In the garage case, the objections to the bid bond was that there was no recourse for the bidder (other than losing the bond) if the redevelopment agreement could not be finalized. Most interested parties did not bid, and Trammell Crow qualified their bid without the bond due to this primary issue. How many people would put 10% down on a major purchase without having a final contract or even mostly final contract? Would you trust the city to negotiate in good faith given their current history and legal track record (i.e. favor friends and litigate to the end of time)? Heck, the contract had no contingencies for what happens if the city cannot vacate within 24 months, and since there is no new site for the garage, that is a pretty likely option.

Also, performances bonds usually exist to allow either completion or complete destruction of a project so the city is not stuck with an eyesore or a hazard if the building is not finished by the original builder. Does anyone know if hoboken does this with construction projects in town?

YipYap
Member
Homeworld, I will agree that they can challenge it in court, but that does not mean that the town cannot void the contract, there will be penty of appeals on this. From the papers, Senate hearings begin today. EnCap investigation nearly finished An 11-month probe into the troubled EnCap project by state Inspector General Mary Jane Cooper is nearly complete, and the findings will soon be released, according to a letter from Cooper’s office obtained by The Record. “The [Office of Inspector General] is in the process of drafting a detailed and thorough report,” Cooper wrote Tuesday in a letter to Senate President Richard Codey, D-Essex. “The report will discuss the role played by the various governmental entities, as well as the use of public funds.” Cooper’s letter asks Codey to postpone planned Senate hearings into EnCap until the report is released. The Senate Legislative Oversight Committee is slated to hear testimony Dec. 13 from agencies that approved funding for the 785-acre landfill-to-housing project, which is in default and has been virtually stalled since February. Postponing the hearing until the report’s release, Cooper said, would provide better context for the public and allow the lawmakers to focus on key areas of the EnCap saga. What’s next • The Senate Legislative Oversight Committee is slated to hear testimony Dec. 13 from agencies that approved funding for the EnCap project, which is in default and has been virtually stalled since February. But the state’s inspector general has asked that the hearing be… Read more »
homeworld
Member

From the newspaper:

“Whether or not the Lyndhurst Board of Commissioners can actually terminate the agreement with a resolution remains to be seen. North Arlington has not had much luck getting rid of EnCap. In October, a judge denied the borough’s motion that the agreement be terminated. North Arlington is seeking termination on the basis that the developer breached the contract.”

The New Jersey Meadowlands Commission would have to terminiate the agreement.

rag246
Member
rag246

[quote comment=”57957″]less 0% credit card offers showing up in the mail and so on and so on.[/quote]

Well, we got that going for us, which is nice.
:mrgreen:

honcho
Member
honcho

They won’t lend to a developer unless that firm has a strong balance sheet…..

doubt very much Metrohomes in that category

applies to individuals as well…that’s why they are all bailing out of subprime….if you need a loan banks won’t lend

if you don’t and are a great credit risk they are more than happy to provide financing

marginal borrowers cut out and the definition of marginal….

used to be subprime…now it Alt A and some former Prime types constantly changing

for the worse…

just wait till they have to put Hoboken University Hospital on the market in a couple of years….

then taxes in this town get really ugly

Chop!Chop!
:mrgreen:

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