Developer who didn't repay loans gets New Jersey tax credits

AP News
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Posted: Mar 22, 2015 1:35 PM

CAMDEN, N.J. (AP) — State tax incentives to boost New Jersey's poorest city are being heralded as a major piece of a turnaround plan after decades of economic despair, corruption and crime. But after a string of revitalization efforts with dubious results, Camden is staking part of its future on a company that failed to deliver on past promises.

Roizman Development, Inc., a Pennsylvania firm headed by a big-time political donor, is receiving millions from two New Jersey agencies to renovate low-income housing it has owned for decades despite owing more than $6 million on a previous unpaid state government loan. The firm also backed out of a pledge to sell other homes he owns in Camden to tenants for $1.

The company's latest project comes with a hefty price tag: The deal, mostly funded by government loans or subsidies, works out to $324,000 per home, four times the cost of a typical one for sale in Camden.

Company president Israel Roizman, who is receiving a $7.6 million developer's fee in the deal, refused to answer questions about it. He also did not respond to an email with detailed questions.

Camden, a former industrial dynamo across the Delaware River from Philadelphia, is now a city of 77,000 where nearly 40 percent of residents live in poverty, one-third of adults lack high school degrees, and there's virtually no middle class.

Under Gov. Chris Christie, a Republican who may be preparing to run for president and who visits Camden often, the state has taken control of the schools, the county government has taken over policing the city, and the state is using generous tax credits to try to persuade businesses to move in.

Roizman was the first developer to take advantage of incentives aimed at creating low-income housing in the city under the state's 2013 Economic Opportunity Act.

The $57 million deal to renovate 175 homes is funded by a mix of federal tax credits, a federal loan and a $26 million state construction loan. The project includes state tax credits that were approved last year for up to $13.4 million over 10 years.

The loans will be repaid from rent — $946 for a two-bedroom unit and $1,348 on a three-bedroom — that is subsidized and guaranteed by the federal Section 8 housing program.

The deal troubles Kelly Francis, president of the Camden branch of the NAACP, who questioned why the government is shelling out so much for privately owned housing.

"You've owned property for 20 years," he said, "Why would you need $100,000" — the rough cost for each home's renovation — "when you are responsible for maintaining that property?"

Without those subsidies developers might not provide homes for low-income people, said Marc Pfeifer, assistant director of the Bloustein Local Government Research Center at Rutgers University and a consultant on parts of the Economic Opportunity Act.

"With the costs of housing, some subsidies are necessary," Pfeifer said. "Engaging the private sector seems to be a good approach that complements publicly owned and operated housing."

Roizman, who owns affordable housing developments from Buffalo, New York, to Fort Lauderdale, Florida, has contributed $800,000 to federal candidates and political action committees over the years and nearly $100,000 to New Jersey campaigns. While he has supported mostly Democrats, Roizman also contributed to Republican causes — including $10,000 to the Republican Governors Association in October 2013, just before Christie became its chairman, and another $10,000 last year when Christie was at the helm.

Roizman bought more than 250 properties scattered around an area south of downtown Camden in the late 1980s and early 1990s, renovated them with the help of publicly financed loans and rented them with government subsidies.

In a loan agreement with the New Jersey Home Mortgage Finance Agency, he said he planned to sell some of them, which he called the Camden Townhouses, for $1 each to the tenants after 15 years.

"Everybody is screaming that low-income people cannot afford to own their own home," Roizman told The Philadelphia Inquirer in 1992. "Here is a way for them to own their own home with the help of the state and private investors. That's what makes this project special."

But when the 15-year mark arrived, the sales didn't happen. Some tenants sued and a federal judge ruled in 2012 the promise was not a contract and the company could not be bound to it.

John Murray, director of multifamily lending the New Jersey Housing and Mortgage Finance Agency, said the Camden Townhouses ran into problems after the initial 15-year Section 8 contract on them expired. When that happened, the residents were given vouchers for housing that they could use elsewhere. Many moved.

Roizman's company had to reduce rents to attract new tenants who were not using subsidies, and that hurt the project's bottom line just as a $2 million balloon payment was due, Murray said. The payment was not made, and the state said Roizman also owes more than $4 million in interest on it.

"The agency is continuing to work with Mr. Roizman on an equitable work-out and/or settlement to resolve this delinquency situation," spokeswoman Tammori Petty said in an email.

She would not say whether the company was current on a previous mortgage on the group of properties that is receiving the makeover, the Broadway Townhouses; $14.6 million in liens also were rolled into the financing for the new deal, according to an Economic Development Authority memo.

Those liens are far more than the appraised value of the homes, which was around $9 million before the renovations.

Reached by phone, Roizman would not answer questions about the deal.

"I'm developing 175 units of housing in Camden. You have a problem with that, go speak to somebody else, not me," he said. "Your job is not to ask me any questions."

Timothy Lizura, chief operating officer and president of the EDA, said the deal is justifiable. He said his agency did not find any problems with Roizman, and said that the latest housing rehabilitations are being done under a different business entity than the previous ones.

"When you're redeveloping an area," Lizura said, "you need to have modern housing stock that is available and suitable to all income levels."

Residents of some of the Roizman homes said the management company is responsive if not perfect, and several moved to another property for a few months so workers could overhaul the homes. They came back to new tile floors, wiring, furnaces, windows and kitchens, among other changes.

"It's nice now. Before, no good," said Eddie Martinez. "Before, a lot of rats."

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Horwitz reported from Washington.

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