OCEAN PLACE: Resort Files for Chapter 11 in New Jersey

(Troubled Company Reporter - Feb. 18, 2011)

The TCR reports that Ocean Place Development LLC, owner of the Ocean Place Resort & Spa in Long Branch, New Jersey, filed for Chapter 11 protection (Bankr. D. N.J. Case No. 11-14295) on Feb. 15, 2011.

William R. Dixon, JR., vice-president of TLC New Jersey Corp., a Delaware corporation, manager of the Debtor, relates that the Debtor has generated positive earnings from operations every year since its acquisition of the resort in 2000. Like many similar properties, the economic declines from 2007 through April 2010 severely harmed revenues and the net operating income from the property. However, since April 2010, revenues have begun to recover and "trailing 12 months" net operating income of the property has more than doubled. Net operating income of the property for 2010 was $3,546,729.

In connection with city of Long Branch's long-term plan to establish itself as a premier resort destination, the Debtor signed a Redevelopment Agreement with the city in August 2007, promising to add 60 new hotel rooms, 200 condo-hotel units and increase square footage of the property to 1,496,163 square feet. The redevelopment would make Ocean Place Resort "the centerpiece of the entire Long Branch Oceanfront Redevelopment and the largest oceanfront resort and conference center on the New Jersey shore between New York City and Atlantic City," Mr. Dixon said.

Dispute with Lender

The Debtor owes $56,606,400 pursuant to two promissory notes held by AFP-104 Corp, secured by the Debtors' resort property. The Debtor also has unsecured debts totaling $60 million.

The secured notes matured and became due on Jan. 9, 2008. The lender refused to grant an extension at maturity of the secured loans and immediately imposed late payment penalties and the default rate of interest, approximately doubling the required debt service payments.

From inception of the secured loans, operating expenses for the property under the terms of the loan documentation have been paid from a "lockbox" under the control of the Lender and its loan servicer.

"Within the last several weeks, the Lender has refused to approve the payment of property and liability insurance premiums from the lockbox for coverage placed by the Debtor beginning on December 1, 2010, which leaves the property and the Debtor severely exposed to loss from possible property damage and liabilities incurred in operating the business," Mr. Dixon said.

According to Mr. Dixon, prior and subsequent to the date of maturity of the secured loans, OPD solicited a full refinance of the secured obligations from over 100 prospective lenders without success due to the withdrawal of virtually the entire lending community from the business of making commercial loans triggered by the global financial meltdown and economic chaos.

Accordingly, the Debtor sought Chapter 11 protection.

"There is substantial value to the existing hotel and resort including the modest value-added improvements which could be made to the property prior to consideration of the value of major redevelopment opportunities," Mr. Dixon said.

First Day Motions

The Debtor has filed "first day" motions aimed at maintaining existing operations at the property and full employment of its employee base in a manner such that "resort guests will generally be unaware of any operational changes or any change in conditions due to the contemplated financial reorganization of the Debtor."

The first day motions include proposals to use cash collateral, maintain existing bank accounts, and pay wages owed to employees.

About Ocean Place Development

Ocean Place Development owns the Ocean Place Resort & Spa, a resort property is located on the Atlantic beachfront in Long Branch, New Jersey, just 55 miles south of New York City and
82 miles north of Atlantic City.

The existing resort is sited on 17-acres featuring approximately 1,000 feet of ocean frontage and is improved with a 254-room hotel that includes 40,000 square feet of meeting space, three restaurants, a bar/lounge, a full-service spa, and numerous resort
amenities.

West Paces Hotel Group LLC is the resort's managing agent.
The number of people employed full time at the Debtor's property ranges, depending on the season, between approximately 95 and 340.