87 Jacobus Ave files Chapter 11 to avoid tax sale foreclosure

By Sarah Lizee

Olympia, Wash., June 8 – 87 Jacobus Ave LLC filed Chapter 11 bankruptcy on Wednesday in the U.S. Bankruptcy Court for the District of New Jersey.

Property developer Lance T. Lucarelli is the managing member of the debtor, which owns about 10.6 acres of undeveloped property in Kearny, N.J.

The debtor recently closed on its purchase of the property from an entity known as Farnow Inc. after executing a contract of sale with Farnow in May 2022.

Farnow had owned the property since the 1960s and used it to manufacture varnishes, alkyds and latexes for paint. As a result of environmental contamination, the property has been the subject of extensive environmental cleanup for almost 40 years.

Lucarelli said in a declaration that the debtor’s goal in purchasing the property was to address all outstanding real estate tax obligations to the town of Kearny, as well as any obligations to the Environmental Protection Agency (EPA), the New Jersey Department of Environmental Protection (NJDEP) and the New Jersey Spill Compensation Fund, all in the context of moving forward with the redevelopment of the property.

When the debtor originally entered into its contract with Farnow in May 2022 for the purchase of the property, the debtor’s efforts to move forward and close the transaction were stalled due to the inability of the EPA and NJDEP to provide necessary information of the amounts required to satisfy their alleged outstanding liens, Lucarelli said.

He said the debtor is now facing a final tax sale foreclosure judgment by Kearny, prompting the Chapter 11 filing to obtain time to satisfy the tax obligations in full, determine the extent and validity of all encumbrances on the property and enable the debtor to move forward with redevelopment.

Lucarelli said that on Oct. 28, 2022, Kearny, the EPA and the NJDEP executed a memorandum of agreement that provides that certain liens would be released in connection with Kearney’s tax foreclosure sale in order to facilitate Kearny’s sale of the sites on the property to a preferred third-party redeveloper free and clear of all liens, and that the EPA and the NJDEP would receive certain benefits in connection with that sale to the third-party redeveloper.

Lucarelli claims that Kearny, the EPA and the NJDEP essentially ignored his and the debtor’s efforts to obtain information because they were financially motivated to proceed under the agreement.

He added that the debtor has been in communication with potential lenders regarding financing and anticipates filing a motion for approval soon.

In its petition, the company listed up to 49 creditors, $50 million to $100 million in debt and $50 million to $100 million in liabilities.

No creditors were listed with unsecured claims of $1 million or more.

Riker Danzig LLP is proposed general bankruptcy counsel and real estate counsel.

The Chapter 11 case number is 23-14955.

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