South Florida Condo Developer Tarragon Files Chapter 11 Bankruptcy

The latest domino to fall. Tarragon was apparently caught up in the current perfect storm of bad timing, falling sales, lack of available credit and a sharp drop off in the housing sector.

Tarragon Corp. is the latest homebuilder to be hit by the housing crisis.

The company and 19 of its subsidiaries filed for Chapter 11 bankruptcy reorganization in New Jersey federal court on Monday.

Tarragon has developed four condominium projects in Jacksonville that include Bishop’s Court at Windsor Parke, Cobblestone at Eagle Harbor, Mirabella and Montreux at Deerwood Lake, none of which are sold out, according to the company’s Web site. Tarragon also owns four apartment communities, including Club at Danforth, River City Landing, Vintage at Plantation Bay and Woodcreek at Regency.

The estimated number of creditors is between 5,001 and 10,000. Assets have been estimated at about $841 million and liabilities at about $1.035 billion, court records show.

The three largest unsecured creditors are listed as New York-based Taberna Capital Management ($125.9 million), New Jersey-based AJD Construction Co. ($2.9 million) and Fort Lauderdale-based Omni Boys North Ltd. ($1.03 million).

Tarragon CEO William S. Friedman did not return a phone call for comment.

The firm has been an active developer of multifamily housing for rent and sale in Florida, Texas, Tennessee and the Northeast.

The bad news for Tarragon stockholders: The company said it does not expect there will be any distribution to equity holders in conjunction with the bankruptcy cases. Shares (NASDAQ: TARR) dropped from a dime to a nickel on the news.

The filing shouldn’t come as a surprise to anyone who has followed the recent fortunes of the firm, which included steady losses – more than $105 million for the first nine months of the year – bargain sales of assets, shareholders suits, deposit forfeiture on land deals, compliance trouble with NASDAQ, margin calls on the stock of the chairman and his wife, and the company’s inability to secure long-term financing.

Tarragon said it had a commitment for debtor-in-possession financing from an affiliate of ARKO Holdings, an Israeli public company, and said the bankruptcy filing shouldn’t have any day-to-day effect on Tarragon’s property management subsidiary, or on the operation of its rental apartment properties.

Friedman said in a release that, based on discussions with unsecured note holders and the support of ARKO, he expects to structure a consensual plan with the creditors to preserve the value of its property management and development platforms, and maximize any return to creditors.

The Tarragon board is being advised by Lazard, and Friedman said in the company news release that the board did not rule out additional asset sales and “all available alternatives.”

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