On May 13, 2021, Camden, New Jersey’s Ground Up Incorporated real estate development company filed for Chapter 11 bankruptcy after mounting debts overtook its assets.
Ground Up markets itself as “a team of Camden residents that revitalizes struggling cities through the purchase of distressed, Tax Lien and foreclosed residential, commercial, and mixed-use properties” — repairing properties and providing “sustainability enhancements” before converting them to “high and low-income” rental properties and commercial units.
However, the company has found itself in a difficult financial position, as it’s now facing municipal and tax liens on 13 of its properties in Camden — liens which come to a total of $867,750 spread between seven creditors.
In contrast, Ground Up’s bankruptcy filing lists only $100,000–$500,000 in total assets.
The company’s largest debt of $400,000 is owed to the American Heritage Federal Credit Union — which holds liens against nine of Ground Up’s properties on Camden’s Mt. Ephraim Avenue and Haddon Avenue.
The liens placed on Ground Up’s properties point towards the difficult financial hurdles that community revitalization efforts face in struggling communities around the country.
Municipal liens are filed by municipal companies against a debtor’s property — as opposed to being filed by an aggrieved contractor — while tax liens are placed on a property by government entities for the amount of a debtor’s unpaid taxes.
However, the company is likely to be able to restructure itself. Chapter 11 bankruptcy — known as “reorganization” bankruptcy — allows a debtor to avoid full liquidation of its assets by developing a plan to reorganize its debts and pay its creditors over time while maintaining its operations.
Ground Up’s bankruptcy filing notes that its legal representatives are in the process of negotiating terms of future payment with its creditors and are preparing reaffirmation agreements in order to structure these future payments.
Ground Up’s business model is connected to multiple aspects of development, economic sustainability
Ground Up’s business model reflects the goal of revitalisation that has driven many residents and businesses of Camden over the past decade.
The company’s website emphasizes the importance of community involvement in its operations:
“We mainly rely on nonprofit groups and leaders to assist in the creation of sustainable community restoration plans and provide support and education to community members,” the website states.
The nature of Ground Up’s business model also emphasizes cooperation and direct collaboration with the city of Camden. There is a significant socio-economic range in which the company operates as a developer, as it notes that it has “strategically modernized and managed over 20 residences, including luxury lofts, duplexes, and housing designed to comply with government assistance programs such as Section 8.”
Though acquiring and developing “distressed” property is the main aspect of Ground Up’s business as listed in its own overview, the company also has divisions to focus on property management and business development and planning.
As part of an “economic growth plan,” Ground Up also has established new businesses at its properties in Camden, focusing on sustainability in the city’s economic growth — claiming that it has “developed comprehensive business plans and marketing strategies for all of the businesses it has materialized in order to help them maintain long-term success.”
Some of these businesses have themselves been impacted by liens — for example, two separate liens have been placed on the company’s Upscale Hair Braiding Salon.
The company adds that “Through advanced integration efforts, [it] aims to help communities maintain growth by educating and supporting members in their goal of raising their quality of life and sense of culture…With help from donations and strategic financial partnerships.”
Economic and cultural revitalisation has been a focus for city of Camden in the last decade
Ground Up’s efforts to restructure itself are especially notable given the importance of such organisations to Camden’s revival and future development. According to data from the 2010 US Census, 42.5% of the city’s population was thought to be below the poverty line. The city’s median household income at that time was $21,191 — the lowest number out of cities surveyed as part of the census.
Due to these issues, revitalisation is a major focus for community officials in the area. In 2013, Camden County United Way president Michael Moynihan spoke about the difficulties facing the community.
“There are some pockets of real progress and there are some very visible neighborhood transformations that have occurred,” Moynihan said. “There are other neighborhoods that still have whole blocks of boarded up or long-vacant houses that serve as places for squatters, for drug users, for all sorts of risky behaviors.
Recent developments have shown promise for Camden’s growth, however. On May 19, 2021, the city was awarded $390,048 by the U.S. Department of Housing and Urban Development to provide emergency housing vouchers to its residents as part of the American Rescue Plan. The previous day, the city allocated $20,900 to support city transit and $24,000 to support regional highway planning.
Additionally, a 2021 effort run by Camden residents and funded by the Bloomberg Philanthropies is seeking to turn six illegal dumping sites around Camden — an issue that has long plagued the city — into art installations, with hopes to boost city pride and economic development.
Further boding well for the city’s efforts at revitalisation, the 2020 US Census showed that poverty rates had fallen to 36.4% with median income of $27,015.
However, even during this period of long-term growth, the COVID-19 pandemic has slowed development — the rate of permits for newly-built properties in Camden fell 5.6% from the first quarter of 2020 to the first quarter of 2021.
“Our lowest-income Americans are spending more on housing and transportation than they’re taking in each month…Building transit and affordable housing alongside each other can be transformational for communities and families.”
US Secretary of Transportation Pete Buttigieg
Construction in Camden could get a boost from government infrastructure spending
Camden’s focus on socio-economic improvement may be able to reverse the slight fall in new development and get companies like Ground Up back on track with the help of rising government infrastructure spending. President Biden’s American Jobs Plan, a proposed bill that would provide over $2 trillion for projects to improve infrastructure, could see funds directed towards Camden projects in a similar fashion to that of the American Rescue Plan.
Recent comments by US Secretary of Transportation Pete Buttigieg emphasized the importance of affordable housing and public transportation — both focuses of Camden’s recent public works spending — amidst community revitalisation, noting that “Our lowest-income Americans are spending more on housing and transportation than they’re taking in each month…Building transit and affordable housing alongside each other can be transformational for communities and families.”
The American Jobs Plan would specifically allocate $213 billion in federal funding and tax credits in an effort to create or repair 2 million affordable homes, as President Biden and Democratic leaders assert that housing is a fundamental part of infrastructure.
Another bill introduced in May 2021 aims to further strengthen the federal government’s commitment to affordable housing. Proposed by Minnesota Senator Amy Klobuchar, the Housing Supply and Affordability Act would organize $1.5 billion in government grants for distribution to communities which are looking to implement comprehensive housing policy plans.
A focus on these types of housing plans would prioritise community-focused organisations such as Ground Up, and encourage coalitions between such organisations and local governments — while also providing local governments resources to combat obstacles to new construction such as discriminatory zoning regulations.
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“Across the country, it is unacceptable that families must struggle to keep a roof over their heads,” Klobuchar noted. “The Housing Supply and Affordability Act is a bipartisan solution that will provide grants to help communities identify their housing challenges, improve affordability, and implement unique solutions to expand their housing supply.”
Stay tuned for further coverage on the American Jobs Plans possible effects for contractors and the construction industry in the near future.