Tarragon Corp. sought bankruptcy protection Monday as part of a proposal to give the New York builder of apartments and condominiums to creditors in exchange for a reduction in debt.

Should the proposal be accepted by creditors and by the U.S. Bankruptcy Court in Newark, N.J., Tarragon would be taken over by its debtholders, including Taberna Capital Management LLC, a subsidiary of the real estate investment trust Rait Financial Trust.

"We're in the wrong business right now," Tarragon's chief executive officer, William S. Friedman, said in a telephone interview.

"The losses that we have incurred in the last three years have eaten up our capital."

Tarragon cited falling home prices, slower sales, and tightening credit.

Mr. Friedman said it has lost $300 million in the last three years, mostly because of declining prices for condos and townhouses.

In its Chapter 11 petition, Tarragon listed assets of $840.7 million and debt of between $500 million and $1 billion.

It also sought protection for 19 units, including Tarragon Development Corp., which listed assets of as much as $100 million and debt of as much as $500 million.

Tarragon Corp. said its biggest unsecured creditor was Taberna, which is owed $126 million. Other creditors whose debt is not backed by collateral include AJD Construction Co., which is owed $2.9 million, and Omni Boys North Ltd., which is owed $1 million.

Mr. Friedman said he and other company officers are owed about $40 million and have offered to exchange that debt for equity in the reorganized company.

An affiliate of Israel's Arko Holdings Inc. agreed to provide financing to help keep the company operating during bankruptcy, Tarragon said.

The company said that it expects to negotiate a consensual reorganization with creditors, and that it did not expect to pay equity holders once it leaves bankruptcy.

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