North Philadelphia Health System's bankruptcy has put a nearly $13 million LGBTQ-friendly affordable-housing project planned by Project HOME near Girard Medical Center in jeopardy, Project HOME officials said.

Project HOME, a nonprofit led by Sister Mary Scullion that has developed 714 units of housing for people who have been homeless or are at risk of homelessness, had agreements to buy five pieces of land from NPHS before the bankruptcy filing on Dec. 31. The bankruptcy froze those deals. As the clock ticks, Project Home is in danger of losing $11 million in construction financing.

To go through with the sales for $1.75 million or even to reject the agreements, NPHS needs permission from U.S. Bankruptcy Judge Magdeline D. Coleman. NPHS wants to do neither. It wants to wait, arguing in a court filing last week that it "should be afforded maximum flexibility to deal with its financial affairs in this large and complex Chapter 11 proceeding."

"We are fully supportive of Sister Mary Scullion's efforts," Lawrence G. McMichael, a Dilworth Paxson lawyer representing NPHS, said in an interview Friday. "We have to get the highest value for the creditors. We think the deal with Sister Mary Scullion probably represents the highest value for the creditors, but there is a process we have to go through."

The uncertainty, driven in part by unsecured creditors owed $29 million, has put Janet Stearns, Project HOME's vice president of real estate development and asset management, on edge.

Since last May, Stearns and other Project HOME officials have been working on the project at North Eighth and West Thompson Streets. Much of the land is now used as a parking lot. The organization spent nearly $1 million on engineers, architects, and lawyers to get to this point, Stearns said.

The first phase of construction would be a four-story building at 1315 N. Eighth St., with 30 one-bedroom apartments for young adults age 18 to 25. The second phase would be a five-story, $14 million building with 40 apartments at 1301 N. Eighth St.

Project HOME has lined up a $3 million state grant, $3.5 million from the city, and $4.5 million in private money, comprised of low-income housing tax credits and bond financing secured through the Pennsylvania Housing Finance Agency, but those agreements will expire at the end of August if Project HOME has not bought the land by then, Stearns said. Project HOME also plans to contribute $1.7 million of its own money.

NPHS argued in its filing that it should not have to decide whether to pursue the real estate sale to Project HOME now because the sale will not help improve the organization’s remaining, money-losing operations at 801 W. Girard Ave. NPHS runs a 65-bed psychiatric hospital and a methadone treatment center there. In April, it sold the shuttered St. Joseph’s Hospital at 16th Street and West Girard Avenue for $8.1 million.

Selling the parcels to Project HOME could hurt the sales process — for the business or for the real estate alone — that is underway. “NPHS should not be rushed into making a decision that could require it to forgo potentially more beneficial options,” which could include the sale of all the real estate to one buyer. “It could also eliminate or significantly reduce the interest of a prospective operator for the business if access to the 73-space parking lot on the site is lost,” NPHS said.

McMichael said NPHS met Thursday with a potential buyer who was willing to carve out the parcels for Project HOME.

A hearing on the matter is scheduled for June 7.

Stearns said she is dismayed at the prospect of having to start over with the project at another location.

“It feels like Sisyphus pushing the boulder up the hill on one of these projects,” she said “Here, we pushed this boulder for a year up this giant hill, and it’s on the pinnacle. It’s really tragic if we’re watching it fall down and smash instead of just being able to build some beautiful housing.”