John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... A judge in the Landmark bankruptcy trial has approved a motion to allow the developer to use $120,899 in cash for day-to-day operations.
The judge also has allowed the developer’ to pay a potential $300,000 “break up fee” to Carmel Landmark LLC, which plans to provide $15 million in financing to the high-rise condo project near Interstate 25 and East Belleview Avenue in Greenwood Village, which filed for Chapter 11 bankruptcy on Aug. 30.
The developer, Zack Davidson also is seeking to continue to retain Denver-based Brownstein, Hyatt, Farber, Schreck as its law firm.
“However, because Brownstein is a very large firms and the Judge and opposing counsel are concerned about possible conflicts, a hearing has been set for September 22, to review the Application for Employment Brownstein ongoing throughout the case,” Landmark developer Zack Davidson told retailers and residents in a letter.
I think Davidson deserves praise for being so transparent and upfront regarding the bankruptcy, which cannot be easy for him.
Far too often, when a a project enters in bankruptcy, often people impacted by it are left in the dark. Sometimes they only learn about developments in the case when a reporter calls them for a comment, or they hire their own lawyer to protect their interests..
Following is a copy of the letter Davidson distributed.
Since our last update on September 4th, our team has been working diligently through the many legal steps associated with Chapter 11. We entered Chapter 11 on August 30, 2009, and there have been 68 items filed in the case, related to everything from the mundane task of address changes; to certificates of mailings to creditors; to the very important tasks of interim orders on the use of cash collaterals and opposing counsels objections; and motions related to the Debtor-in-Possession loan.
If you’re following along side us, either because you are also a creditor and you’re receiving information in the mail, or you’re accessing court documents online through the courts record access system, the sheer volume of filings can seem daunting, surprising or both. Let me assure you that most of these filings are customary and completely par for the course in a reorganization case. There are a few filings that are noteworthy and we’d like to point them out and offer some additional insight.
Statement of Financial Affairs and Summary of Schedules
These two documents were filed with the Court on September 14th. Together they represent our financial status. The Summary of Schedules details all of our assets and liabilities. Assets include The Landmark and The Meridian towers, the retail shops and the additional assets of personal property, deposits on homes, the sales tax rebate agreement with Greenwood Village, retail leases, and office equipment, furniture, etc. The liabilities include secured and unsecured creditors and creditors holding unsecured priority claims. Every asset and every liability is listed in the Summary of Schedules document. The Statement of Financial Affairs details our sources of income and payments from May 31, 2009 through August 30, 2009.
Interim Orders Authorizing Use of Cash Collateral
Judge Michael Romero granted our motion for the interim use of cash collateral to continue day-to-day operations at the community. The interim order is for a specific timeframe, from September 4, 2009, through October 5, 2009. It permits us to use the revenue generated from rent for operating expenses, including our office overhead, building maintenance, warranty work, marketing and public relations. The total approved budget for the 31-day period is $120,899, of which $45,649 is allocated to building maintenance and warranty work. Our hearing for the ongoing budget and DIP financing is schedule for October 1st and 2nd. At this hearing, we will present our case for approval of our Post-Petition Financing, including the DIP Loan.
Carmel Landmark LLC Financing Fee and Employment of Professionals
Other items brought before Judge Romero include a financing fee related to our funding agreement with Carmel Landmark LLC. In an Emergency Motion to Approve Post-Petition Financing Break-Up Fee and Expenses for Carmel Landmark, LLC, our attorneys detailed the necessity of agreeing to pay a fee equal to 2 percent of the maximum amount of the DIP loan, or a total of $300,000, if the DIP loan is not approved by the Court. Known as the “Break-Up Fee,” we believe it is a reasonable fee related to Carmel Landmark’s risk, labor and expenses of executing a loan agreement with us. Judge Romero approved our motion and this means we have finalized the loan agreement with Carmel Landmark. The next step comes at the hearing for Post-Petition Financing, set up for October 1st and 2nd, as mentioned above. Naturally, we anticipate that the issue of Post-Petition Financing will bring out many objections by our creditors, thus the Judge has set aside two days to hear the arguments on both sides.
As for professional employed by Landmark for the case, as noted earlier, we have Court approval to continue our work with Lawscomm for public relations services. We have permission to work with Brownstein, Hyatt, Farber, Scheck, LLP, on an interim basis as well. However, because Brownstein is a very large firms and the Judge and opposing counsel are concerned about possible conflicts, a hearing has been set for September 22, to review the Application for Employment Brownstein ongoing throughout the case. While we don’t know what the outcome will be, we’re hopeful that Brownstein will remain our legal counsel for the duration. The Application to Employ CPH Holdings, LLC, as Financial Advisor was withdrawn and is being amended.
Hearing for Creditors
The first creditors’ meeting is scheduled for October 7th at 9:30 a.m. This meeting is held to give creditors important information including deadlines and proof of claims information. The Chapter 11 filing automatically stays certain collection and other actions against us. This meeting will help to explain that information as well as other information about the process to creditors.
Motion to Close Homes Under Contract to be Filed
We have a full schedule of Court activities in the weeks ahead, however, it is important for us to bring to the Court a motion asking for approval to close homes that are under contract. We have 23 buyers under contract and one reservation, all of whom are anxious to move into The Landmark and The Meridian. We understand from our legal counsel that is very typical for Judges in Colorado to grant the motion to close homes because it is in the best interest of all parties to generate sales that inevitably allow the loans related to the partnership to be paid off. We have also received the approval of Hypo (our largest creditor and primary lender) to begin closing units again, which will be looked upon very favorably by Judge Romero. We are hoping to be able to start closing residences again in October and move new homeowners into our community.
We recognize that many of you are interested in receiving regular updates on the case, and we’ll continue to provide you with information as the case progresses. You can send specific questions to reorg@landmarkresident.com. We’ll aggregate the questions and send out another letter addressing questions you have in the near future. In the meantime, you can access any of the ca
ses records by going to http://pacer.psc.uscourts.gov/cgi-bin/links.pl, the Web site for court cases, getting a login name and password and looking up our case. Our case number is 09-28000. We hope this information is helpful to you.
Contact John Rebchook at JRCHOOK@gmail.com, or 303-945-6865.
Mr. Davidson is to be commended for sure because of his transparency and forthrightness.
There is a situation in Colorado Springs where a developer is behaving just the opposite. Jannie Richardson of Sunshine Development ( owner of Block 18 at Union Station btw). Nearly $17million in liens against her attempt at building a towncenter and facing foreclosure on many of her other properties.
There is Class and then again there is classless…
Mr Davidson is certainly the former… Ms. Richardson ? Well time will tell ….
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