by Allison Collins | Published January 3, 2012 at 3:48 PM
Apartment complex owner Summer View Sherman Oaks LLC would sell its property to fund its reorganization plan.
Summer View is set for a Jan. 11 hearing on the disclosure statement for the plan, according to debtor counsel Terry Shaylin of Karasik Law Group LLP.
Summer View, which does business as Summer View Sherman Oaks Apartments LLC, owns a 169-unit apartment complex with four buildings in Sherman Oaks, Calif. The property has covered parking, a gated entrance, a fitness center, two swimming pools and basketball and tennis courts, court documents show. The occupancy rate as of Nov. 15 was 84%.
Under the debtor's plan, filed Nov. 15, Summer View would seek to sell its property for $21 million before September 2012, court documents show.
Administrative claims would be paid in full.
U.S. Bank NA's secured $18.12 million claim would be paid through installments of $78,584 until the property were sold. If the property were sold before April 2014, the buyer would assume the mortgage loan to avoid prepayment penalties.
Summer View would repay the $12,078 claim of E Rojas Landscape Inc., secured by mortgage liens, through 12 quarterly installments without interest.
Unsecured creditors, owed $24,339.32, would be paid in full through eight quarterly installments.
The Efim Sobol Family Trust, sole owner of the debtor, would retain its interests and receive the balance of the sale proceeds after all other creditors were paid in full. Eighty-eight-year-old Sonia Sobol controls the trust, court papers show.
U.S. Bank filed an objection to the disclosure statement on Dec. 28, asserting it is in discussions with Summer View, and if the talks were successful, the company would file an amended plan. The lender did not elaborate on what the discussions entail. U.S. Bank also argued Summer View did not sufficiently describe certain parts of the plan.
Summer View filed for Chapter 11 bankruptcy protection on Aug. 15 in the U.S. Bankruptcy Court for the Central District of California in Woodland Hills to halt a foreclosure sale.
The company has since been operating with use of its cash collateral. Judge Alan M. Ahart of the Woodland Hills court on Dec. 5 approved interim use of the funds. A final cash hearing has not been scheduled, Shaylin said.
According to court papers, the quality of Summer View's management decreased when Riverstone Management Co. took over maintenance of the property. Riverstone acquired former manager Stratus Real Estate Inc. in 2007.
Summer View wasn't allowed to change its management without permission from lender Wachovia Bank, from which it had borrowed $16 million to acquire the property, according to court documents.
Under Riverstone's management, the property's occupancy rate dropped below 90% for the first time since 2005. The occupancy decrease resulted in a decline in revenue at the same time operating expenses were increasing (but not from capital improvement), Summer View asserted.
Sobol got permission from Wachovia to replace Riverstone with Mashcole Property Management in December 2009. Mashcole, however, "failed to competently manage the property," according to court documents, and the occupancy rate dropped further.
Mashcole missed a loan payment in December 2010, and the company received a notice of default on Feb. 25, 2011, court documents show. Sobol then turned to the former president of Stratus, who had formed a new property management company, Cirrus Asset Management Inc. The president, Steven Heimler, said Cirrus could seamlessly take over property management because of his familiarity with the property, court documents show.
U.S. Bank, which acquired the loan from Wachovia on March 22, 2011, denied the request to change management companies, however, and had Clyde Holland of Holland Residential Inc. in Vancouver, Wash., appointed as receiver on April 28, court documents show.
When Holland took over, the company reported $28,000 in security deposits were missing and that Mashcole had collected some rent payments and not reported them to Summer View. U.S. Bank informed Summer View on July 28 that Holland planned to sell the property. The foreclosure sale was scheduled for Aug. 16, which prompted the debtor's petition.
Ahart granted Summer View's Sept. 7 motion for Holland to turn over the property and appoint Cirrus as the management company on Oct. 5, court documents show.