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Storage companies to seek plan approval on July 17

by Allison Collins | Published July 3, 2012 at 6:00 AM

Storage companies GAC Storage El Monte LLC and Makena Great American Anza Co. LLC are set to seek approval of their disclosure statements next month after the scheduled hearing was continued.

Judge Jacqueline P. Cox of the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago is scheduled on July 17 to consider the outlines of the companies' separate reorganization plans. The affiliates seek to schedule an Aug. 9 confirmation hearing.

The disclosure statement hearing was scheduled for June 27 before its continuance for unspecified reasons.

Cox on July 17 is also set to consider a key motion for a third affiliate, GAC Storage Lansing LLC.

Secured lender Branch Banking & Trust Co., owed $4.4 million, seeks relief from the automatic Chapter 11 stay to foreclose on the debtor's assets.

The company is negotiating a deal that would resolve the motion and allow BB&T to credit-bid for the property at an auction. A sale motion had not been filed as of afternoon on Monday, July 2.

Lansing owns a 532-unit self-storage facility in Lansing, Ill.

Nonbankrupt GAC Storage LLC holds a membership interest in the three debtors, court documents show, as well as a fourth debtor, GAC Storage Copley Place LLC, and San Tan Plaza LLC, whose case was dismissed on June 22. All of the debtors aside from San Tan Plaza own storage centers.

GAC Storage, in turn, is part of the portfolio of Las Vegas real estate developer Great American Capital Inc., according to its website.

A series of defaults sent the debtors into Chapter 11 last fall. Copley, El Monte and Lansing filed petitions on Oct. 7, followed by Makena on Dec. 1 and San Tan on Dec. 5. The cases are jointly administered, with Lansing's proceeding as the lead case.

Makena, El Monte and Copley, however, all have proposed separate plans. Lansing has yet to submit a plan.

Makena was started to acquire and develop a shopping center in Torrance, Calif. It sold the property in August 2004 and bought 2.19 acres in Westminster, Calif., to build storage and retail space.

On Sept. 10, 2007, Makena entered into a construction loan agreement with Wachovia Bank NA. The loan, ultimately $15.65 million, matured on Aug. 31, 2010.

Makena also borrowed $850,000 from Overland Financial Co. LLC on Feb. 5, 2009, to complete the property. The note matured on May 5, 2009.

The company has been in litigation with certain contractors over alleged construction defects the debtor says led to flooding and hindered its ability to turn the construction loan into a permanent loan before it matured. Wachovia declared a default on Sept 7, 2010, and accelerated the loan. Makena tried to work something out with the bank so the property wouldn't be sold, but the company eventually sought Chapter 11 protection to try to reorganize its financial affairs and pursue its construction litigation.

Under the company's reorganization plan, filed May 1, guarantors of the construction loan will contribute $275,000 to a construction litigation fund. The guarantors may also make additional equity contributions in exchange for the company's reorganized equity, court documents show.

Wachovia's secured claim would be reduced to $10.75 million and paid over seven years with a blended 4.9% interest rate. The bank could also receive a one-time $500,000 principal payment from proceeds of the construction litigation.

The company would pay the $230,000 it owes to Orange County, Calif., for real estate taxes over six years with 4% interest.

Other secured claimholders, owed $80,0000, would be paid in full.

General unsecured creditors, owed $1.2 million, could elect to receive a pro rata share of net cash flow or a pro rata share of fixed monthly payments of $8,333 over the repayment term of the Wachovia loan.

Under El Monte's plan, meanwhile, also filed May 1, administrative claims and priority claims would be paid in full.

Wachovia would be paid $8.5 million over a seven-year period with a blended 4.9% interest rate.

Other secured claims would be paid in full.

Unsecured creditors owed $1,500 or less would be paid 50% of their claim 60 days after the effective date.

General unsecured creditors, including Wachovia for a deficiency claim, would either receive a pro rata share of the company's net cash flow, or monthly payments of $6,666 until the secured loan matures, for an estimated 10% recovery.

An entity linked to Ronnie Schwartz, secretary of Great American Capital, would own the reorganized El Monte. Outside investors also could have stakes in the vehicle.

El Monte took out an $11.9 million construction loan from Lehman Brothers Holdings Inc. and built 1,171 storage units in a 121,900-square-foot building. On Feb. 28, 2008, the company refinanced its loan through a $12.65 million loan from Wachovia, court documents show. El Monte defaulted on the loan on Sept. 8, 2010, and a receiver was appointed by the Supreme Court of the State of California in Los Angeles. Receiver William J. Hoffman controlled the property until shortly after the petition date.

Copley, the third debtor with a plan, was founded on March 27, 2007, to develop 3.9 acres in San Diego into a property with two buildings with 112,000 square feet of storage space.

The company entered into a construction loan agreement with Bank of America NA for $10.24 million. Construction was completed in 2008, with 1,000 storage units and 38 recreational vehicle spaces.

The construction loan was supposed to mature on April 13, 2009. The company planned to convert it to a permanent loan but couldn't because of the economic downturn. The bank agreed to modify the loan to extend the maturity date to Dec. 13, 2011, and reduce the loan amount to $10.03 million, court documents show. As part of the modification agreement, Copley agreed to make quarterly principal payments of $62,500. It made two payments but could make no further payments.

The bank then initiated a foreclosure action on July 27.

Under the plan, filed March 30, Schwartz would be issued new equity interests in exchange for an equity contribution that would fund either a $385,000 payment reserve or a $1 million lump sum payment.

Administrative claims and priority claims would be paid in full.

General unsecured creditors would receive a pro rata share of $10,000 60 days after the effective date.

BofA would receive monthly payments of principal and interest at 4% for the first four years and 5% until the seventh year, when the loan would mature. Schwartz would contribute $385,000 to fund the bank's interest payments for one year.

The bank could also elect to have its claim reduced by the $1 million. In that case, it would receive the lump sum from Schwartz plus accrued interest at the nondefault rate, followed by monthly payments of principal and interest at 4.5%.

Schwartz's Great American Capital is the manager of DMSI LLC, which owns 74% of GAC Storage, court documents show.

Other secured claims, estimated at $30,183, would be paid in full.

Equity interests would be canceled and reissued to Schwartz's company.

Cox approved the disclosure statement for the plan on May 24. A confirmation hearing is set for Aug. 8.

The final debtor, San Tan, owned an undeveloped property in Chandler, Ariz. Its case was dismissed on June 22 after Bank of America NA, owed $1.96 million, asserted the debtor's only interest was in an undeveloped parcel of real estate and it had no hope of reorganization, court documents show. BofA said in the motion that San Tan filed for Chapter 11 just to delay foreclosure.

Lead debtor Lansing listed assets of $624,473 and liabilities of $4.57 million in schedules filed Nov. 10.

Debtor counsel Robert M. Fishman and Gordon E. Gouveia of Shaw Gussis Fishman Glantz Wolfson & Towbin LLC did not immediately return calls for comment.

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Storage companies to seek plan approval on July 17

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