George Washington Bridge Bus Station Development Venture LLC
CASE SUMMARY: George Washington Bridge Bus Station Developer to Sell Assets After Years of Delays, Litigation with Contractor Tutor Perini
Tue 10/08/2019 11:24 AM
Relevant Documents:
Voluntary Petition
First Day Declaration
DIP Financing Motion
First Day Hearing Agenda
New York-based George Washington Bridge Bus Station Development Venture, the lead developer of a public/private venture renovation and improvement project for the George Washington Bus Station, located at the east end of the George Washington Bridge, which is owned and operated by the Port Authority of New York and New Jersey, filed for chapter 11 protection on Monday in the Bankruptcy Court for the Southern District of New York. The debtor seeks to sell substantially all of its assets.
In the first day declaration of BAK Advisors principal Bernard Katz, who serves as the debtor’s manager, Katz says that contractor Tutor Perini caused “years” of delays on the project, which the debtor anticipated “would cost $183 million and take one year to complete.” The prolonged delays landed the debtor and Perini in a lengthy arbitration proceeding and precipitated a foreclosure action commenced by senior secured lender George Washington Bridge Bus Station and Infrastructure Development Fund against the debtor in July, culminating in a public foreclosure sale scheduled for Oct. 17. Through Houlihan Lokey as investment banker, the debtor says it “intends to conduct a thorough post-petition marketing process of no more than 135 days,” Katz writes, “thereby providing significant opportunity for interested bidders to formally bid for the Debtor’s assets and business operations.”
To facilitate the sale process, the debtor also requests approval of $4.4 million in DIP financing from New York City Regional Center, LLC, an affiliate of the debtor’s senior secured lender, George Washington Bridge Bus Station and Infrastructure Development Fund, LLC.
The first day hearing has been scheduled for Thursday, Oct. 10, at 11 a.m. ET.
The debtor has $93.5 million in assets and $133 million in liabilities. The company’s prepetition capital structure includes approximately $105 million in principal of outstanding funded debt, including:
GSNMF Sub-CDE 12 LLC, LIIF Sub-CDE XXVI, LLC and DVCI CDE XIII, LLC are the building lenders, which were formed to make qualified low-income community investments with respect to a New Markets Tax Credit Program, with GSB NMTC Investor LLC as administrative agent.
The debtor’s largest secured claims are listed as follows:
A diagram of the debtor’s debt investment structure, including the flow of the building loans and direct loan is HERE.
The George Washington Bridge Bus Station and Infrastructure Development Fund, LLC senior secured loan is guaranteed by non-debtor GWB Development Partners LLC.
Pursuant to intercreditor agreements, “(x) any lien on the Prepetition Collateral securing the Senior Secured Loan Obligations shall have priority over and be senior in all respects and before any lien on the Prepetition Collateral securing any UMEZ Loan Obligations or Building Secured Loan Obligations and (y) any lien on the Prepetition Collateral securing the UMEZ Loan Obligations shall have priority over and be senior in all respects and before any lien on the Prepetition Collateral securing any Building Secured Loan Obligations (other than the liens pertaining to the FoodCo Building Loan Obligations, which such FoodCo Building Loan Obligations shall rank first and prior to the UMEZ Loan Obligations).” In addition, “the UMEZ Loan Obligations and the Building Loan Obligations are subordinated in right of payment to the Prepetition Senior Loan Obligations.”
“As a result of thirty (30) months of delays by Tutor Perini,” Katz explains, the debtor incurred “millions of dollars” of unanticipated costs for interest on loans and additional project carrying costs. Once Perini’s contractual deadline to complete the project had lapsed, the debtor began withholding funds from each of Perini’s progress payments as liquidated damages under the construction contract, which the debtor applied to debt service, delay charges to the Port Authority, additional architect and engineering costs, legal fees and lease penalties. Perini disputed the debtor’s entitlement to withhold the funds, resulting in the commencement of an American Arbitration Association, or the AAA, arbitration proceeding by the debtor against Perini. Subsequently, Perini filed an answering statement and counterclaim against the debtor asserting $130 million of damages.
Later in the proceeding, Perini filed an application for a preliminary injunction and interim order of attachment. An interim order was entered on June 4 granting the interim attachment order request in the amount of $23 million against any “EB5 funds, funds paid by the Port Authority and/or net lease payments in the possession of the [Debtor].” The debtor says it is unable to satisfy the attachment or its debt service obligations to the senior secured lender, under which the debtor defaulted on April 10. Due to Perini’s “efforts to deprive the Debtor of its cash,” the debtor is also struggling to pay critical contractors and trade vendors.
The debtor is represented by Cole Schotz as counsel, Sills Cummis & Gross as special corporate counsel and Houlihan Lokey as investment banker. The case has been assigned to Judge Shelley C. Chapman (case no. 19-13196).
Background
The debtor is the developer for a renovation and improvement project for the George Washington Bridge Bus Station, which is a commuter bus terminal located at the east end of the George Washington Bridge in the Washington Heights section of New York City. The project was structured as a public/private venture between the Port Authority and the debtor, and included relocating bus terminals to the third floor of the complex, increasing the number of gates and creating a retail center. The Port Authority approved a $183.2 million plan in 2011, construction began in 2012 and was completed in May 2017. The debtor was also granted a 99-year lease to operate the retail space, and after “significant construction delays,” the debtor began leasing operations in the retail portion of the bus station on Aug. 1, 2017.
As of the petition date, 67 days of evidentiary hearings had been conducted in the arbitration proceeding during which Perini “put on its entire case-in-chief,” while the debtor says it has yet to present its case, as, after Perini’s case-in-chief was complete, the debtor’s construction counsel withdrew its representation. “Tutor Perini took advantage of the Debtor’s vulnerability,” the debtor claims, and filed for a preliminary injunction and order of attachment. An interim order was entered on June 4 granting Perini’s request for an order of attachment in the amount of $23 million against any “EB5 funds, funds paid by the Port Authority and/or net lease payments in the possession of the [Debtor].”
Perini then petitioned to confirm the interim attachment order in the U.S. District Court for the Southern District of New York. On July 22, the district court entered a judgment granting Tutor Perini’s petition to confirm the interim attachment order. On Oct. 3, the AAA issued an order holding that the debtor (i) willfully violated the interim attachment order (ii) transferred funds subject the interim attachment order to one of its principals for the payment of legal fees and expenses and (iii) wrongfully transferred net rental income received to the senior secured lender. When the interim attachment order was entered, on July 19, 2019, the senior secured lender commenced a foreclosure action against the debtor in New York state court. Given the debtor’s default, it was obligated to notify the current tenants of the retail space that all current and future rent payments were to be deposited into a lockbox, and “a majority” of the debtor’s tenants now pay rents directly to the senior secured lender.
“Prior to the Petition Date, the Debtor maintained approximately $350,000 in cash from rents received on the Project which, with the consent of the Senior Secured Lender, the Debtor used to pay pre-petition expenses,” the debtor says.
The debtor’s corporate organizational structure is as follows:
(Click HERE to enlarge)
The debtor's largest unsecured creditors are listed below:
The case representatives are as follows:
DIP Financing Motion
The debtor seeks $4.4 million in DIP financing ($1.2 million on an interim basis) from the New York City Regional Center, LLC, an affiliate of the debtor’s senior secured lender, George Washington Bridge Bus Station and Infrastructure Development Fund, LLC. There is no proposed rollup. The debtor stresses that substantially all of its assets are encumbered in its existing capital structure. “Under the proposed financing, the DIP Lender has agreed to prime its own pre-petition collateral, eliminating many of the concerns applicable in contested priming cases,” the debtor adds. The DIP financing would also have superpriority administrative expense claim status. The debtor proposes a lien on avoidance actions subject to the final order.
The DIP financing bears interest at 10% (payable in kind until maturity), with a default rate of 10.75%, and matures five months after the petition date.
The facility includes various fees, including: an origination fee of the lesser of 2% and $50,000 and an exit fee of the lesser of 3% of the maximum amount of DIP commitments and $75,000.
In support of the proposed DIP financing, the debtors filed the declaration of manager Bernard Katz of BAK Advisors, who states that the debtor did not receive any interest from third-party financial institutions for DIP financing.
Adequate Protection
The prepetition secured parties consent to the use of cash collateral. The company proposes the following adequate protection to its prepetition secured parties: replacement liens, superpriority administrative expense claims and reimbursement of fees, costs and expenses.
In addition, subject to the final order, the debtor proposes a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).
The carveout for professional fees of the debtor, Bernard Katz as independent member of the debtor or any official creditors’ committee is $200,000. In addition, professional fees of a creditors’ committee may not exceed $375,000 for the duration of the case.
DIP Budget
The proposed budget for the use of the DIP facility is HERE.
DIP Milestones
The DIP financing is subject to the following milestones:
The sale milestones are as follows:
The plan milestones are as follows:
Other Motions
The debtor also filed various standard first day motions, including the following:
Voluntary Petition
First Day Declaration
DIP Financing Motion
First Day Hearing Agenda
| Summary |
| Debtor is the developer of a public/private venture renovation and improvement project for the George Washington Bridge Bus Station in New York |
| Attributes filing to “years” of delays caused by contractor Tutor Perini, leading to entry of $23 million interim attachment order in favor of Perini and foreclosure action commenced by the debtor’s senior secured lender |
| Seeks to sell substantially all of its assets through a marketing process “of no more than 135 days” and $4.4 million in DIP financing from senior secured lender affiliate |
New York-based George Washington Bridge Bus Station Development Venture, the lead developer of a public/private venture renovation and improvement project for the George Washington Bus Station, located at the east end of the George Washington Bridge, which is owned and operated by the Port Authority of New York and New Jersey, filed for chapter 11 protection on Monday in the Bankruptcy Court for the Southern District of New York. The debtor seeks to sell substantially all of its assets.
In the first day declaration of BAK Advisors principal Bernard Katz, who serves as the debtor’s manager, Katz says that contractor Tutor Perini caused “years” of delays on the project, which the debtor anticipated “would cost $183 million and take one year to complete.” The prolonged delays landed the debtor and Perini in a lengthy arbitration proceeding and precipitated a foreclosure action commenced by senior secured lender George Washington Bridge Bus Station and Infrastructure Development Fund against the debtor in July, culminating in a public foreclosure sale scheduled for Oct. 17. Through Houlihan Lokey as investment banker, the debtor says it “intends to conduct a thorough post-petition marketing process of no more than 135 days,” Katz writes, “thereby providing significant opportunity for interested bidders to formally bid for the Debtor’s assets and business operations.”
To facilitate the sale process, the debtor also requests approval of $4.4 million in DIP financing from New York City Regional Center, LLC, an affiliate of the debtor’s senior secured lender, George Washington Bridge Bus Station and Infrastructure Development Fund, LLC.
The first day hearing has been scheduled for Thursday, Oct. 10, at 11 a.m. ET.
The debtor has $93.5 million in assets and $133 million in liabilities. The company’s prepetition capital structure includes approximately $105 million in principal of outstanding funded debt, including:
- Secured debt:
- George Washington Bridge Bus Station and Infrastructure Development Fund, LLC: $72 million plus interest
- Building Loans: $19.1 million plus interest
- Direct Loan (GWB Leverage Lender, LLC): $9 million plus interest
- Upper Manhattan Empowerment Zone Development Corporation: $4.8 million plus interest
- Equity: GWB Development Partners, LLC (91%) and Marketplace GWB, LLC (9%) are members of the debtor.
GSNMF Sub-CDE 12 LLC, LIIF Sub-CDE XXVI, LLC and DVCI CDE XIII, LLC are the building lenders, which were formed to make qualified low-income community investments with respect to a New Markets Tax Credit Program, with GSB NMTC Investor LLC as administrative agent.
The debtor’s largest secured claims are listed as follows:
A diagram of the debtor’s debt investment structure, including the flow of the building loans and direct loan is HERE.
The George Washington Bridge Bus Station and Infrastructure Development Fund, LLC senior secured loan is guaranteed by non-debtor GWB Development Partners LLC.
Pursuant to intercreditor agreements, “(x) any lien on the Prepetition Collateral securing the Senior Secured Loan Obligations shall have priority over and be senior in all respects and before any lien on the Prepetition Collateral securing any UMEZ Loan Obligations or Building Secured Loan Obligations and (y) any lien on the Prepetition Collateral securing the UMEZ Loan Obligations shall have priority over and be senior in all respects and before any lien on the Prepetition Collateral securing any Building Secured Loan Obligations (other than the liens pertaining to the FoodCo Building Loan Obligations, which such FoodCo Building Loan Obligations shall rank first and prior to the UMEZ Loan Obligations).” In addition, “the UMEZ Loan Obligations and the Building Loan Obligations are subordinated in right of payment to the Prepetition Senior Loan Obligations.”
“As a result of thirty (30) months of delays by Tutor Perini,” Katz explains, the debtor incurred “millions of dollars” of unanticipated costs for interest on loans and additional project carrying costs. Once Perini’s contractual deadline to complete the project had lapsed, the debtor began withholding funds from each of Perini’s progress payments as liquidated damages under the construction contract, which the debtor applied to debt service, delay charges to the Port Authority, additional architect and engineering costs, legal fees and lease penalties. Perini disputed the debtor’s entitlement to withhold the funds, resulting in the commencement of an American Arbitration Association, or the AAA, arbitration proceeding by the debtor against Perini. Subsequently, Perini filed an answering statement and counterclaim against the debtor asserting $130 million of damages.
Later in the proceeding, Perini filed an application for a preliminary injunction and interim order of attachment. An interim order was entered on June 4 granting the interim attachment order request in the amount of $23 million against any “EB5 funds, funds paid by the Port Authority and/or net lease payments in the possession of the [Debtor].” The debtor says it is unable to satisfy the attachment or its debt service obligations to the senior secured lender, under which the debtor defaulted on April 10. Due to Perini’s “efforts to deprive the Debtor of its cash,” the debtor is also struggling to pay critical contractors and trade vendors.
The debtor is represented by Cole Schotz as counsel, Sills Cummis & Gross as special corporate counsel and Houlihan Lokey as investment banker. The case has been assigned to Judge Shelley C. Chapman (case no. 19-13196).
Background
The debtor is the developer for a renovation and improvement project for the George Washington Bridge Bus Station, which is a commuter bus terminal located at the east end of the George Washington Bridge in the Washington Heights section of New York City. The project was structured as a public/private venture between the Port Authority and the debtor, and included relocating bus terminals to the third floor of the complex, increasing the number of gates and creating a retail center. The Port Authority approved a $183.2 million plan in 2011, construction began in 2012 and was completed in May 2017. The debtor was also granted a 99-year lease to operate the retail space, and after “significant construction delays,” the debtor began leasing operations in the retail portion of the bus station on Aug. 1, 2017.
As of the petition date, 67 days of evidentiary hearings had been conducted in the arbitration proceeding during which Perini “put on its entire case-in-chief,” while the debtor says it has yet to present its case, as, after Perini’s case-in-chief was complete, the debtor’s construction counsel withdrew its representation. “Tutor Perini took advantage of the Debtor’s vulnerability,” the debtor claims, and filed for a preliminary injunction and order of attachment. An interim order was entered on June 4 granting Perini’s request for an order of attachment in the amount of $23 million against any “EB5 funds, funds paid by the Port Authority and/or net lease payments in the possession of the [Debtor].”
Perini then petitioned to confirm the interim attachment order in the U.S. District Court for the Southern District of New York. On July 22, the district court entered a judgment granting Tutor Perini’s petition to confirm the interim attachment order. On Oct. 3, the AAA issued an order holding that the debtor (i) willfully violated the interim attachment order (ii) transferred funds subject the interim attachment order to one of its principals for the payment of legal fees and expenses and (iii) wrongfully transferred net rental income received to the senior secured lender. When the interim attachment order was entered, on July 19, 2019, the senior secured lender commenced a foreclosure action against the debtor in New York state court. Given the debtor’s default, it was obligated to notify the current tenants of the retail space that all current and future rent payments were to be deposited into a lockbox, and “a majority” of the debtor’s tenants now pay rents directly to the senior secured lender.
“Prior to the Petition Date, the Debtor maintained approximately $350,000 in cash from rents received on the Project which, with the consent of the Senior Secured Lender, the Debtor used to pay pre-petition expenses,” the debtor says.
The debtor’s corporate organizational structure is as follows:
(Click HERE to enlarge)
The debtor's largest unsecured creditors are listed below:
| 10 Largest Unsecured Creditors | |||
| Creditor | Location | Claim Type | Amount |
|---|---|---|---|
| Tutor Perini | Philadelphia | Litigation Claim |
$23,000,000 |
| GSNMF Sub-CDE 12 LLC c/o Goldman Sachs Bank USA |
New York | Loan | 19,065,000 (5,000,000 secured) |
| GWB Leverage Lender, LLC | Reston, Va. | Loan | 9,000,000 |
| Zetlin & DeChiara LLP | New York | Professional Services |
945,782 |
| SJM Partners, Inc. | Reston Va. | Loan | 898,682 |
| FTI Consulting, Inc. | Boston | Professional Services |
578,847 |
| DTI | Dallas | Trade | 430,951 |
| STV Incorporated | Douglassville, Pa. | Trade | 418,595 |
| Goldberg & Banks, PC | Pikesville, Md. | Professional Services |
227,088 |
| Construction Claims Group | Cedar Knolls, N.J. | Trade | 203,832 |
The case representatives are as follows:
| Representatives | |||
| Role | Name | Firm | Location |
|---|---|---|---|
| Debtor's Counsel | Michael D. Sirota | Cole Schotz | New York |
| Felice R. Yudkin | |||
| Ryan T. Jareck | |||
| Mark Tsukerman | |||
| Rebecca W. Hollander | |||
| Debtor's Investment Banker |
N/A | Houlihan Lokey | N/A |
| Debtor's Special Corporate Counsel |
N/A | Sills Cummis & Gross |
Newark, N.J. |
| Debtor's Manager | Bernard A. Katz | BAK Advisors | Newtown, Pa. |
| Counsel to GSNMF Sub-CDE 12 |
Neil S. Faden | Manatt, Phelps & Phillips |
New York |
| Counsel to New York City Regional Center |
Matthew S. Barr | Weil, Gotshal & Manges |
New York |
| Heather A. Viets | |||
| David J. Cohen | |||
| Counsel for UMEZ | Rishi Kapoor | Venable | New York |
| Michael C. Phillipou | |||
| Counsel for the Port Authority |
Jay M. Goffman | Skadden, Arps, Slate, Meagher & Flom |
New York |
| Christine A. Okike | |||
| Counsel for Tutor Perini |
Robert Nida | Nida & Romyn | Los Angeles |
DIP Financing Motion
The debtor seeks $4.4 million in DIP financing ($1.2 million on an interim basis) from the New York City Regional Center, LLC, an affiliate of the debtor’s senior secured lender, George Washington Bridge Bus Station and Infrastructure Development Fund, LLC. There is no proposed rollup. The debtor stresses that substantially all of its assets are encumbered in its existing capital structure. “Under the proposed financing, the DIP Lender has agreed to prime its own pre-petition collateral, eliminating many of the concerns applicable in contested priming cases,” the debtor adds. The DIP financing would also have superpriority administrative expense claim status. The debtor proposes a lien on avoidance actions subject to the final order.
The DIP financing bears interest at 10% (payable in kind until maturity), with a default rate of 10.75%, and matures five months after the petition date.
The facility includes various fees, including: an origination fee of the lesser of 2% and $50,000 and an exit fee of the lesser of 3% of the maximum amount of DIP commitments and $75,000.
In support of the proposed DIP financing, the debtors filed the declaration of manager Bernard Katz of BAK Advisors, who states that the debtor did not receive any interest from third-party financial institutions for DIP financing.
Adequate Protection
The prepetition secured parties consent to the use of cash collateral. The company proposes the following adequate protection to its prepetition secured parties: replacement liens, superpriority administrative expense claims and reimbursement of fees, costs and expenses.
In addition, subject to the final order, the debtor proposes a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).
The carveout for professional fees of the debtor, Bernard Katz as independent member of the debtor or any official creditors’ committee is $200,000. In addition, professional fees of a creditors’ committee may not exceed $375,000 for the duration of the case.
DIP Budget
The proposed budget for the use of the DIP facility is HERE.
DIP Milestones
The DIP financing is subject to the following milestones:
- Sale Professional Retention Application: Filed five business days of petition date
- Final DIP Financing Order: Entered within 30 days of petition date
- Sale Professional Retention Order: Entered within 30 days of petition date
The sale milestones are as follows:
- Bid Procedures Motion: Filed within 30 days of petition date
- Bid Procedures Order: Entered within 60 days of petition date
- Auction: Within 135 days of petition date
- Sale Order: Entered within 140 days of petition date
- Sale Consummation: Within 150 days of petition date
The plan milestones are as follows:
- Plan / Disclosure Statement: Filed within 60 days of petition date
- DS Order: Entered within 95 days of petition date
- Plan Solicitation: Commenced within 100 days of petition date
- Plan Confirmation: Within 140 days of petition date
- Plan Consummation: Within 150 days of petition date
Other Motions
The debtor also filed various standard first day motions, including the following:
- Motion to Pay Independent Contractors
- The debtor does not have any employees, but rather uses independent contractors and/or consultants, of which five individuals are "critical" and the subject of the motion. As of the petition date, the debtor estimates that it owes approximately $43,462 for accrued and unpaid compensation, all of which would be due within the first 21 days of the case. The debtor also estimates that it owes up to $1,500 in prepetition expenses.
- Motion to Maintain Insurance Programs
- Motion to Provide Utilities with Adequate Assurance
- Motion to Extend Deadline to File Schedules to Nov. 4
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