Mon 03/27/2023 18:24 PM
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Relevant Document:
Notice of Second Amendment to APA

Judge Michelle Larson today delivered a bench ruling confirming the Edgemere debtors’ plan and approving the sale of substantially all of their assets to Bay 9 Holdings. The court overruled all unresolved plan and sale objections with the exception of the official committee of unsecured creditors’ objection to the plan’s proposed $1.5 million cap on fees for estate professionals incurred from Dec. 1, 2022, through the plan’s effective date. On that issue, Judge Larson withheld her ruling to allow time for the debtors, the UCC and UMB Bank, which serves as bond trustee, DIP lender and initial plan sponsor, to continue working toward a consensual resolution in advance of a status conference set for April 4 at 3 p.m. ET.

Judge Larson first addressed the proposed sale, including issues concerning adequate assurance of Bay 9’s future performance under the debtors’ ground lease with Intercity Investment Properties Inc., or ICI. In approving the sale, the court observed that Bay 9 has substantial backing from its sponsor, Lapis Municipal Opportunities Fund IV LP, including $55 million in funding on top of a $2.4 million deposit to fund the $48.5 million purchase price, leaving nearly $9 million to fund the purchaser’s operations upon closing; a $15 million permanent capital commitment; and a three-year $1 million capital commitment to fund unanticipated rent shortfalls.

The court further noted the financial wherewithal, experience and diligence of Bay 9, Lapis and its affiliates and Bay 9’s proposed manager for The Edgemere, concluding that Bay 9 demonstrated by a preponderance of the evidence that it will be able to meet its obligations under ICI’s lease.

Overruling ICI’s objections and request for additional protection in the form of additional commitments such as a deposit or guaranty, the court stated that Lapis’ existing commitments go “above and beyond” addressing the concerns raised by ICI. However, the court directed Bay 9 to notify ICI of any sponsor commitment failures and required the sponsor to provide a limited rent backstop tied to unused rent commitment funds.

Turning to confirmation issues, Judge Larson reviewed the major elements of the plan, including the proposed sale and the settlement with Lifespace Communities Inc. providing for approximately $160 million in contributions for the benefit of the debtors’ current and former residents and bondholders, noting that it was the culmination of negotiations over numerous alternatives by the stakeholders.

Judge Larson then overruled confirmation objections from former broker David Steven Donosky, ICI and the U.S. Trustee. The court determined that Donosky’s broker agreement is distinct from ICI’s lease and not required to be assumed in connection with the lease. In overruling the remaining confirmation objections, Judge Larson ruled that, among other things, the plan properly classifies and values UMB’s secured claim, which was given a market test through the sale process; there is no evidence that the debtor will be unable to pay administrative expenses; the plan is feasible; the modifications included in the fourth amended plan do not need to be resolicited; and the releases included in the plan are appropriate.

The court concluded the ruling by providing suggestions for revisions to the proposed confirmation order and thanking the parties for their hard work and professionalism, stating that the sale of The Edgemere and the plan’s confirmation are “in the very best interests” of the community and its residents.
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