Fri 03/04/2022 14:04 PM
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The Bridgemoor at Plano Chapter 11:

Relevant Documents:
Voluntary Petition
List of Largest Unsecured Creditors
DIP Financing Motion
Cash Collateral Motion
Bond Trustee Objection
First Day Hearing Notice





















Summary
BSPV was formed in May 2018 to acquire, own, develop and operate The Bridgemoor at Plano, a 31.5-acre independent senior luxury apartment community with 318 apartment units
Seeks $1 million in DIP financing from DCJ Capital LLC, an affiliate of the debtor’s equity sponsors, and the use of cash collateral
Project under construction, with debtor projecting completion by this summer
Bond trustee Huntington National Bank filed a limited objection in the case and says it is evaluating whether completion of the project or a sale would yield the highest recovery for bondholders and other creditors

BSPV-Plano LLC, which was organized to develop, construct, own, finance and operate a 318-unit senior living community in Plano, Texas, known as The Bridgemoor at Plano, filed for chapter 11 protection on March 1 in the Bankruptcy Court for the Eastern District of Texas. The “‘55+’ Independent Senior Luxury Apartment Community” is projected to be complete by this summer and is worth “upwards” of $80 million, but once “completed and stabilized” will have a value of more than $120 million, according to the debtor. Prepetition, the bond trustee and bondholders had negotiated but never finalized a potential forbearance agreement, which included discussions regarding a shortfall of funds to complete construction.

The developer-debtor had provided $1.5 million of the shortfall, and bondholders said that they would agree to the forbearance after the debtor funded the remaining shortfall, which in December 2021 was estimated to be approximately $750,000. The bankruptcy filing is accompanied by a motion for $1 million junior secured debtor-in-possession financing provided by DCJ Capital LLC, an affiliate of the debtor’s equity sponsors.

The debtor is the borrower of $66.8 million of Series 2018 senior living revenue bonds issued by the New Hope Cultural Education Facilities Corp. in connection with the development of Bridgemoor. Huntington National Bank, as bond trustee, issued a notice in June 2021 saying that BSPV was in default on its obligation to pay monthly interest and principal payments on the bonds and had not deposited any funds to pay interest and principal on the bonds since November 2020.

In an objection filed in the bankruptcy case, the bond trustee says that some of the construction delays were outside of the debtor’s control but that some were a result of “mismanagement.” Nevertheless, the bond trustee says that it has attempted to work with the debtor to complete the project by not exercising remedies.

The bond trustee notes that on Feb. 17, the debtor informed it that the construction budget agreed to with the trustee’s installed project manager was short $2 million. The bond trustee also asserts that one of the debtor’s principals failed to execute a construction completion guaranty “even though the Debtor represented in the offering statement for the Bonds that such a guaranty would be in place,” making the debtor’s assurances that the project would be completed “meaningless.”

The bond trustee says that one of the debtor’s principals “repeatedly and publicly” assured the bond trustee and bondholders that he would personally cover cost overruns. The bond trustee says that it is not permitted under the bond documents to use funds that constitute collateral to cover the construction costs.

Nevertheless, the bond trustee says, the debtor has demanded use of these funds. Huntington stresses that it is “unclear” if completing the project will benefit bondholders, and so it is hiring an expert to evaluate the project to determine whether its completion or a sale “in its current state” would yield the highest recovery for bondholders and other creditors.

The bond trustee’s objection focuses on the debtor’s intention to move tenants to the project “as soon as this week,” saying that “[n]o prudent debtor would move seniors into an active construction site that it does not know it will ever be able to complete.” The bond trustee contends that because no tenants have moved in prepetition, it would be out of the ordinary course of business to do so now, requiring a motion by the debtor to move in tenants.

The first day hearing has been scheduled for Monday, March 7, at 3 p.m. ET.

The company reports $50 million to $100 million in both assets and liabilities. The company’s prepetition capital structure includes:

  • Secured debt:

    • New Hope Cultural Education Facilities Finance Corp. revenue bonds: $66.8 million outstanding:

      • Senior living promissory note senior Series 2018A dated Jan. 8, 2019: $50.5 million original principal amount.

      • Senior living promissory note taxable senior Series 2018B dated Jan. 8, 2019: $6.8 million original principal amount.

      • Senior living promissory note subordinate Series 2018C dated Jan. 8, 2019: $5 million original principal amount.

      • Senior living promissory note junior subordinate Series 2018D dated Jan. 8, 2019: $4.5 million original principal amount.






The senior living promissory notes have different interests and priorities regarding collateral. The bond trustee has a first-priority lien against certain of the debtor’s funds, including a project fund with $6.2 million intended for the development and buildout of the project. The project fund is in the possession of and under the control of the issuer, New Hope Cultural Education Facilities Finance Corp., but otherwise belongs to the debtor.

The issuer also holds other “additional funds belonging to the debtor,” according to the debtor’s cash collateral motion. The issuer froze the project fund in January 2021 because of delays and overruns in construction of the project, after which the debtor financed the project through $6.9 million in investments from its indirect equity holders.

Construction of the project began in January 2019 and was slated for completion in June 2020 but was stymied by inclement weather including the “2021 freeze” that led to delays. These delays were exacerbated by the Covid-19 pandemic, causing “extraordinary supply chain issues and shortages in construction materials and supplies, as well as available labor.” The city of Plano and other regulatory agencies’ temporary closure also resulted in “significant delays” regarding inspections and permits.

The project is more than 85% complete and is now projected to be completed in June 2022, with 40 units available for immediate occupancy, according to the debtor.

The debtor is represented by Munsch Hardt Kopf & Harr in Dallas. The case has been assigned to Judge Brenda T. Rhoades (case No. 22-40276).

Background

BSPV was formed in May 2018 to acquire, own, develop and operate The Bridgemoor at Plano, a 31.5-acre independent senior luxury apartment community with 318 apartment units. The development is adjacent to a golf course known as Pecan Hollow, along with a 13-acre park along Rowlett Creek, which encompasses a pond, dog park, gazebo and creekside fishing. The community is also close to restaurants, shopping, a DART line and “lively entertainment venues.” The debtor characterizes the project as “a premiere property in Plano” that is “expected to be a generator of significant additional business,” and notes that the project is financed in part with tax-exempt bonds “due to the importance of the Project to the city and the country.”

This community is marketed to independent seniors and offers a variety of one- and two-bedroom floor plans comprising 156 cottage-style units in 22 stand-alone buildings as well as 162 units contained in a single elevator-serviced three-story apartment building with a subterranean garage with 194 leased parking spaces and a 10,000 sq. ft. clubhouse, with a requirement that a certain percentage of units must be leased at a discounted rate to meet affordability criteria.

The debtor says that its equity sponsors have more than 80 years of real estate development, construction and management experience regarding more than 50 commercial apartment developments including over 35,000 units, primarily in Texas.

The debtor's largest unsecured creditors are listed below:































































10 Largest Unsecured Creditors
Creditor Location Amount
JM Lawncare & Sprinkler LLC Highland Village, Texas $    131,570
Oldham Lumber Co. Dallas 118,738
Regent Construction Fort Worth, Texas 91,646
AGES Service Co. Inc. Southlake, Texas 75,600
Landstar Excavation Inc. Lewisville, Texas 74,187
Zais Cos. Decatur, Texas 50,000
Slates Harwell LLP Dallas 45,012
Paradis Brothers Construction Inc. Southlake, Texas 37,360
Southwest Enclosure Systems Inc. Carrollton, Texas 34,965
Centex Skilled Trades LLC Crowley, Texas 30,760

The case representatives are as follows:







































Representatives
Role Name Firm Location
Debtor's Counsel Thomas D. Berghman Munsch Hardt Kopf & Harr Dallas
Davor Rukavina
Jay H. Ong
Counsel for Huntington
National Bank
Karl D. Burrer Greenberg Traurig Houston
Kevin J. Walsh Boston
Charles W. Azano

DIP Financing Motion / Cash Collateral Motion

The debtor requests the use of cash collateral and also seeks approval of $1 million in DIP financing ($500,000 on an interim basis) from an entity affiliated with the debtor’s equity sponsors, DCJ Capital LLC, to be used for administrative costs, other expenses and as a “standby” if more funds are needed than projected in the cash collateral budget and as a “bridge” while the debtor obtains the project funds. The cash collateral would be used first, before the DIP loan, to complete the development of the project. According to the DIP financing motion, the DIP lender is “potentially an insider.”

The debtor seeks the use of cash collateral on an interim basis through March 31 and thereafter for an additional three-month period. Without the use of cash collateral to complete the project, the debtor says it will not realize market leasing rates and may not be able to obtain the necessary permitting and certificates of occupancy, and the project “will be seen as a failure and a blight to the community and will not be able to attract tenants.”

Even a short delay, including if the issuer forecloses on the collateral, the debtor says, would result in costs and delays and “inevitably lead to a market perception of the Project that will, for a long time, seriously affect its prospects and its rental rates.”

The debtor proposes adequate protection in the form of replacement liens and superpriority administrative expense claims.

The DIP financing bears interest at 4.5% with interest only pending maturity. The DIP loan matures on Dec. 31, with an “option to extend for [an] additional year under negotiation.”

To secure the DIP financing, the debtor proposes to grant a first-priority lien on unencumbered assets and a junior lien on encumbered assets. The DIP lender would not have a lien on avoidance actions. The debtor stresses that it is “not seeking to prime or prejudice the Issuer and its collateral.”

The facility includes a $2,500 origination fee and $500 administrative and legal fee.

The carve-out for professional fees and U.S. Trustee fees is “under negotiation.”

The debtor’s four-week and 13-week cash flow is HERE.

Other Motions

The debtor also filed various standard first day motions, including the following:


 

  • Motion to pay employee wages and benefits

    • The motion states that although the debtor already made its most recent payroll for the period ending on Feb. 28, because certain employees are paid in arrears, the debtor may owe accrued and unpaid wage obligations to these employees. The debtor says it believes that unpaid withholding obligations generally are held in trust by the debtor and are therefore not property of the estate.

    • “Accordingly, the Debtor does not believe that it needs authority to remit such payments to the appropriate third parties. Out of an abundance of caution, however, the Debtor seeks authority to remit the accrued, unpaid Withholding Obligations to the respective third-party payees and to continue to honor and process the Withholding Obligations after the Petition Date in the ordinary course of business and consistent with historical practices,” the motion adds.



  • Motion to extend time to file schedules to April 11

  • Motion to provide utilities with adequate assurance

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