In re Club Associates
| Decision Date | 18 September 1989 |
| Docket Number | Bankruptcy No. 87-01356 |
| Citation | 107 BR 385 |
| Parties | In re CLUB ASSOCIATES, a Georgia Limited Partnership, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
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Mark S. Kaufman, J. James Johnson, Long, Aldridge & Norman, Atlanta, Ga., for debtor.
Joseph Scott Jacobson, Holt, Ney, Zatcoff & Wasserman, Atlanta, Ga., for Vinland Property Trust.
This matter is before the court on Debtor's Second Amended Plan of Reorganization filed January 19, 1989 (hereinafter the "Plan"). Debtor's Second Amended Disclosure Statement was approved by order entered February 7, 1989. Consolidated Capital Realty Corporation (hereinafter "CCRI")1 objects to confirmation of the Plan. A hearing on confirmation of the Plan commenced after due notice March 13, 1989. The presentation of evidence continued March 14, March 15, March 17, March 29, and April 20 (hereinafter the "Confirmation Hearings"). Closing arguments were heard June 13, 1989.
Debtor Club Associates (hereinafter "Club") filed its voluntary Chapter 11 petition February 23, 1987.2 Club has two general partners, Club One Investors (hereinafter "Club One") and Club Two Investors (hereinafter "Club Two"). The sole limited partner of Club is Collins Powell, who holds one-tenth of a one percent interest in the limited partnership. Club was formed in 1984 for the purpose of acquiring, owning, and operating the Tahoe Club Apartments in DeKalb County, Georgia, a 652-unit complex (hereinafter the "Project") located on 52 acres in Clarkston, Georgia (hereinafter the "Property"). A portion of the Property is subject to a ground lease. Both Club One and Club Two are limited partnerships with numerous individual limited partners. The general partner of each of Club One and Club Two is Investors Realty Group II (hereinafter "IRG II"), a general partnership. David Baker is a general partner of IRG II.
Club purchased the Property from CCRI November 30, 1984, for a purchase price of $26,800,000. Club paid $4,800,000 in cash at closing and gave CCRI a promissory note for the $22,000,000 balance of the purchase price (hereinafter the "Note"). The Note is a wraparound note, which includes three prior first mortgages,3 the principal balances of which aggregate approximately $7,800,000. The Note provides for interest-only payments during the ten-year term of the Note, with the $22,000,000 principal balance coming due at maturity November 30, 1994. Interest accrual was calculated on the $22,000,000 principal balance of the Note. The rate of interest accrual was 8.89771% per annum for the first seven years of the Note's term. For the last three years of the Note's term, interest was to accrue at a rate 1% higher than a specified prime rate, with a minimum interest rate of 12% and a maximum rate of 17%. The weighted contract rate was 9.45%. The amount of the monthly interest payment due under the Note was less than the amount of interest accruing at the rates stated above. In years eight through ten, unpaid and accrued interest was to have been added to the principal balance of the Note and accrue further interest to be paid at maturity. Interest accrued but unpaid during years one through seven was merely deferred but accrued no further interest. In years 8-10, CCRI was to have been eligible to receive additional interest payments from the net cash flow from the Project. The Note provides for CCRI to pay all principal and interest payments on the first mortgage loans as well as all payments on the ground lease.
Under the Plan, claims of Club's creditors are divided into 11 classes. Class 1 consists of administrative expenses and claims with priority pursuant to 11 U.S.C. §§ 503(b) and 507(a). Allowed claims in Class 1 will be paid in cash in full on the effective date of the Plan (hereinafter the "Effective Date") except for such claims as may fall due after the Effective Date or as to which the holder consents to payments in monthly installments after the Effective Date. Class 1 is not impaired under the Plan.
Class 2 contains only the claim of CCRI. CCRI's claim includes the original principal balance under the Note of $22,000,000 plus approximately $691,000 in unpaid prepetition interest payments. Under the Plan, part of CCRI's claim will be paid as of the Effective Date by applying a substantial portion of payments made by Club to CCRI after the filing of the Chapter 11 petition and prior to the Effective Date (hereinafter the "Postpetition Payments"). The balance of CCRI's claim will be paid in full by deferred payments over a period of not more than ten years, together with interest at an annual rate of 10%. Class 2 is impaired under the Plan and CCRI objects to confirmation of the Plan.
Class 3 includes only the secured claim of Sun Life Assurance Company of Canada ("Sun Life"), which holds a note dated January 20, 1972, secured by a first priority lien on one parcel of the Property in the original principal amount of $3,450,000 maturing March 1, 2002. The loan evidenced by Sun Life's note, to which Club is not a party, is not and has not been in default. Under the Plan, as under the terms of the original wraparound Note made in favor of CCRI, CCRI will remain responsible for making all payments of principal and interest on Sun Life's note as they become due. The Plan provides for the following modification of Sun Life's loan documents: in the event of a default under Sun Life's note, Sun Life will be required to provide Club written notice of said default and the opportunity to cure said default within five days of Club's receipt of notice. Class 3 is impaired and has accepted the Plan.
Class 4 includes only the secured claim of American Savings Bank, which holds a note dated November 26, 1976, secured by a first priority lien on a second parcel of the Property in the original principal amount of $2,750,000 maturing November 30, 1990. The loan evidenced by American Savings Bank's note, to which Club is not a party, is not and has not been in default. Under the Plan, as under the terms of the original wraparound Note made in favor of CCRI, CCRI will remain responsible for making all payments of principal and interest on American Savings Bank's note as they become due. As with Sun Life, the Plan provides for the modification of American Savings Bank's loan documents such that in the event of a default under American Savings Bank's note, American Savings Bank will be required to provide Club written notice of said default and the opportunity to cure said default within five days of Club's receipt of notice. The Plan also provides that the maturity date of American Savings Bank's note will be extended for two years until November 30, 1992. Class 4 is impaired and has accepted the Plan.
Class 5 includes only the secured claim of Transamerica Life Insurance and Annuity Company (hereinafter "Transamerica"), which holds a note dated October 26, 1978, secured by a first priority lien on a third parcel of the Property in the original principal amount of $3,000,000 maturing November 1, 1998. The loan evidenced by Transamerica's note, to which Club is not a party, is not and has not been in default. Under the Plan, as under the terms of the original wraparound Note made in favor of CCRI, CCRI will remain responsible for making all payments of principal and interest on Transamerica's note as they become due. As with Sun Life, the Plan provides for the modification of Transamerica's loan documents such that in the event of a default under Transamerica's note, Transamerica will be required to provide Club written notice of said default and the opportunity to cure said default within five days of Club's receipt of notice. Class 5 is impaired under the Plan and has accepted the Plan.
Class 6 includes only the claim of the lessor under a ground lease on one portion of the project. The ground lease was assumed by Club pursuant to this Court's order entered April 24, 1987. No defaults or arrearages in payments are due under the ground lease, and the Plan provides for the continuation of all payments due under the ground lease. Class 6 is not impaired under the Plan.
Class 7 includes the general unsecured claims of Club's trade creditors. The allowed claims of the five creditors holding claims designated in Class 7 totals $10,358.41. Under the Plan, holders of claims of Class 7 will be paid 80% of the amount of their claims in cash within thirty (30) days after the Effective Date. Class 7 is impaired. Four of the five creditors in Class 7 holding allowed claims in the aggregate amount of $10,265.50 have accepted the Plan.
Class 8 includes the claims of tenants of the Project who have security deposits held by Club. Under the Plan, each such tenant will be treated in accordance with the provisions of the tenant's lease agreement with Club. Class 8 is not impaired under the Plan.
Class 9 includes only the unsecured claim of Club's general partner, Club Two, in the approximate amount of $109,000, evidenced by a promissory note dated November 30, 1984, originally in favor of Maccabee Realty Company. Under the Plan, the Class 9 claim will be paid in full only after all other creditors have been paid in accordance with the Plan and then only upon the sale of the Property or the maturity of the wraparound Note as modified pursuant to the Plan. Class 9 is impaired and has accepted the Plan.
Class 10 includes only the unsecured claim of Investors Realty Group, Inc. (hereinafter "IRG") for partnership administration fees payable prior to the Effective Date. Under the Plan, IRG will receive nothing on such claim. Class 10 is impaired and has accepted the Plan.
Class 11 includes the unsecured claims of Club's general partners, Club One and Club Two, for funds advanced or loaned to Club prior to the Effective Date4 in the aggregate amount of $41,997.42. Under the Plan, the...
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