A hearing on the Receiver’s motion to sell the bulk of the receivership’s multifamily properties to Cortland Acquisitions, LLC, for a sales price of $338,500,000 was held on May 19, 2014. The court approved the Receiver’s motion for the sale of 18 of the multi‐family properties, for which no objection had been filed or for which objections were filed but were later withdrawn. The 10 properties for which objections remain are still included in the sales contract with Cortland, but will not be sold until the objections are resolved, either by court order or agreement by the parties. A continued hearing on the sale of the remaining 10 properties included in the Cortland sale has been scheduled for August 1, 2014 at 10:00 a.m. The remaining 10 properties included in the Cortland sale are: Buffalo Run, City View, Lake Ridge, Madison Chase, Oak Hill, Providence Estates, Retreat at Stonebridge Ranch, Stonebrook Phases 1 and 2, Toscana/Tuscany Gardens, and Town Plaza.
The Cortland Agreement was executed February 4, 2014, and covers almost all of the multifamily properties remaining in the receivership. The buyer is an affiliate of Cortland Partners. Cortland Partners, based in Atlanta, Georgia, owns and operates about 15,000 multifamily apartment units located in Florida, Georgia, Louisiana, North Carolina, and Texas.
The primary terms of the Agreement are:
Buyer: Courtland Acquisitions, LLC
Price: $338,500,000 (subject to adjustments)
Properties included in sale: All multifamily properties currently held in the receivership except Stonebrook Idaho, Stonebrook Idaho Tetonian, Summerwind (48 condo units), and Lakeshore Village/Goodfellow Housing
Earnest Money: $1,200,000, with an additional $5,200,000 upon Due Diligence Acceptance. The earnest money is non-refundable except in the event of default by Seller, failure of a condition to closing, or failure of the Court to approve the sale.
Excluded Properties: A property may be removed from the sale under any of the following conditions: (i) Seller does not hold title or cannot deliver clear title, (ii) the property is subject to a valid tenant-in-common (“TIC”) interest and the TIC interest is not included in the sale by consent of the TIC holder or order of the Court, (iii) Stonebridge Phase II (Texas) will be removed if Stonebridge Phase I (Texas) is removed due to the TIC interest, (iv) the lender does not approve assumption of the loan on a property subject to loan assumption. However, Cortland has agreed that if it cannot assume a loan on a property it will arrange to prepay the loan.
Closing: 30 days after court approval for properties not subject to a loan assumption, 90 days for properties subject to loan assumption. Buyer has extended this deadline for 30 days, and may extend for an additional 30-day period by depositing an additional $500,000 earnest money for the extension.
Due Diligence Inspection Period: 21 business days. Cortland has concluded its due diligence review.
Loan Assumptions: The agreement provides that Cortland will assume the existing loans on Retreat at Stonebridge Ranch, Cleburne Terrace, Retema Ranch, The Charlestonian, Brooksedge, and Jefferson Chase and that it will pay all costs of the loan assumptions. Cortland also has the option of prepaying the loans on these properties, subject to any applicable lender requirements, in which case Cortland will pay costs related to the prepayment.
Loan Payoff Costs: Seller will pay all defeasance, prepayment and yield maintenance costs on properties other than the properties with loans which Cortland has agreed to assume.
Title Insurance: Costs will be split equally between Buyer and Seller.
Court Approval: Has been obtained with regard to 18 of the sale properties, and is pending with regard to the remaining 10 properties, for which objections have been filed by parties owning or claiming tenant in common interests or other interests in the properties.
The Cortland sales contract provides that a property will be excluded from the sale if the receiver is unable to deliver good title to the property. In that event, the gross sales price will be reduced by the amount Cortland has allocated to each such property in the sale agreement. Representatives of the Receiver have contacted recorded TIC owners to seek their consent to sale of the entire property to Cortland and have been contacting lenders to negotiate payoff amounts. Recorded TIC interests exist in the following properties: Buffalo Run, City View, Lake Ridge, Madison Chase, Oak Hill, Smokey Trail of Limon, Stonebrook Phase I (Texas), and Toscana/Tuscany Gardens. Representatives of the Receiver have also been contacting persons claiming unrecorded TIC interests in an effort to resolve the objections of those parties to the sale of the properties in which they claim an interest.
As provided in the Receiver’s Amended Second Liquidation Plan, for purposes of the receivership the net proceeds from the Cortland sale will be allocated to each property pro rata based on the Receiver’s median appraised value for the sale properties. Overall, the Cortland sale price is 99.56% of the Receiver’s median appraised value of the sale properties.
The allocation that reduces the gross sales price differs from the allocation of the proceeds of the sale as described in the Amended Second Liquidation Plan.
The Amended Second Liquidation Plan, which was approved by the Court, provides for allocation of the proceeds of sale of the properties as follows:
“The net proceeds from sale of the properties in Portfolios A and B will be allocated to the individual properties pro rata based upon the Receiver’s median appraised value of each property divided by the Receiver’s median appraised value for all properties in the portfolio.”
The Receiver feels that the allocation of the proceeds of the sale based on the median appraised value is the most appropriate allocation and that any difference between the allocation methods will likely be negligible.
The Receiver’s Amended Second Liquidation Plan, which was approved by the Court, provides that the net proceeds from sale of the multi-family properties portfolio will be allocated to the individual properties pro rata based upon the median appraised value for each property obtained by the Receiver. The below chart lists the percentage allocation for each property. (This should not be confused with the allocations set forth in Schedule 2.1(a)(i) the Purchase and Sale Agreement with Cortland Acquisitions, LLC, which are used for a different purpose.) The dollar amount that will be allocated to each property cannot be determined at this time because the sale price is subject to adjustments and the Receiver’s costs of closing cannot be finalized at this time.