Bankruptcy

Southern District Opinion; Relief From Stay; Single Asset Case

By Scott Riddle

Suntrust Bank v. Global One, L.L.C. (In re Global One, L.L.C), 411 B.R. 524 (Bankr. S.D. Ga. July 21, 2009).  SunTrust sought relief from stay on the grounds that the value of the real property ($460,000) was far less than the amount of the secured claim ($548,159).  "Debtor described the nature of its business as a "single asset LLC to develop property," admitted it is receiving no income from the operation of the business, and also identified its business as a "single asset real estate" business as defined in 11 U.S.C. § 101."

At the hearing, Sun Trust's only witness was Joel Crisler, an appraiser. Crisler stated that in his expert opinion the fair market value of the Property was $ 460,000.00, a value which is based upon a future value of $ 1,197,800.00 with a five year holding period at a discount rate of twenty percent. Debtor's first witness, Johnnie Ganem, who is also an appraiser but did not conduct an independent appraisal of the Property, testified that in his opinion a three year holding period and a twelve percent discount rate were more appropriate valuation parameters. Adapting Crisler's appraisal with these changes, Ganem testified the value of the Property would yield a value of between $ 750,000.00 to $ 800,000.00. Debtor's second witness, Derek Pommerenck, a principal of Debtor, testified in his opinion the property was worth $ 1,200,000.00...

After considering the expert testimony of appraisers for both parties, I conclude that SunTrust did not carry its  burden as of the date of the hearing. SunTrust's expert established a value of $ 460,000.00 utilizing what he believed the value of the property would be in five years and discounting it to present day value at twenty percent per year. Debtor's expert believed that a three year holding period with a discount rate in the range of twelve to thirteen percent was more appropriate and concluded to a value in the range of $ 750,000.00 to $ 800,000.00. I am unable to conclude what the proper discount rate would be after hearing the testimony of these two appraisers, but assuming a five year holding period at a lower discount rate of twelve percent, the value of the property today would exceed $ 600,000.00. Similarly, a shorter three year holding period at a twenty percent discount rate would yield a value of roughly $ 675,000.00. Without reaching a precise conclusion as to what the value of the property is, however, I am able to conclude, given a pre-petition SunTrust   debt totaling approximately $ 550,000.00, that there remains some equity in this property. As a result, the burden is not carried under § 362(d)(1), and I move on to the consideration of the Motion based on 11 U.S.C. § 362(d)(3)...

SunTrust's motion requests that this Court determine that the Property securing its claim is "single asset real estate." Unless I so find, SunTrust can not rely on § 362(d)(3) but only § 362(d)(1) and (2), which would impose the burden of establishing that there is no equity in the property to obtain relief, a burden that SunTrust cannot meet as described above. See 11 U.S.C. § 362(g).

There is no doubt that the property meets the definition. It constitutes a single project and is not residential, Debtor is not a family farmer, and no business is being conducted on the property. See Statement of Financial Affairs, Dckt.No. 8, pgs. 14 & 19. Therefore, the Property qualifies as a "single asset real estate."

However, Debtor argues that (d)(3) does not apply because it has a counterclaim against Portrait Homes in Superior Court, which "is clearly not real property nor is it an attachment or appurtenance to the property." Brief, Dckt.No. 71, pg. 6. This fact does not change this Court's finding.Go to the description of this Headnote.The focus of the definition is not whether the case involves a "single asset" but rather whether the stay applies to "single asset real estate" held by a bankruptcy estate.

 Having concluded that there is, at the present time, some equity in this property, although slight equity, I hold that while it is mandatory that I grant stay relief under § 362(d)(3), it is not mandatory that I grant unconditional relief from stay. Instead, I am permitted under that section to condition or modify the stay in accordance with the evidence.

Full post as published by Georgia Bankruptcy Blog on November 07, 2009 (boomark / email).