American Bankruptcy Institute | Real Estate Committee Meeting Minutes

At the Winter Leadership Conference in Rancho Mirage, California last December, the Real Estate Committee and the Young and New Members Committee, met jointly and offered a presentation entitled : "The New American Skyline: Builder/Developer Workouts and Restructurings"

The New York based speakers were: Leslie Berkoff, Esq., a member of Moritt Hock Hamroff & Horowitz LLP, who served as the moderator; Jeffrey Hubbard, an executive managing director at Sheldon Good & Co.; Heidi Sorvino, Esq. a member of Katten Muchin Rosenman LLP; and Joseph H. Smolinsky, a member of Chadbourne & Parke LLP. The panel presented a case study of a publicly-traded home builder, with subsidiaries including a developer of condominiums and a licensed mortgage broker, and considered issues related to financing the operations, problems with construction lending and issues with mechanics' liens, and issues with the disposition of the real property. The meeting was well attended and the presentation was enthusiastically received.

On Saturday, Dec. 2, 2006, the committee presented a joint program with the UCC Committee. Featured speakers Leslie A. Berkoff (Moritt Hock Hamroff & Horowitz LLP; Garden City, N.Y.) and David D. Farrell (Thompson Coburn LLP; St. Louis) discussed "Competing Rights of Secured Parties, Landlords & Equipment Lessors in Collateral and Fixtures in Real Estate Related Transactions." Written materials were distributed at the site and are available on request. The meeting was well attended and the materials and presentation were excellent.

Committee Co-chair Alec P. Ostrow preceded the presentation by describing the committee's ongoing project of preparing a model annotated contract for the sale of real property by a bankruptcy fiduciary for publication, and requested the participation of members in working on the project. Those interested in participating should contact the co-chairs.

The Real Estate Committee met at the Annual Spring Meeting on Saturday, April 22, 2006. Co-chair Alec Ostrow of Stevens & Lee, P.C. in New York City began the meeting by giving a status report on the on-going project to draft a model, annotated contract for the sale of real property in a bankruptcy case. A drafting session was held on the campus of St. John's University School of Law in Jamaica, New York, on January 23, 2006, hosted by Prof. Robert M. Zinman. The next drafting session will be scheduled soon. Alec Ostrow requested volunteers for this ongoing project, as well as for articles to appear in the Real Estate Committee's electronic newsletter.

The Committee next gave its educational presentation, entitled "Managing and Marketing Weird Real Estate." Written materials were distributed for the presentation. The featured speakers, Stephen Karbelk of Tranzon Fox in Burke, Virginia and Alex D. Moglia of Moglia Associates in Chicago, Illinois, discussed dealing with unusual properties, such as churches, unbuildable land, obsolete office buildings, funeral homes and cemeteries, as well as environmentally distressed property and property in which there is or has been criminal activity, such as illegal laboratories for methamphetamines. Co-chair Alec Ostrow moderated the presentation and offered his own proposal for dealing with environmentally distressed property, called the "Overland Option," in which a very long-term option is granted for a significant option price that can be distributed immediately in the bankruptcy case, and a very modest exercise price, subject to setoff for unpaid property taxes. The option enables the optionee to have a recorded interest in the real property for the purpose of negotiating a limitation of liability with the environmental authorities in the event the option is exercised, but not an immediate ownership interest, which would subject the optionee to immediate liability for remediation. There was active participation by committee members and others in attendance during the presentation.

The committee will present a panel on real estate topics in consumer bankruptcy, addressing such issues as the survival of tenancies by the entirety; sales of residential property free and clear of co-owners under section 363(h); extraterritorial homestead exemptions; cure, modification or strip-down of mortgages on primary residences in chapter 13; and retention by debtors of leased primary residences in chapter 7.

The Real Estate Committee provided a highly informative CLE panel presentation on real estate valuation, with a focus on disparities between MAI appraisal theory and values achieved in actual sales. Real estate valuation was considered in the context of fee sales, leasehold sales, designation rights and as a component of business valuations. Panelists were Andy Graiser of DJM Asset Managment LLC, Bill Hoffman, president and CEO of Trigild International Inc., and John Collen of Duane Morris LLC and author of Buying and Selling Real Estate in Bankruptcy. Committee Co-Chair Alec Ostrow moderated the panel.

The Real Estate Committee settled on a topic for the Winter Conference: Real Estate in Consumer Bankruptcies, which will explore a number of important issues outside the chapter 11 context that has been the committee's traditional focus. The committee continues its work on a model real estate purtchase contract, and has lined up future authors for articles on real estate topics to be published on the committee's web site.

2003 Winter Leadership Conference

The Real Estate and Asset Sales Committees conducted a joint presentation and panel discussion of the decision of the Seventh Circuit U.S. Court of Appeals in In re Qualitech Steel SBQ LLC, 327 F.3d 537 (2003), holding that a sale "free and clear of liens, claims, encumberances and interests" extinguished a lessee's interest in the property. The bankruptcy, real property and due process aspects of that decision were explored by a panel including Prof. Robert M. Zinman, attorney Thomas Wolford and committee Co-chair Alec Ostrow, and was moderated by John Collen.

2002 Winter Leadership Conference

The Real Estate Committee met on Friday, Dec. 6, 2002, and was attended by approximately 20 persons, despite the early hour. Co-Chairs Alec Ostrow and John Collen presented a seminar-format discussion on contracts to purchase real estate out of bankruptcy. Issues included the relationship between the sale contract and the sale approval order, title insurance considerations, the form of deeds and seller's representations and warranties. The committee also discussed, and recruited several volunteers for a project to prepare, as an ABI project, an annotated form of real estate purchase contract to use in bankruptcy.

2002 Annual Spring Meeting

The Real Estate Committee met on April 20 at the ABI annual spring meeting in Washington, D.C. The Committee presented a CLE panel discussion of, and debate on, leasehold designation rights using actual pleadings from the Mongomery Ward case as materials. The panelists were Committee Co-Chair Alec Ostrow and Biff Ruttenberg arguing against permitting designation rights, with Andrew Silfen and Corry Lipoff arguing in favor of such rights. Committee co-chair John Collen moderated the lively debate. (Designation rights refer to the sale to a non-debtor of the right to direct or control assumption and rejection of leases). Despite the early hour (8:00 a.m.), the session was well attended.

The Committee considered several initiatives, including a written article to follow up on the panel debate, and tracking the real estate aspects of pending bankruptcy legislation.

2001 Annual Spring Meeting

The Real Estate Committee meeting focused on a presentation by Committee Chair John Collen on the real estate aspects of S. 420, particularly the provisions limiting extensions of time to assume or reject non-residential real estate property leases. The committee formed a task force consisting of John Collen, Prof. Robert M. Zinman, Alec Ostrow, Weldon L. Moore III and Evan Smiley to assemble a brief written analysis of the effect of such provisions on reorganizations. In addition, the committee is exploring the formation of a subcommittee on hotel bankruptcies; David M. Neff and Andrew I. Silfen will be involved. The committee believes that hotel bankruptcies present a sufficient variety of unique issues to deserve their own task force.

2000 Winter Leadership Conference

The Real Estate Bankruptcy Committee held its first meeting under the leadership of its new chairman, John Collen, of the Chicago office of Duane, Morris & Heckscher, LLP. A highly informative CLE credit presentation was given by members Weldon L. Moore, III and Andrew Silfen on the topic of "Deconstructing Timbers—Application of Adequate Protection Payments to Undersecured Creditors in Single Asset Bankruptcy Cases." Lively discussion and debate followed. Participants included Christopher Graham, chairman emeritus of the Committee, and former ABI President Prof. Robert Zinman.

The committee also briefly discussed new projects and topics for 2001, and welcomed several first time attendees.

2000 Annual Spring Meeting

Mark Shinderman gave an excellent summary of the evolving Ninth Circuit law on whether option contracts to purchase real estate are executory contracts. Andrew Silfen provided a highly insightful analysis of In re Fours On Seventh LLC, a Southern District of New York case dealing with the rights of mortgagees under participation agreements. Finally, Robert Millner gave an outsanding keynote presentation on "Future Shock: Mortgage Securitization In Bankruptcy."

1999 Winter Leadership Conference

The single item of old business for the Real Estate Committee meeting was to announce the publication in the ABI Law Review 203 N. LaSalle

The committee intends to present a program for CLE credit at the Annual Spring Meeting discussing the allocation of adequate protection payments, especially when the real estate is fluctuating in value. Committee members Weldon Moore (Creel, Sussman & Moore LLP, Dallas) and Mr. Silfen will head up the discussion. A long and lively discussion was held on the relationship of §1129(d) to tax-driven real estate reorganizations. The topic proved both deep and fascinating, and the committee decided to seek a future panel discussion on that topic for presentation to the full ABI membership. Lastly, a fascinating discussion was held on the relationship between real estate purchase options and executory contract law in bankruptcy. The committee will explore ways of expanding on this topic in an educational manner for other ABI members.

1999 Annual Spring Meeting

The committee plans to hold a roundtable discussion regarding the Supreme Court's recent decision in 203 N. LaSalle, ABI Journal,

The Conveyancing Issues Project is moving in the direction of an ABI web site posting. There is an emerging consensus that the project should address regional variations in judicial approaches to issues and have a practical focus. Specific suggested topics included comfort orders, §363(m) protection, sales free of claims, the creditors' rights exception to title policies and transfer tax avoidance (can §1146 protection be obtained outside of a plan?). Basil Mattingly may compile several proposals on comfort orders, while John Collen will put together a price on §363(m). Because of the significance New York City transfer taxes play in New York real estate deals, a Second Circuit person should ideally be one of thoseinvolved with the §1146 issue. Volunteers are needed for other topics, so please call John Collen at (312) 861-1400 if you are interested.

There was a general agreement to set up a chat room to share information on current topics of interest. The committee is looking into this possibility and a regular time period for discussions. The committee also agreed to establish content for the committee at ABI World, creating a forum for publishing completed projects and posting information and insights into "hot topics," among other purposes. In addition, the committee expressed interest in forming an ad hoc subcommittee on SPEs, and is looking for volunteers.

1998 Winter Leadership Conference

The committee will form a working group on real estate conveyance issues in bankruptcy cases with the object of assembling written materials and preparing a panel discussion for a future ABI conference. The persons willing to work on this project are John Collen (Sonnenschein, Nath & Rosenthal; Chicago), Prof. Basil Mattingly (Georgia State University College of Law; Atlanta), Dolly Hoffman (New York), Romaine Scott (The Scott Firm; Birmingham, Ala.), Joe A. Joseph (Lange, Simpson, Robinson & Somerville; Birmingham, Ala.), Evan Smiley (Albert, Weiland & Golden; Costa Mesa, Calif.), Edward Flint (Shaw Licitra Parente Esernio & Schwartz PC; Garden City, N.Y.), John Durkheimer (Lane Powell Spears Lubersky; Portland, Ore.) and Andrew I. Silfen (Olshan, Grundman, Frome & Rosensweig LLP; New York).