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Property Owner Allowed To Sell
by Ron Davis
Time is apparently running out for the debt-plagued proprietor of a New Mexico strip shopping center.
The center is an eight-unit property located in Albuquerque, and the proprietor has lately been struggling to retain the property’s control.
Those struggles have so far been only somewhat successful. Among the past and present tenants are a restaurant, salons, an insurance broker, a tax preparer and an accountant, as well as a local management company.
The mortgage holder, however, holds a promissory note, signed by the shopping center proprietor. That note shows a debt of about $1.6 million, is secured by a first mortgage on the property, and is now payable in full. The proprietor has, however, been making monthly payments to the mortgage holder of about $5,120.
The property is apparently worth much less than the debt owed. Estimates of the current value range from about $750,000 to $925,000. A problem with the value of the property is the tenant occupancy rate. For example, a recent loss of a major tenant was a popular restaurant whose chef is apparently widely known in and around the Albuquerque area.
After reviewing the alternatives the mortgage holder opted to sell the property. In response, the center owner complained that the mortgage holder would likely fail to seek the fair market value of the property. Therefore, the center owner was justifiably concerned that he would not receive sufficient payment for himself and his heirs.
That concern led to his proposal that he should re-tenant the center and control the sale of the property. His reasoning was that in a foreclosure proceeding, he could get a higher price for the shopping center than could the mortgage holder.
At trial, the judge agreed in part with the center proprietor’s idea. Explained the judge in referring to a previous but similar court ruling: “The fact that a debtor lacks equity in the property in question is not fatal where the secured claimant is adequately protected, and the debtor has made progress in formulating a plan that is a reasonable possibility of confirmation within a reasonable time.
“In this case,” the judge continued, “the debtor’s estate is solvent. Furthermore, the debtor has enough cash flow to make principal and interest payments while the property is renamed and marketed…. It seems to the court that a solvent debtor with current monthly income and a willingness to liquidate as needed to pay creditors in full should be a good candidate to confirm a plan of liquidation.
“Added the judge, “the debtor should be given a chance to try to confirm its plan”
(2016 WL 552751, United States Bankrupt Court, D. New Mexico, In re Kadlubek Family, Revocable Living Trust, Debtor, No. 15-10736-tii, February 11,2016.)
Decision: February 2016
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