Real Estate

Sonnenschein's Corporate Reorganization & Bankruptcy, Real Estate, Environmental, Taxation and other practice groups work on a variety of matters across the nation and globally in connection with foreclosures, workouts, bankruptcies and related issues in connection with commercial, office, residential and other real property interests, whether owned or leased.  Areas in which Sonnenschein has significant expertise include:

• Automatic stay, adequate protection and cash collateral issues
• Foreclosure and receivership
• Management, franchise and other agreements and personal property interests for hotels and other operating properties
• Specialized loans such as HUD loans, tax credit transactions and TIFs
• Securitization transactions and special servicing issues
• Forbearance agreements, lock boxes and pre-petition waivers
• Assumption and assignment of leasehold interests in bankruptcy, including tenant mix and balance issues
• Lease rejection damages
• Tax recapture and other tax issues
• Environmental issues
• Limited recourse guarantees
• Leasehold mortgage issues
• Letters of credit
• Nonconsolidation opinions in connection with real estate loan financings

Representative Engagements

The following is a summary of certain of the matters in which we have been actively involved for the party or parties noted in the descriptive text and that are of a public nature.  There are also representations in non-public matters that are not discussed by name herein. 

Equity Office Properties: 
We represent Equity Office Properties in connection with complex bankruptcy matters.  A key matter for EOP is the 5th Circuit decision of In re Stonebridge Props., 430 F.3d 260 (5th Cir. 2005).  In that decision, the 5th Circuit held that it was proper for an EOP entity to draw on a letter of credit to satisfy lease rejection damages against the debtor's estate, which were in excess of the Bankruptcy Code cap of one year for lease rejection damages.

Kmart Corporation (N.D. Ill.): 
We represented several landlords in connection with Kmart's Chapter 11 bankruptcy.  On behalf of its clients, Sonnenschein successfully negotiated numerous real property lease assumptions and rejections.  Upon confirmation of the Kmart plan of reorganization, we were able to successfully preserve important protections for our landlord clients.

Cheetah Gyms (Ill.): 
We successfully represented the secured lender of this Chicago-area chain of troubled fitness centers in its emergency state court receivership motion that allowed the lender to reopen and operate the gyms.  We are also handling litigation brought by a landlord who asserts that the receivership is a default event under the terms of the lease.

Carter Hawley Hale (C.D. Cal.): 
We represented Prudential Insurance Company of America as principal secured creditor of CHH.  Our representation related to mortgage debt and security interests Prudential held on a significant portion of the debtors' assets and real estate.  Material issues in the case included restructuring complex mortgages on multiple properties, exercise and preservation of lien rights on related non-real estate property, and fraudulent transfer issues arising out of lender participation in an LBO transaction.

HUD Portfolios: 
We represented a Goldman Sachs affiliate, Archon Group, in connection with the foreclosures and bankruptcies of properties that it had acquired through purchases of HUD loan portfolios.  These cases involved the full panoply of real estate issues including issues raised by HUD loan servicing regulations, valuation of apartment complexes, and intercreditor agreement and junior mortgage issues.

Brandess Home Builders, Inc.
We represented the Chapter 7 trustee for this Chicago area home builder.  Issues addressed in the case included customer deposits and warranty claims, mechanics and materialmans liens, secured financing and surety bonds.

VMS Realty Partners: 
We handled the out-of-court winddown of the holding companies for over 400 properties, including several properties with environmental issues.

Handy Andy Home Improvement Centers, Inc. (N.D. Ill.): 
After failing to find a business model to successfully compete with "big box" retailers, such as Home Depot, retail hardware chain Handy Andy engaged Sonnenschein to represent it in a liquidation of its assets through an orderly Chapter 11 proceeding.  This case included an auction of undermarket leaseholds that had value assignable to third parties.

Philip Services Corporation (S.D. Tex.): 
We represented over 40 affiliated debtors in the United States and Canada in the second Chapter 11 filing for this debtor.  The debtor's businesses involved hazardous waste disposal, scrap metal yards and industrial cleaning.  In this second Chapter 11 case, the debtors sought to abandon burdensome environmentally impaired properties to the applicable states and discharge their environmental liabilities.  The abandonment motions and discharge proceedings resulted in creative structured settlements with applicable state and federal environmental agencies. 

Montgomery Ward (Del.): 
We represented acquirers of leasehold interests under a designation rights agreement in the second Chapter 11 case of Montgomery Ward.

Doctors Hospital of Hyde Park (N.D. Ill.): 
We represented the special loan servicer and public real estate investment trust in connection with the bankruptcy proceedings of the tenant borrower, the foreclosure proceedings against the landlord borrower, and related mechanics lien priority litigation.

Bass Hotels: 
We handled a state court replevin action for Bass Hotels after their general contractor went insolvent before completing a hotel renovation.  In the replevin action, the hotel sought certain furnishings and decorations, which were necessary to complete and open the renovated section of the hotel and which were in the possession of the insolvent general contractor and an unpaid warehouse. 

Preserve at Woodland Harbor (N.D. Ill.): 
We represent the debtors, who owned arsenic-contaminated and undeveloped land in Southeastern Michigan.  We assisted them with using the bankruptcy process to remediate the property and to effectuate a marketing process and sale of assets pursuant to Section 363 of the Bankruptcy Code.

Sweetwater Land and Cattle/C&C Wineries (Santa Rosa, California): 
In this chapter 11 case, a member of our firm served as counsel to a secured lender to a winery and vineyard.  We consensually resolved multiple intercreditor and plan disputes, which ultimately led to the consensual confirmation of a chapter 11 plan.

Landmark Hospitality LLC (Santa Ana, California): 
A member of our firm served as counsel to a major international hotel company that was the manager of and lender to a debtor hotel.  We successfully restructured the hotel to convert to franchise.  We also resolved disputes regarding loan obligations and prior hotel management.
 
Ocean Trails, L.P. (Woodland Hills, California): 
A member of our firm represented the debtor in this chapter 11 case.  The debtor owned and managed premium oceanfront golf course and luxury home development.  After a lengthy valuation dispute with a secured lender, we facilitated confirmation of the chapter 11 plan with the support of the lender.

NVR, L.P. (Richmond, Virginia): 
Representing the official committee of unsecured creditors in this case, a member of our firm facilitated the quick emergence from bankruptcy and restructuring of the company with limited impairment of stakeholder interests.

Queen Seaport Development, Inc. (Queen Mary) (Los Angeles, California):
A member of our firm represented a cruise line in connection with its rights as the subleasee of the debtor cruiseship, the sale of the debtor's assets, and the assignment of executory contracts and leases.

Eichenbau Construction & Development LLC (Kansas City, Missouri): 
A member of our firm served as counsel to the acquirer of an historic hotel in an urban development zone from the chapter 11 debtor.

Leasehold and Acquisition Restructuring: 
We represented a landlord in its settlement with a tenant arising from the bankrupt estate's rejection of real property leases.  We helped our client to apply its lease rejection claims as credit against the purchase price of seven properties contiguous with the leased premises.  Our client paid a total of $3 million for the purchased properties, receiving credits from the estate for lease rejection damages of $1 million.  Our client was then able to earn a profit of more than $20 million on the subsequent resale of many of these properties.  One property alone was sold for $5 million. 

Foreclosures and Workouts: 
We have handled a number of foreclosures and workouts of property.  These include properties with material environmental issues requiring particular expertise.