Landmark ownership entity files bankruptcy to restructure loan

By Caroline Salls

Pittsburgh, Aug. 31 - Everest Holdings, LLC, EDC Denver I, LLC and 7677 E. Berry Avenue Associates, LP filed for Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the District of Colorado, according to a company news release.

The companies own The Landmark and The Meridian residential condominium towers and The Village Shops retail project in Denver.

The Everest entity said it will continue with sales and operations of the residential towers as it restructures and extends its existing financing.

In addition, retailers will continue operations as usual at The Village Shops at Landmark.

According to the release, the Chapter 11 filing does not include the separately owned European Village of Homes, a master-planned community just to the south of The Landmark, slated to be built as part of the second phase of the project.

"We are grateful to the Denver community for its tremendous support of The Landmark community over the past four years," Everest president and chief executive officer Zack Davidson said in the release.

"This support has led to continued success even through the downturn in the economy and more specifically, of the residential home market.

"We regret that certain challenges, including financing issues with the project's senior lender, Hypo Real Estate Capital Corporation, combined with the local and national slowdown of residential home sales, and the inability of our buyers to sell their existing homes and obtain financing for their new homes here at Landmark, have unfortunately impacted our cash flow and made reorganization our only option.

"Even with the project's continued success, the ownership group has run into a problem that is unfortunately far too common in today's economy - a financially distressed lender that is unwilling to provide us with a short-term loan extension in order to facilitate an orderly repayment."

Construction loan

7677 has $165 million of assets and $100 million in debt, the release said, including $93.8 million in secured construction debt with Hypo Real Estate.

The ownership entity said 7677 will seek to restructure and extend its construction financing with Hypo while in bankruptcy.

"Over the last several months, the ownership group has repeatedly requested a formal extension of our loan with Hypo, which matures in November of 2009," Davidson said in the release.

"Hypo has consistently indicated a complete unwillingness to renew the loan for even a few months unless we agree to bulk sales of unsold condominiums and a substantial discount on all unsold residences.

"Either of these options will have a hugely negative impact on the value of our existing homeowners' property, and will eliminate the chance of returning the invested capital to the other stakeholders in the property."

DIP facility details

In connection with the bankruptcy filing, the debtors have obtained a commitment for $15 million in debtor-in-possession financing from Carmel Landmark, LLC, an indirect subsidiary of Carmel Partners Fund III, LLC.

Everest said the new facility will provide enough capital to the ownership entity to complete all remaining construction in the development, as well as provide funds to pay for the day-to-day operations of the community going forward.

Interest will be 12%.

7677 will pay a $300,000 closing fee. Also, if the court approves any alternate financing, Carmel will receive a $300,000 break-up fee

The DIP facility will mature on the earliest of Jan. 31, 2011, 30 days after the bankruptcy filing date if a final order has not been entered, the effective date of a plan of reorganization, upon the sale of the entity's assets for $40 million or more and upon conversion or dismissal of the bankruptcy case.

According to court documents, 7677's largest unsecured creditor is Nexbank, SSB of Dallas, with an $11.77 million unsecured loan claim.

7677 is the owner of The Landmark, the Meridian and the Village Shops project. The Chapter 11 case number is 09-27906.

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