The Twist and Turns of a Chapter 11 Bankruptcy: How Real Estate Investors Can Be Impacted by a Chapter 11 Filing and How They can Maximize Their Investment If They are Willing to Fight Back

The Twist and Turns of a…

Eleven separate individuals and entities collectively as tenants in common (TIC Owners) owned a piece of real estate in Pinellas County, out of which a senior care facility operated. These eleven TIC Owners invested millions in the real estate purchase in 2004. Back in 2004, investing in real estate as a tenants-in-common owners through a financial advisor was not an unusual investment. However, what started as a fruitful real estate investment nearly ended in a heavy financial loss to these eleven TIC Owners.

 The TIC Owners did not know or have contact with one another. This became important many years later, when problems arose with the Tenant.  For years, the TIC Owners received a return on their investment by way of rents from the Tenant, who operated the senior care facility under a lease agreement with the TIC Owners. However, in 2016, the investment started falling apart. The TIC Owners stopped receiving rents and stopped receiving reliable information from the Tenant on the business operations. Matters got worse when the TIC Owners were sued by a purported buyer of the real estate. The purported buyer claimed to have a contract to purchase the real estate and the Tenant’s operations. The TIC Owners knew nothing about the contract and had not authorized it.

Matters escalated even further when the Tenant filed a Chapter 11 bankruptcy. During that Chapter 11 bankruptcy, the holding company and other subsidiaries, including the Tenant senior care facility, attempted to force a sale of the real estate together with the sale of the operations, even though the TIC Owners were not in bankruptcy themselves. The Tenant operations were worth very little without the TIC Owners’ real property. The TIC Owners did not understand how they could be forced to sell at a loss through a Chapter 11 bankruptcy process, and the debtor could continue to operate a senior care facility without paying thousands and thousands of dollars of rent.

This is when they turned to Camille Iurillo and her team at Iurillo Law Group, P.A. The matters before the court in this case were unique. The bankruptcy court did not have jurisdiction over the TIC Owners, so one of the alternatives was to remove the real estate from the bankruptcy process. Ms. Iurillo’s advises her clients of their rights in state court versus bankruptcy court, as well as their practical business alternatives, and helped them consider their situation from all angles. Ms. Iurillo, who is also a business owner and real estate investor, understands the importance of the big picture from a business standpoint.

The bankruptcy judge, who fondly referred to the case as a “Rubik’s cube,” continued to encourage and support the settlement process. The TIC Owners received many unreasonable offers that would have resulted in very little proceeds to them and would have barely recouped their initial investment of fourteen years. However, once the TIC Owners spoke through one voice, they realized their immense bargaining power. After fighting lawsuits in and out of the bankruptcy court, as well as contested mediation sessions, a consensual workout was finally reached. Guided by Iurillo Law Group, the TIC Owners finally participated in a complex settlement involving many different groups of bankruptcy and non-bankruptcy creditors and debtors. The settlement allocated payment to secured lenders for the TIC owners, secured lenders for the debtor, AHCA, the unsecured creditors, taxing bodies, and a variety of different entities. The settlement netted the TIC owners millions of dollars, instead of the cents-on-the-dollar that early settlement offers contemplated. In the end, the TIC Owners benefited not only from Ms. Iurillo’s expertise in real estate law and litigation, the Chapter 11 process, and bankruptcy jurisdictional issues, but also from her practical business experience.

Lesson learned: A Chapter 11 bankruptcy does not mean the end of options for a creditor, whether you are a real estate owner, a creditor in a bankruptcy case, or otherwise. Ms. Iurillo and her team at Iurillo Law Group, P.A. will help you make the best decision under the circumstances and work toward maximizing recovery to you.

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