Case Studies

NJ Affordable Homes Bankruptcy (“NJAH”)

Situation

Our team was retained by a Chapter 7 bankruptcy trustee to market a 340-property portfolio of one- to four-family homes and land throughout the state of New Jersey. The portfolio ended up in a Chapter 7 bankruptcy proceeding as a result of a massive mortgage fraud and Ponzi scheme. The portfolio included vacant property, as well as occupied two- and three-family homes. A Chapter 7 Trustee was appointed to manage and liquidate the portfolio; however, the estate had no cash in order to operate and manage the portfolio, nor did it have enough money to allow for an orderly liquidation. As a result, the initial plan of the trustee was to liquidate the portfolio via a bulk sale, generating quick cash and alleviating the financial responsibility of managing the portfolio. The trustee was being forced to trade a discounted bulk price in order for a quick sale due to the lack of operating cash. We put forth a plan to maximize return to the estate by executing an auction portfolio sale program, where all 340 properties were marketed, sold, and closed at the same time, individually, on a non-contingent basis. This provided the estate the opportunity to obtain the financial benefit of selling the properties individually, resulting in a greater return for the estate while also executing a bulk sale (all properties selling and closing at the same time). In order for the estate to realize the benefit of a portfolio auction program, it had to resolve its immediate cash requirements. We provided a debtor-in-possession loan (DIP loan) to the estate to allow for an orderly sales process in order for it to maximize return.

Strategy

The properties were offered via an eight-week, regional, national, and partially international marketing and PR campaign, Absolute Regardless of Price, with the secured creditors having the right but not the obligation to credit bid.

DIP Loan: We provided a debtor-in-possession loan in a super-priority position to the estate. The DIP loan had two components: (1) A revolving credit line that the trustee could draw upon for the operation and management of the portfolio while the portfolio was being marketed and sold to generate cash, and (2) An advance of the marketing money required to execute a portfolio sale program. 

Results

The auction generated over 13,000 inquiries and over 2,000 bidders. The properties of the portfolio were all sold on an individual basis (retail vs. bulk) via the “Buyer’s Choice” bidding method for approximately $49,000,000 at auction.

Important Notes

The Trustee had considered a bulk offer of $26,000,000 to sell the entire portfolio in bulk prior to our sale.  

DIP loan was paid back 100% in a super-priority position. We advanced a total of $1,500,000 to the estate.