Creditors oppose Stanbrough reorganization
Real estate developer Daniel Stanbrough has circled his corporate wagons in federal bankruptcy court, where creditors have pointed to weak cash flows and mounting property tax debt as reasons to force the liquidation of at least one of his companies.
Stanbrough sought protection in November under Chapter 11 of the U.S. Bankruptcy Code to reorganize the finances of four companies in the face of court actions by Regions Bank.
Last April, Dan Stanbrough LC filed for Chapter 11 after Regions filed a foreclosure lawsuit against Keck City Center at 500 Grand Ave.
In all cases, his lawyer says that Stanbrough has been targeted due to technical defaults on loans, unpaid property taxes being one of the chief transgressions.
The tax bills on two of the properties – Keck City Center and Corporate Woods, 1700 N.W. 118th St., Clive – total nearly $1.5 million, according to court documents and Polk County property tax records.
Dan Stanbrough LC has filed a reorganization plan that includes establishing an escrow account to pay more than $400,000 in taxes on Keck City Center that have been purchased by Tiger 116 Partnership in Red Oak.
However, the reorganization plan has been rejected by the U.S. trustee overseeing the bankruptcy as well as Regions, Community Business Lenders LLC and Tiger 116.
The trustee noted that the plan would circumvent state laws that allow individuals or companies that purchase delinquent taxes to claim a right to the property if they are not redeemed by the owner.
Regions, which claims it is owed $5.5 million on loans to Dan Stanbrough LC, also has objected to the plan because the reorganization calls for Regions to be paid in part from lease income generated by another Stanbrough company, American Abstract Co.
Stanbrough proposed moving the company from its location at Corporate Woods to Keck City Center. Regions has loans secured by both properties and notes that it makes little sense to take away income from one property simply to transfer it to another problem property.
Stanbrough attorney Jerrold Wanek said Corporate Woods suffered from low lease payments paid by American Abstract and another partner in the development, Joel Goodman, whose Triton Group LLC home building company filed for bankruptcy last month.
“American Abstract is moving to make room for a more market-rate tenant,” Wanek said. He would not identify the tenant.
Regions takes a different view, saying in court documents that “it also appears that such an arrangement between insiders is cause for concern and scrutiny of the risk associated with the possibility that the arrangement is not valid or legally possible.”
Tha bank also has filed a motion in the Corporate Woods bankruptcy to continue to pursue a foreclosure action in state court and to prohibit the company from having unrestricted use of its operating cash.
The lender said it is due nearly $9.4 million in principal, interest and late fees on loans to Corporate Woods LLC.
The property has been placed under receivership in the state court action. Regions maintains that Corporate Woods’ profits should have been used to pay its more than $1 million delinquent property tax bill, but that the funds were used for other purposes.
Wanek said that principal and interest payments on loans for three other Stanbrough companies that filed for bankruptcy on Nov. 22 – Rose Marie LC, Orchard LC and DTS LC – were current. However, some of those loans also were tied into the operating company that operated Keck City Center.
“These last three weren’t even in default … (Regions) just used cross-default provisions,” he said.
Meanwhile, Community Business Lenders has objected to a Dan Stanbrough LC plan to pay slightly more than $1 million in loans to a partnership that leased 1238 Eighth St. in West Des Moines to the former Jimmy’s American Cafe. The restaurant was paying more than $12,950 a month in lease payments that Dan Stanbrough LC wanted to use to retire its share of the loan. Wanek said another tenant has been found to replace the cafe.
Wanek said his client is in bankruptcy because Regions has decided to pursue court action rather than work out problems with its loans.
“No one else was foreclosing against him,” Wanek said. “For some reason, they’re making a problem where one doesn’t exist.”