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Elementary school student Eric Theodore Cartman described his experience at Casa Bonita as “totally” worth making an entire town panic, losing all his friends and going to juvenile hall for a week in an episode of the TV show “South Park.” For more than four decades, Casa Bonita, located in Denver, has been an iconic Colorado “eatertainment” establishment offering dining and entertainment, including cliff-diving shows, live music and an amusement arcade. Now stricken by bankruptcy and its future uncertain, Casa Bonita could very well find a home with the creators of “South Park.”
The pandemic and its enormous global impact clearly demonstrate the latent volatility of hospitality real estate. The lodging industry is perhaps the most labor capital-intensive sector of real estate, and it is unequivocally being stressed by the pandemic. National U.S. hotel occupancy has been historically consistent, with occupancy percentages in the mid-60% range, until COVID-19 took national occupancy to an all-time low of 44%.
When selling significant assets in chapter 11, more often than not debtors and their professionals proceed with a stalking-horse bid. On occasion, however, we do see assets valued at $100+ million on the auction block without a stalking-horse bid. One such example is the currently pending chapter 11 case of In re Wardman Hotel Owner LLC (the debtor), pending in the U.S. Bankruptcy Court for the District of Delaware under Case No. 21-10023. At the time of the commencement of that chapter 11 case, the debtor was the owner of the Washington Marriott Wardman Park Hotel.
The chairs of the Real Estate Committee thank all the committee members for their support during this past year. COVID has had quite an impact on real estate lending and real estate bankruptcies. A major (and obvious) theme was the force majeure provision in contracts, and whether the COVID pandemic triggers the clause to, inter alia, excuse rental payments. Many governors’ emergency orders affected real estate as well, from construction permit tolling to foreclosure and eviction moratoriums.
In a June 3, 2020, decision,[1] the U.S. Bankruptcy Court for the Northern District of Illinois held that a force majeure provision partially excused a restaurant’s obligation to make post-petition rental payments after the Governor of Illinois, J.B.
On May 15th, JCPenney announced that the company was filing for chapter 11 relief. Another in a trend of major retailers filing for bankruptcy. JCPenney’s announcement was expected, as forced closures in the pandemic exacerbated the company’s pre-COVID financial problems.[1] However, what raised some eyebrows is the company’s plan to spin its properties into a real estate investment trust (REIT) as a part of its proposal to emerge from bankruptcy.
In a matter of first impression,[1] the U.S. District Court for the Southern District of New York vacated and remanded a bankruptcy court order that had overruled objections and allowed the assumption and assignment of Sears’s lease with Mall of America.[2] The district court found that the assignee failed to give Mall of America “adequate assurance of future performance” of the lease under 11 U.S.C.
