In about 25 separate legal paperwork filed along with the bankruptcy petition, attorneys for Realty Executives reveal that only the franchise is a debtor in the Realty Executives bankruptcy, and that the parent corporation and its owner are two of its greatest collectors.
A list of the twenty most significant creditors, filed with the company's Chapter 11 petition, includes Rector as the most significant creditor, declaring the business owes him about $1.25 million. Franchisor Realty Executives Global is the 3rd biggest, with a claim of about $600,000.
Other debtors contain Phoenix law firm Greenberg Traurig, owed about $838,000 and Scottsdale-primarily based Johnson Financial institution, which is owed $400,000.
Morrie Aaron, founder and president of Phoenix-based MCA Money Group, the bankruptcy consultant to Realty Executives Inc., claimed that the real-estate firm is in reasonably superior financial health besides for a number of expensive lease agreements it has been attempting for months to renegotiate.
He claimed the firm's agents and customers had almost nothing to be troubled about. The bankruptcy paperwork reveal that all money linked to them are getting kept safely in separate accounts.
Of the approximately 15 leases Realty Executives retains for several workplace locations in the Valley, there are four in specific in which renegotiations with the home owners had damaged down, making it necessary to file the bankruptcy petition, Aaron stated.
A motion filed along with the bankruptcy petition by Realty Executives attorneys Steven Jerome and Andrew Hardenbrook of Phoenix-primarily based law firm Snell & Wilmer requests instant court approval for Realty Executives to "reject," or walk away from, 4 of the 15 lease agreements.
These leases consist of two Tucson offices, 1 in Peoria and one more in north Scottsdale, which value the corporation a mixed $37,733 per month.
In exchange for breaking the leases, Realty Executives proposed incorporating the quantity nevertheless owed on every single lease, not to exceed 12 months' worth of payments, to the company's list of unsecured debts to be settled in the bankruptcy.
Carolyn Johnsen, a bankruptcy lawyer who is not involved in the case, explained the Realty Executives proposal is relatively typical, and that Chapter 11 reorganization is frequently utilized to break burdensome lease agreements.
Johnson, chair of the business restructuring and reorganization segment at law firm Jennings, Strauss & Salmon, claimed the U.S. Bankruptcy Court typically gives debtors broad discretion to determine which lease agreements and other support contracts to reject or hold in a reorganization proceeding.
The other party to just about every agreement has a appropriate to claim damages, which could or could not be compensated as element of the reorganization prepare, she said.
Aaron stated Realty Executives is in the method of renegotiating other lease specials, and that all round its landlords have been willing to deal.
Nevertheless, his client even now has about 120 days to add other leases to the listing of rejects if other negotiation efforts fall as a result of.
Aaron mentioned several dozens of other organizations have utilised Chapter eleven of the U.S. Bankruptcy Code recently to get out from underneath lease agreements signed a handful of several years ago, when the worth of business real estate was significantly increased.
"The purpose of this is to get the lease agreements appropriate-sized to meet our requires," Aaron claimed.
It is unclear how extended Realty Executives bankruptcy had been planning to file the bankruptcy petition. Aaron said it had not seriously thought to be bankruptcy as an option right up until previous week, when, for the 3rd time in recent weeks, proprietors of one of its branch offices locked agents and workers out of the developing for nonpayment of the lease.
However, the motion to reject the four lease agreements says the decision had been produced two weeks previously. "By mid-April of 2011, it grew to become apparent that the debtor could not full the necessary restructuring strategy, which needed important workplace lease terminations and modifications, without having the aid of a Chapter 11 filing," the motion explained.
1 of the company's landlords, Montana-primarily based Saypo Cattle Co., filed a grievance March 31 in Maricopa County Outstanding Court alleging nonpayment of lease and fraud.
Aaron characterized the fraud declare as an outrageous lie and explained there were a lot of complications with the north Scottsdale place, and that Saypo had been unwilling to operate out a offer.
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