Case GLT Doc 1824 Filed 11/01/18 Entered 11/01/18 15:15:24 Desc Main Document Page 1 of 9

Transcription

1 Document Page 1 of 9 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA In re: rue21, inc., et al., 1 Case No (GLT Debtors. Chapter 11 (Jointly Administered ARC NPHUBOH001, LLC, Centennial Real Estate Company, LLC, C.E., John Company, Inc., Deutsche Asset & Wealth Management, Foursquare Properties, Inc., Gem Realty Capital, Inc., KRE Colonie Owner, LLC, The Macerich Company, PGIM Real Estate, Southgate Mall Associates, LLP, Starwood Retail Partners LLC, and Vintage Real Estate, LLC, Movants, rue21, inc., et al., Respondent. Hearing Date: November 8, 2018, at 2:00 p.m. (prevailing Eastern Time Response Deadline: November 1, 2018 at 4:00 p.m. (prevailing Eastern Time Related to Doc. No. 912 REORGANIZED DEBTORS RESPONSE TO OBJECTION OF ARC NPHUBOH001, LLC, CENTENNIAL REAL ESTATE COMPANY, LLC, C.E. JOHN COMPANY, INC., DEUTSCHE ASSET & WEALTH MANAGEMENT, FOURSQUARE PROPERTIES, INC., GEM REALTY CAPITAL, INC., KRE COLONIE OWNER, LLC, THE MACERICH COMPANY, PGIM REAL ESTATE, SOUTHGATE MALL ASSOCIATES, LLP, STARWOOD RETAIL PARTNERS LLC, AND VINTAGE REAL ESTATE, LLC TO NOTICE OF FILING OF ASSUMED EXECUTORY CONTRACT AND UNEXPIRED LEASE SCHEDULE AND RESERVATION OF RIGHTS WITH RESPECT TO DEBTORS FIRST AMENDED JOINT PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE 1 The Reorganized Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: rue21, inc. (1645; Rhodes Holdco, Inc. (6922; r services, llc (9425; and rue services corporation (0396. The location of the Reorganized Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania

2 Document Page 2 of 9 The above-captioned reorganized debtors (collectively, the Reorganized Debtors and, before the Effective Date (as defined herein of the Plan, the Debtors file this response (the Response to the Objection of ARC NPHUBOH001, LLC, Centennial Real Estate Company, LLC, C.E., John Company, Inc., Deutsche Asset & Wealth Management, Foursquare Properties, Inc., Gem Realty Capital, Inc., KRE Colonie Owner, LLC, The Macerich Company, PGIM Real Estate, Southgate Mall Associates, LLP, Starwood Retail Partners LLC, and Vintage Real Estate, LLC to Notice of Filing of Assumed Executory Contract and Unexpired Lease Schedule and Reservation of Rights With Respect to Debtors First Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 912] (the Cure Objection filed by ARC NPHUBOH001, LLC, Centennial Real Estate Company, LLC, C.E., John Company, Inc., Deutsche Asset & Wealth Management, Foursquare Properties, Inc., Gem Realty Capital, Inc., KRE Colonie Owner, LLC, The Macerich Company, PGIM Real Estate, Southgate Mall Associates, LLP, Starwood Retail Partners LLC, and Vintage Real Estate, LLC (collectively, the Landlords. 2 In support of this Response, the Reorganized Debtors respectfully state as follows. JURISDICTION 1. The United States Bankruptcy Court for the Western District of Pennsylvania (the Bankruptcy Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b. The Reorganized Debtors confirm their consent, pursuant to rule 7008 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules, to the entry of a final order by the Bankruptcy Court in connection with the Cure Objection to the extent that it is later determined that the Bankruptcy 2 Capitalized terms used but not defined herein shall have the meanings set forth in the Lease (as defined herein. 2

3 Document Page 3 of 9 Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 2. Venue is proper pursuant to 28 U.S.C and The statutory predicate for the relief requested herein is sections 105 and 365 of the Bankruptcy Code. Background 4. On May 15, 2017 (the Petition Date, the Reorganized Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. 3 On May 17, 2017, the court entered an order [Docket No. 120] authorizing joint administration and procedural consolidation of these chapter 11 cases pursuant to Bankruptcy Rule 1015(b. 5. On July 12, 2017, the Reorganized Debtors filed the Debtors First Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (as amended and supplemented, the Plan [Docket No. 695]. 6. On August 7, 2017, the Reorganized Debtors filed the Notice of Filing of Assumed Executory Contracts and Unexpired Lease Schedule [Docket No. 836] (as amended and supplemented at Doc. Nos. 877, 944, and 947, the Assumption Notice. 7. On September 8, 2017, the Court entered an order confirming the Plan (the Confirmation Order. 8. The effective date of the Plan occurred on September 22, 2017 (the Effective Date. See Docket No A description of the Reorganized Debtors businesses and the reasons for commencing these chapter 11 cases are set forth in the Declaration of Todd M. Lenhart, Acting Chief Financial Officer and Senior Vice President of Accounting of rue21, inc. in Support of Chapter 11 Petitions and First Day Motions [Docket No. 8], as supplemented by the Addendum to Declaration of Todd M. Lenhart, Acting Chief Financial Officer and Senior Vice President of Accounting of rue21, inc., In Support of Debtors Chapter 11 Petitions and First Day Motions [Docket No. 194] (the First Day Declaration. 3

4 Document Page 4 of 9 BACKGROUND REGARDING THE LEASES 9. Pursuant to the Assumption Notice, the Reorganized Debtors indicated their intent to assume various unexpired leases of non-residential property, including the leases identified in Exhibit A (together, the Leases : 10. On August 21, 2018, the Landlords filed the Cure Objection to dispute the Reorganized Debtors proposed cure amounts. The Landlords assert the total balances owing under the Leases consisting of, among other things, base rent, attorneys fees, and common area maintenance fees, are not accurately reflected in the Assumption Notice. See Cure Objection at 2. OBJECTION 11. The Cure Objection should be overruled because the Reorganized Debtors, with assistance from the Landlords, made a good faith effort to reconcile and satisfy any outstanding defaults under the Leases since the Cure Objection was filed. To the Reorganized Debtors knowledge, all outstanding defaults under the Leases have been remedied. Indeed, the Reorganized Debtors believe the stipulations filed at docket numbers 1524, 1532, and 1546 resolved the Cure Objection in addition to the motion for administrative expenses referenced in each stipulation. 12. Under section 365(b(1 of the Bankruptcy Code, [i]f there has been a default in an executory contract or unexpired lease of the debtor, the [debtor-in-possession] may not assume such contract or lease unless, at the time of assumption of such contract or lease, the [debtor-in-possession] (A cures... such default[.] 11 U.S.C. 365(b(1(A. 13. If a debtor-in-possession chooses to assume an unexpired lease, it must assume the lease in its entirety. See In re CellNet Data Systems, Inc., 327 F.3d 242, 249 (3d Cir ( [t]his election [to assume] is an all-or-nothing proposition either the whole contract 4

5 Document Page 5 of 9 [or lease] is assumed or the entire contract [or lease] is rejected.. The unexpired lease must be assumed cum onere, with its benefits and its burdens. See In re LRP Mushrooms, Inc., 2010 WL , *5 (Bankr. E.D. Pa. July 13, 2010 (citing NLRB v. Bildisco & Bildisco, 465 U.S. 513, ( The Reorganized Debtors do not dispute their obligations under section 365(b(1 of the Bankruptcy Code to cure any defaults under the Leases prior to assumption, rather the Reorganized Debtors object to the Cure Objection to the extent that the Landlords claim there are continuing defaults under the Leases. 15. After the Cure Objection was filed, the Reorganized Debtors performed a lease audit on each of the Leases to calculate the amount of any outstanding defaults and on September 19, 2017, issued checks to the Landlords in full satisfaction of the outstanding defaults. 16. To the extent there are outstanding defaults under the Leases, the Landlords have failed to communicate such defaults to the Reorganized Debtors. 17. Accordingly, the Cure Objection should be overruled because the Reorganized Debtors satisfied known defaults under the Leases. The Reorganized Debtors are about ready to close the Bankruptcy Cases, and the Landlords non-responsiveness cannot be allowed to delay the closing of the cases. WHEREFORE, the Reorganized Debtors respectfully request that the Bankruptcy Court (a overrule the Cure Objection, (b find that the Reorganized Debtors have cured all defaults under the Leases, and (c grant such other and further relief as is just and proper. 5

6 Document Page 6 of 9 Dated: November 1, 2018 Jonathan S. Henes, P.C. (admitted pro hac vice George Klidonas (admitted pro hac vice KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York Telephone: ( Facsimile: ( Counsel to the Reorganized Debtors /s/ Jared S. Roach Eric A. Schaffer (PA I.D. #30797 Jared S. Roach (PA I.D. # REED SMITH LLP 225 Fifth Avenue Pittsburgh, Pennsylvania Telephone: ( Facsimile: ( Local Counsel to the Reorganized Debtors 6

7 Document Page 7 of 9 EXHIBIT A Leases

8 Document Page 8 of 9 LEASES ARC PHUBOH001, LLC Store No North Park Center Huber Heights, OH C.E. John Company, Inc. Store No. 636 Willamette Town Center Salem, OR Centennial Real Estate Company Store No. Brazos Mall Lake Jackson, TX Store No. Chico Mall Chico, CA Store No. Connecticut Post Mall Milford,CT Store No. 944 Fox Valley Mall Aurora, IL Store No. 744 Pueblo Mall Pueblo, CO CenterCal Properties, LLC Store No. Treasure Valley Marketplace Nampa, ID Store No. 873 Valley Mall Union Gap, WA Deutsche Asset & Wealth Management Store No. RiverGate Shopping Center Charlotte, NC Foursquare Properties, Inc. Store No. Plaza at Jordan Landing West Jordan, CT GEM Realty Capital, Inc. Store No. Green Tree Mall Clarksville, IN Store No. Valdosta Mall Valdosta, GA Goldman Sachs Realty Management, L.P. Store No Santa Maria Town Center Santa Maria, CA Store No. Colonie Center Albany, NY The Macerich Company Store No. Desert Sky Mall Phoenix, AZ Store No. Eastland Mall Evansville, IN Store No. Northpark Mall Davenport, IA 8

9 Document Page 9 of 9 Store No. Southpark Mall Moline, IL Store No. Southridge Mall Des Moines, IA Store No Superstition Springs Mesa, AZ Store No. Towne Mall Elizabethtown, NY Store No. Valley Mall Harrisonburg, VA Store No. Valley River Center Eugene, OR Store No. Wilton Mall Sarasota Springs, NY PGIM Real Estate Store No. Hillside Village Cedar Hill, TX Store No. 503 Southern Hills Mall Sioux City, IA Starwood Retail Partners LLC Store No Chicago Ridge Chicago Ridge, IL Store No Franklin Park Toledo, OH Store No Gateway Mall Lincoln, NE Store No. 928 Great Northern Mall North Olmsted, OH Store No. Kitsap Mall Silverdale, WA Store No Louis Joliet Joliet, IL Store No. MacArthur Center Norfolk, VA Store No. Northridge Center Northridge, CA Store No. Parkway Plaza El Cajon, CA Store No. Rimrock Mall Billings, MT Store No Solano Town Center Fairfield, CA Store No Southlake Mall Merrillville, IN Store No Southpark Mall Strongville, OH Southgate Mall Associates, LLP Store No Southgate Mall Missoula, MT Steadfast Companies, Inc. Store No Everett Mall Everett, WA Vintage Real Estate LLC Store No South Bay Pavilion Carson, CA Store No. 876 Southlake Mall Morrow, GA Store No The Mall at Whitney Field Leominster, MA Store No. 748 Wenatchee Valley Mall East Wenatchee, WA 9