Case 1-18-45284-nhl Doc 173 Filed 11/16/18 Entered 11/16/18 11:49:17 Alan D. Halperin. Esq. Objection Date: November 16, 2018 Donna H. Lieberman, Esq. Time: 4:00 p.m. HALPERIN BATTAGLIA BENZIJA, LLP 40 Wall Street, 37 th Floor New York, New York 10005 Phone: (212) 765-9100; Fax: (212) 765-0964 ahalperin@halperinlaw.net dlieberman@halperinlaw.net Marc A. Klitenic, Esq. KANDEL KLITENIC LLP 9515 Deereco Road, Suite 1015 Timonium, MD 21093 Phone: (410) 561-6116; Fax: (410) 561-6120 mklitenic@mk2law.com Co-counsel to Office MD-1, Inc. UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK -------------------------------------------------------------x In re: SEASONS CORPORATE LLC, et al., Debtors. Chapter 11 Case No. 18-45284 (NHL) (Jointly Administered) -------------------------------------------------------------x OBJECTION OF LANDLORD OFFICE MD-1, INC. TO THE NOTICE PURSUANT TO BIDDING PROCEDURES ORDER OF (A) TRANSFERRED CONTRACTS, (B) CURE AMOUNTS, IF ANY, AND (C) RELATED PROCEDURES IN CONNECTION THEREWITH [D.N. 156] AND AMENDED EXHIBIT A TO SUCH NOTICE [D.N. 159] TO THE HONORABLE NANCY H. LORD, UNITED STATES BANKRUPTCY JUDGE: Office MD-1, Inc. ( Office MD ), by and through its undersigned counsel, submits this objection (the Objection ) to the cure amounts proposed in the Notice Pursuant To Bidding Procedures Order Of (A) Transferred Contracts, (B) Cure Amounts, If Any, and (C) Related Procedures In Connection Therewith [D.N. 156] and Amended Exhibit A To Such Notice [D.N. 159] (together, the Notice ). In support of this Objection, Office MD respectfully states:
Case 1-18-45284-nhl Doc 173 Filed 11/16/18 Entered 11/16/18 11:49:17 BACKGROUND 1. Office MD and one of the above-captioned debtors (individually the Debtor and together, the Debtors ) entered into a commercial lease for the premises known as 1628-1630 Reistertown Road, Pikesville, Maryland (the Leased Premises ) on or about July 21, 2014. Pursuant to a first amendment to lease dated March 27, 2015, the parties agreed that the lease commencement date was November 1, 2014, and a second amendment dated April 29, 2016 corrected an inadvertent error in the name of the tenant. (The lease and the first and second amendments are hereafter referred to as the Lease. ) (a) The Landlord s Motion 2. The Debtor has been in repeated breach of the Lease since early in the Lease term, with violations including failure to timely pay rent and real estate taxes due and payable as rent, and failure to properly maintain insurance. Office MD brought an eviction action against the Debtor in mid- August of 2018, upon the Debtor s failure to pay July or August rent. 3. That action was stayed upon the Debtors filing of voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on September 16, 2018 (the Petition Date ). 4. On October 30, 2018, Office MD filed a Motion for an Order (I) Compelling the Debtor to Immediately Reject the Lease, (II) Granting Landlord Relief from Stay to Pursue Its State Court Remedies, and (III) Compelling Immediate Payment of Accrued Post-Petition Obligations (the Landlord s Motion ) [D.N. 151]. The Landlord s Motion is scheduled to be heard on November 29, 2018 at 11:00 a.m. 5. As set forth in the declaration that accompanied the Landlord s Motion, base monthly rent under the Lease is currently $36,197.10, and no rent has been paid for the months of July, August or September of 2018. In addition, the Debtor has failed to, among other things, pay the real estate 2
Case 1-18-45284-nhl Doc 173 Filed 11/16/18 Entered 11/16/18 11:49:17 taxes of $36,423.68 that were due on September 30, 2018 pursuant to the Lease. As of the date of the declaration (October 30 th ) and as stated therein, the total amount that was due to Office MD, without the inclusion of the fees and expenses of the landlord s bankruptcy counsel, was $168,069.92. (b) The Debtors Sale Process 6. The Debtors filed an initial motion for approval of bidding procedures in connection with the sale of the Debtors assets on the Petition Date, and amended that motion on October 15, 2018, to, among other things, change stalking horse bidders. [D.N. 12, 109]. On October 18, 2018, a day after conducting a hearing to consider the motion, the Court entered an Order Approving Bidding Procedures for the Sale of Substantially All of the Debtors Assets, (B) Scheduling an Auction and a Sale hearing Related Thereto, (C) Approving the Form and Manner of Notice of the Auction and the Sale Hearing, and (D) Approving Bidding Protections (the Bidding Procedures Order ). The Bidding Procedures Order established a deadline by which a notice would be filed identifying the executory contracts and leases the proposed purchaser of the Debtors assets was interested in acquiring and the corresponding cure amounts with respect to those contracts and leases. 7. The proposed purchaser filed that notice on November 9, 2018, and stated in the notice that objections to either of (a) the assignability of leases and contracts or (b) the asserted cure amounts were due by November 16, 2018 at 4:00 p.m. However, the exhibit to the notice did not provide any cure amount for Office MD or many of the other landlords. 8. On November 13, 2018, the proposed purchaser filed an amended exhibit to the notice, which included amounts which the purchaser identified as proposed cure/arrears amount. (The notice and the amended exhibit have previously been defined as the Notice.) The amount shown as a cure amount for Office MD on the Notice is $49,040.00. 3
Case 1-18-45284-nhl Doc 173 Filed 11/16/18 Entered 11/16/18 11:49:17 OBJECTION 9. Office MD objects to both the assignment of its Lease to the proposed purchaser and to the cure amount asserted in the Notice. 10. Office MD notes that, as set forth above, the Landlord s Motion is pending and scheduled to be heard on November 29 th. Office MD believes that sufficient bases exist for the granting of the relief requested in the Landlord s Motion, and if the motion is in fact granted, the Lease will be rejected in advance of the proposed sale of the Debtors assets. In that event, the Debtors will be unable to assume and assign the Lease or convey the Leased Premises. 11. In addition, the cure amount stated in the Notice is incorrect. The amount identified by the proposed purchaser -- $49,040 -- appears to reflect what the proposed purchaser would like to pay, rather than what is actually due under the Lease. 1 12. As set forth in the Landlord s Motion and the attendant declaration, the Debtors owe (a) more than $100,000 in base rent for the months of July, August and September of 2018, (b) $36,423.68 in real estate taxes, (c) late fees for July, August and September (and now October), and (d) attorneys fees. A schedule of the amounts due, including attorneys fees as of October 31, 2018 2, is attached hereto as Exhibit B and totals $192,619.60 (the Cure Amount ). 3 13. In the event that the Lease has not been rejected prior to the closing of the proposed sale, assumption and assignment of the Lease is, pursuant to statute, conditioned on the Debtors compliance with the requirements of section 365 of the Bankruptcy Code, including, but not limited to, paying all amounts due and owing under the Leases through the effective date of the assumption and 1 A copy of the Lease was previously filed with the Landlord s Motion, but another copy is attached as Exhibit A to this Objection, for the convenience of the Court. 2 Additional attorneys fees have accrued since October 31 and continue to accrue. 3 Office MD notes that (as the Debtors and the proposed purchaser are aware) it holds a security deposit of $100,000. Provision of a security deposit by the tenant is a requirement under the Lease. 4
Case 1-18-45284-nhl Doc 173 Filed 11/16/18 Entered 11/16/18 11:49:17 assignment of the Lease. 4 14. The Cure Amount represents the known amounts due and owing to Office MD under the Lease, and as noted, includes attorneys fees only through October 31, 2018. The Cure Amount will increase to reflect attorneys fees after that date, and if the Lease is not rejected, may also increase prior to any actual date of assumption and assignment of the Lease if the Debtor does not timely pay all amounts that accrue thereunder. 15. Accordingly, Office MD expressly reserves its right to amend or supplement this Objection and the Cure Amount from time to time, and requests that the Debtors remain liable for, among other things: (a) post-petition rent and other charges under the Lease; (b) amounts accruing under the Lease which may be unbilled as of the date hereof; (c) any regular or periodic adjustment of charges under the Lease; (d) any non-monetary defaults; and/or (e) insurance, indemnification and other contractual obligations under the Lease. Such obligations are properly included in cure amounts pursuant to the statutory requirement that the Debtor cure all arrears in connection with assumption (with or without assignment). See 11 U.S.C. 365(b)(1). RESERVATION OF RIGHTS 16. Nothing in this Objection is intended to be, or should be construed as, a waiver by Office MD of any of its rights under the Lease, the Bankruptcy Code, or applicable law. Office MD expressly reserves all such rights, including, without limitation, the right to: (a) supplement and/or amend this Objection and to assert additional objections to the proposed assumption and assignment of the Lease on any and all grounds; (b) amend the Cure Amount; (c) assert additional non-monetary defaults under the Lease; (d) assert any rights for indemnification or contribution against the Debtors arising under the Lease; and (e) assert any further objections as it deems necessary or appropriate. 4 As noted in the Landlord s Motion, the Debtor is also in breach of its obligations to maintain 5
Case 1-18-45284-nhl Doc 173 Filed 11/16/18 Entered 11/16/18 11:49:17 CONCLUSION WHEREFORE, Office MD respectfully requests that this Court enter an order: (a) sustaining this Objection; and (b) granting Office MD such other and further relief as this Court deems just and appropriate under the circumstances. Dated: November 16, 2018 Respectfully submitted, HALPERIN BATTAGLIA BENZIJA, LLP /s/ Donna H. Lieberman Alan D. Halperin, Esq. Donna H. Lieberman, Esq. 40 Wall Street 37 th Floor New York, New York 10005 Telephone: (212) 765-9100 Facsimile: (212) 765-0964 ahalperin@halperinlaw.net dlieberman@halperinlaw.net -and- Marc A. Klitenic, Esq. KANDEL KLITENIC LLP 9515 Deereco Road, Suite 1015 Timonium, MD 21093 Telephone: (410) 561-6116 mklitenic@mk2law.com Co-counsel to Office MD-1, Inc. insurance. 6
Exhibit A
Case 1-18-45284-nhl Doc 173-2 Filed 11/16/18 Entered 11/16/18 11:49:17 Exhibit B
Case 1-18-45284-nhl Doc 173-2 Filed 11/16/18 Entered 11/16/18 11:49:17 OFFICE MD 1 1391 Sawgrass Corporate Pkwy Sunrise, FL 33323 SEASONS MARYLAND, LLC Account #0000788 1 68 18 Main Street invoice prepared 11/14/2018 Flushing, NY 11337 Charges through 10/31/2018 Attn: Mr. Zvi Bloom DATE CODE DESCRIPTION CHARGES PAYMENTS AMOUNT DUE 7/1/2018 RENT base rent July 36,197.10 0 36,197.10 8/1/2018 RENT base rent August 36,197.10 0 36,197.10 9/1/2018 RENT base rent September 36,197.10 0 36,197.10 9/30/2018 RTX real estate taxes 36,423.68 0 36,423.68 LAT late fee re taxes 1,821.18 0 1,821.18 7/7/2018 LAT late fee rent 1,809.86 0 1,809.86 8/7/2018 LAT late fee rent 1,809.86 0 1,809.86 9/7/2018 LAT late fee rent 1,809.86 0 1,809.86 10/7/2018 LAT late fee rent 1,809.86 0 1,809.86 8/22/2018 PROF attorneys' fees Klitenic 5,048.49 0 5,048.49 9/17/2018 PROF attorneys' fees Klitenic 3,985.83 0 3,985.83 10/9/2018 PROF attorneys' fees Klitenic 4,960.00 0 4,960.00 11/13/2018 PROF attorneys' fees Klitenic 8,006.00 0 8,006.00 11/14/2018 PROF attorneys' fees Halperin Battaglia 16,543.68 0 16,543.68 BALANCE DUE 192,619.60
Case 1-18-45284-nhl Doc 173-2 Filed 11/16/18 Entered 11/16/18 11:49:17 NOTES TO OFFICE MD 1, LLC INVOICE PREPARED 11/14/2018 All charges reflected above are amounts to which landlord is entitled under the lease and lease amendments for the property located at 1628 1630 Reistertown Road, Pikesville, Maryland. Real estate taxes are a tenant obligation under the lease. Taxes can be paid as early as 8/1/2018 for the tax period 7/1/2018 to 6/30/2019, and must be paid by 9/30/2018. Attorneys' fees for the Klitenic firm (general/real estate counsel) and for the Halperin Battaglia firm (bankruptcy counsel) are amounts accrued through 10/31/2018.