Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 1 of 23 Desc Main IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLUMBIA In re: TERRACE MANOR, LLC, Debtor. ) ) ) ) ) ) ) ) ) Case No.: 17-00175-SMT Chapter 11 OBJECTION TO DISTRICT OF COLUMBIA’S MOTION TO DISMISS CHAPTER 11 CASE PURSUANT TO SECTION 1112(b) OF THE BANKRUPTCY CODE Terrace Manor, LLC (the “Debtor”), the debtor and debtor-in-possession in the abovecaptioned case, hereby files this objection (the “Objection”) to the Motion to Dismiss Chapter 11 Case Pursuant to Section 1112(b) of the Bankruptcy Code and accompanying Memorandum of Law (together, the “Motion”) filed by the District of Columbia (the “District”), and in support thereof states as follows: The Debtor And Its Business Operations 1. The Debtor is a limited liability company organized under the laws of the State of Delaware. The Debtor is the owner of a 61 unit residential apartment building built in 1949 located at 3341-3353 23rd Street S.E., 3371-3373 23rd Street S.E., 2276 Savanah Street, S.E. and 2270-2272 Savanah Street, S.E. Washington, DC 20020 (the “Property”). The Debtor acquired the Property on December 24, 2012. 2. As set forth below, the Debtor has obtained a contract to sell the Property for $5,856,000.00. The Property is subject to a deed of trust securing a debt to EagleBank in the amount of $2,841,865.82 and real property tax liens totaling $29,776.79. The Debtor has approximately $1,530,000.00 in unsecured debt, the vast majority of which is owed to Sanford and its property manager, Oakmont Management Group (“Oakmont”).1 1 This amount does not include the unliquidated and disputed claim asserted by the District. Case 17-00175 3. Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 2 of 23 Desc Main However, the Debtor’s expenses greatly exceed its income. As of the filing of this bankruptcy case, only 13 of the 61 units at the Property were occupied pursuant to various rental leases generating maximum possible rents totaling $11,812.00 per month. See Exhibit A. Not all of the possible rents are actually collected from the tenants. The Debtor’s income statement for the first quarter of 2017 attached hereto as Exhibit B shows that the Debtor took in $28,606.12 in total income during the quarter, an average of only $9,535.37 per month. Its expenses, not including a one-time payment of $25,000.00 for pre-petition legal fees in connection with this bankruptcy case, totaled $82,163.79, an average of $27,387.93 per month. The Debtor also suffered considerable losses in 2016. The Debtor’s income statement for 2016 attached hereto as Exhibit C shows that the Debtor earned $113,789.51 in total income during 2016, an average of $9,482.46 per month. Its expenses (not including depreciation) totaled $460,317.78, an average of $38,359.82 per month. The Debtor has been in a negative cash flow situation during all of 2016 and 2017. 4. A summary of the Debtor’s income and expenses is below: Average Average Total Monthly Total Monthly Year Income Income Expenses Expenses 2016 $113,789.51 $9,482.46 $460,317.782 $38,359.82 2017 (to date) $28,606.12 $9,535.37 $82,163.793 $27,387.93 5. Average Total Net Monthly Loss Net Loss -$346,528.27 -$28,877.36 -$53,557.67 -$17,852.56 The Debtor’s losses are not sustainable on a long-term basis. The Debtor’s substantial operating shortfall was previously funded by loans from the Debtor’s parent company, Sanford Capital LLC (“Sanford”). With over $1,272,812 loaned to date and no end to the losses in sight, however, Sanford is no longer willing to fund the operations of the Debtor 2 The Debtor’s expenses in 2016 cited in this Objection do not include depreciation expenses included in the Income Statement attached as Exhibit B. 3 The Debtor’s expenses in 2017 cited in this Objection do not include a one-time $25,000.00 payment made in connection with this bankruptcy case included in the Income Statement attached as Exhibit C. 2 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 3 of 23 Desc Main going forward. The Debtor will be unable to pay its basic monthly expenses necessary to operate the Property. 6. Given the Debtor’s inability to pay its debts from cash flow, the Debtor determined that the filing of this case to effect an expedited sale of the Property was in the best interest of the Debtor and its creditors. The Debtor has obtained a sale contract (the “Sale Contract”) that, upon approval of this Court and subject to higher and better offers, provides for the sale of the Property for $5,856,000.00 (the “Sale Price”). The Sale Price will provide sufficient funds to pay all creditors in full. 7. The Debtor is advised that the proposed purchaser of the Property under the Sale Contract intends to commit in excess of $1.3 million to rehabilitate and refurbish the Property. 8. On April 10, 2017, the Debtor filed its Plan of Reorganization (the “Plan”) and Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code for Debtor’s Plan of Reorganization (the “Disclosure Statement”). See Docket Nos. 27, 28. The Plan provides for the full payment of the allowed claims of all creditors on the effective date of the Plan. Given the Plan’s proposal to pay all creditors in full, the Debtor also filed a motion to combine the hearing on the Plan and Disclosure Statement (the “Disclosure Statement Motion”) to obtain confirmation of the Plan on an expedited basis in order to minimize the cost to the estate and to accelerate both payments to creditors and the planned repairs and rehabilitation of the Property. Argument I. Balance Sheet Insolvency is Not a Prerequisite for Chapter 11 The District has no basis for its fundamental premise that the Debtor filed this case in bad faith because “there is no justification for bankruptcy protection, where Debtor’s assets far outweigh any reported liabilities.” See Docket No. 21, Memorandum at 10. Courts are clear that there is no requirement that a debtor must be insolvent, let alone balance sheet insolvent, to file a bankruptcy case. See, e.g., NMSBPCSLDHB, L.P. v. Integrated Telecom Express, Inc. (In re Integrated Telecom Express, Inc.), 384 F.3d 108, 121 (3d Cir. 2004) (“[A] debtor need not be insolvent before filing for bankruptcy protection.”); In re Terry, 543 B.R. 173, 182 (E.D. Pa. 3 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 4 of 23 Desc Main 2015) (“The Bankruptcy Code does not bar a solvent debtor from filing for bankruptcy protection.”); Marshall v. Marshall (In re Marshall), 721 F.3d 1032, 1055 (9th Cir. 2013) (“As to reorganizations under chapter 11, there is substantial reason for Congress to decide that a debtor should be eligible before the debtor becomes insolvent under a balance sheet test. The prospects for reorganizing a debtor in financial difficulty are much better when the debtor is still solvent than after it becomes insolvent.”) (citation omitted). To the contrary, both Congress and the courts have expressed a clear intention to allow debtors to file a bankruptcy case in order to prevent their financial situation from worsening to the point where such insolvency is inevitable. Official Comm. of Unsecured Creditors v. Nucor Corp. (In re SGL Carbon Corp.), 200 F.3d 154, 163 (3d Cir. 1999) (“It also is clear that the drafters of the Bankruptcy Code understood the need for early access to bankruptcy relief to allow a debtor to rehabilitate its business before it is faced with a hopeless situation.”); In re Johns-Manville Corp., 36 B.R. 727, 736 (Bankr. S.D.N.Y. 1984) (“[T]he drafters of the Code envisioned that a financially beleaguered debtor with real debt and real creditors should not be required to wait until the economic situation is beyond repair in order to file a reorganization petition.”). That the value of the Property exceeds the Debtor’s liabilities is not dispositive of whether the petition was filed in good faith. While insolvency may not be required, the Debtor acknowledges that a good faith bankruptcy filing does require “some degree of financial distress on the part of a debtor.” In re SGL Carbon Corp., 200 F.3d at 166 (“Courts . . . have consistently dismissed Chapter 11 petitions filed by financially healthy companies with no need to reorganize under the protection of Chapter 11.”). The financial distress need not even be extreme or beyond repair before a solvent debtor may file a bankruptcy case in good faith. Baker v. Latham Sparrowbrush Assocs. (In re Cohoes Indus. Terminal, Inc.), 931 F.2d 222, 228 (2d Cir. 1991) (“Although a debtor need not be in extremis in order to file such a petition, it must, at least, face such financial difficulty that, if it did not file at that time, it could anticipate the need to file in the future.”). 4 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 5 of 23 Desc Main The cash flow insolvency experienced by the Debtor is a clear and commonly cited example of financial distress warranting the filing of a bankruptcy case. In re Marshall, 721 F.3d at 1055 (“It is not uncommon for debtors to be solvent under the balance sheet test, and yet to have severe financial problems. The United States bankruptcy law is designed to provide relief from creditor pressures for debtors with cash flow difficulties, even where they are clearly solvent under a balance sheet test.”); In re Energy Future Holdings Corp., 561 B.R. 630, 633 (Bankr. D. Del. 2016) (finding good faith where the debtor filed a bankruptcy petition to prevent impending cash flow insolvency). Here, there can be no question that the Debtor is cash flow insolvent. The Debtor’s income has averaged less than $10,000.00 per month since the beginning of 2016, compared to monthly expenses averaging $38,359.82 in 2016 and $27,387.93 in 2017. The Debtor lost a total of $346,528.27 in 2016, not including depreciation expenses, and has already lost $53,557.67 to date in 2017, not including one-time expenses incurred in connection with this case. These substantial net losses constitute clear financial distress justifying the filing of this case at the present time. See In re Cohoes Indus. Terminal, Inc., 931 F.2d at 228. II. The Debtor’s Bankruptcy Case was Filed for a Proper Purpose To be filed in good faith a bankruptcy case must also be filed for a proper purpose. The Supreme Court has identified two of the basic purposes of Chapter 11 as (1) “preserving going concerns” and (2) “maximizing property available to satisfy creditors.” Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434, 453 (1999). Accord Toibb v. Radloff, 501 U.S. 157, 163-64, 115 L. Ed. 2d 145, 111 S. Ct. 2197 (1991) (discussing “the congressional purpose of deriving as much value as possible from the debtor’s estate”). As applied to liquidating chapter 11 cases, the test requires that the case “must either preserve some going concern value, e.g., by liquidating a company as a whole or in such a way as to preserve some of the company’s goodwill, or by maximizing the value of the debtor’s estate.” NMSBPCSLDHB, L.P. v. Integrated Telecom Express, Inc. (In re Integrated Telecom Express, Inc.), 384 F.3d 108, 5 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 6 of 23 Desc Main 120 (3d Cir. 2004). The Debtor meets this test here, as this case was filed for the clear purpose of preserving and maximizing the value of the estate. As set forth above, the Debtor is operating at a substantial net loss. The Debtor lost a total of $346,528.27 in 2016. Given that the Debtor’s income has not substantially changed since 2016, this loss is not likely to decrease in the current year. The Debtor’s operating losses largely have been funded by loans from its parent company, Sanford. Each successive loan has steadily depleted the equity remaining in the Debtor. More importantly, though, Sanford has lost faith that a reasonable resolution of the issues between the Debtor and the District can be reached and is no longer willing to indefinitely fund the Debtor’s shortfall. Without further loans from Sanford, the value of the Debtor likely will plummet. The roughly $9,500.00 in monthly income received by the Debtor is grossly insufficient to fund basic repairs and maintenance, pay utilities, and provide other basic services to the Property. Without these services, the Debtor is likely to lose its remaining tenants and suffer increased fines and other penalties imposed by the District. The condition of the Property will also likely deteriorate and lower its value, thus further eroding the value of the Debtor. The Debtor filed this case and proposed the Plan in order to stop the continued losses and preserve the value remaining in the estate. The Plan proposes to sell the Property for $5,856,000.00 to a buyer who, upon information and belief, intends to invest over $1.3 million to refurbish and redevelop the Property. All creditors will be paid in full on the effective date. The Plan preserves the maximum possible value for the estate going forward and is in the best interest of all parties involved, and thus serves a valid bankruptcy purpose. III. The District Has No Basis to Require Sanford to Indefinitely Fund the Debtor’s Operations The District alleges, without citing to any authority whatsoever, that this case was filed in bad faith because its parent company, Sanford, has the ability to fund the Debtor’s operations. See Docket No. 21, Memorandum at 12 (“Debtor has failed to show why it requires reorganization to effectuate the sale of the property. . . . Sanford Capital can continue to provide 6 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 7 of 23 Desc Main capital to the Debtor to operate until it is able to effectuate a sale of the property outside of bankruptcy.”). This is an extraordinary claim that finds no support in either the Bankruptcy Code or case law. The District’s premise that the Debtor has “ready access to capital infusions from its parent company” is false and based upon mere speculation by the District. See Docket No. 21, Memorandum at 2. Sanford has made clear that it is not willing to make indefinite and boundless loans to the Debtor. As the Debtor stated during the hearing on its motion to approve the use of cash collateral, Sanford indicated that it would fund certain necessary expenses to carry the Debtor through the sale of the Property in connection with the Plan. The Debtor anticipates that, with the Court’s approval, this can occur within three months of the petition date and has filed the Disclosure Statement Motion to expedite the sale process. Sanford’s willingness to make limited additional loans to ensure that the Debtor can pay its basic debts during this bankruptcy case does not, however, equate to a commitment or obligation to fund the Debtor indefinitely so that the sale can proceed on the District’s preferred lengthy timeline.4 Further, the District has not cited, and the Debtor has been unable to locate, any authority for the extraordinary proposition that the Debtor’s bankruptcy filing was in bad faith because its parent company has the financial ability to fund the Debtor’s operating shortfall. A parent company has no duty or obligation to continue to pump funds into a money-losing business simply because it has the ability to do so. Such a requirement would only result in the failure of both companies. This result is not what the drafters of the Bankruptcy Code intended and should not be required here. IV. The “Evidence” of Bad Faith Cited by the District is Unsupported by the Record The District puts forth a long list of “evidence” that it claims supports its contention that this case was filed in bad faith. Among the allegations are purportedly factual statements as well 4 The District incorrectly claims that the Debtor stated that it “has sufficient cash flow to continue its business.” As set forth above, the Debtor operates at a substantial loss. 7 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 8 of 23 Desc Main as statements regarding the Debtor’s intentions and motivations in this case that have no basis in the record or in actual fact.5 The District makes several claims regarding the Debtor’s motivation for filing this bankruptcy case that are pure conjecture. Most notably, the District repeats throughout the Motion that the Debtor filed this case “to further evade its obligations as a landlord to provide safe and habitable housing to its tenants.” See Docket No. 21, Motion at 2. This is simply not the case. As the Debtor argues in the Superior Court Litigation, it has already made all of the repairs necessary to address the alleged code violations identified by the District. The Debtor would not have made these repairs if it intended to file this case to avoid further responsibility. The Debtor also has sought to engage in good faith discussions with the District regarding a resolution that would address any additional issues with the Property identified by the District while permitting the Debtor to sell the Property pursuant to the Plan and Sale Contract. Instead, the District has filed a litany of pleadings seeking to undermine this bankruptcy case and continue the status quo for the tenants. The District continues to refuse to withdraw this Motion and persists in its efforts to dismiss of this case notwithstanding the Debtor’s agreement on April 25, 2017, to the appointment of a receiver with limited powers, subject to Bankruptcy Court approval, to make any necessary additional repairs to bring the Property up to code and to ensure the safety and habitability of the Property through the sale pursuant to the Plan. The Debtor is seeking to improve the tenants’ living conditions, but, ironically, is being prevented from doing so by the District. 5 In addition to the allegations addressed in this section, the District makes numerous factual allegations in the Motion regarding the Property, the Debtor, Sanford, and other parties. These allegations are the subject of ongoing litigation in the Superior Court for the District of Columbia (the “Superior Court Litigation”) and will be resolved in that litigation. See District of Columbia v. Terrace Manor, et al., 2016 CA 7767 (D.C. Super. Ct. 2016). Therefore, the Debtor will not address these allegations here, and reserves its right to address such allegations at the appropriate time. 8 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 9 of 23 Desc Main The District also states on several occasions that its “pending enforcement action is not identified in the Debtor’s [petition],” Docket No. 21, Memorandum at 8 (emphasis in original), and declares this to be evidence of the Debtor’s “attempt to hide the District’s legal proceeding” from the Court. Id. at 2. This contention is baseless. No section of the petition requires a listing of pending legal actions against the Debtor. Rather, this information is provided in the Schedules and Statement of Financial Affairs, which will be filed by the Debtor shortly and will include the District’s pending litigation. Further, the Debtor included a description of the District’s legal action in Article X of the Disclosure Statement. No effort was, or ever would be, made to hide the existence of such a lawsuit from the Court. The District next attacks the Debtor’s failure to list all eleven street addresses of the Property on the first page of the Petition as “misleading.” The District claims that “by omitting other addresses, the Debtor omits from its filing other buildings at the property with serious housing code violations.” Docket No. 21, Memorandum at 14. This was a simple drafting omission. The Debtor is unsure what advantage could possibly be gained from omitting these street addresses. Failing to include all eleven street addresses on the first page of the petition does not somehow exclude them from the Debtor’s bankruptcy case. The District also attacks the Debtor for its failure to answer affirmatively to question 12 of the Petition, which asks whether the Debtor owns “any real property . . . that needs immediate attention.” Docket No. 21, Memorandum at 14. In characterizing this response as a “striking omission,” the District assumes as fact what it is trying to prove in the Superior Court Litigation, and as of the date of the Motion has not yet proven. The Debtor contests the District’s claims that the Property is in need of further repairs to comply with District of Columbia housing codes. The District inspected the Property on several occasions prior to the Petition Date and provided the Debtor with a list of alleged violations. The Debtor remedied all violations identified by the District. Indeed, on April 24, 2017, the Debtor met with inspector Michael Lampro of the District, at which time he informed the Debtor that all housing code violations had been 9 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 10 of 23 Desc Main remedied. As of the petition date, the issues that would cause the Property to need further attention had been addressed. The Debtor answered question 12 accurately and in good faith. The District’s claim that the definition of “property that needs immediate attention. . . includes property that ‘poses or is alleged to pose a threat of imminent and identifiable hazard to public health or safety’” is similarly false. The District unilaterally expands the scope of Question 12. The question asks: “Does the debtor own or have possession of any real property or personal property that needs immediate attention?” The Debtor contends that it does not. While the District previously made allegations concerning the Property, the allegations were made well prior to the Petition Date. The Debtor investigated the allegations and repaired all issues identified by the District. As a result of these repairs, the Debtor considered the allegations to be addressed. The Debtor is not required to indefinitely list the Property in question 12 simply because an allegation was made and resolved sometime in the past. The Debtor contends that no further attention is needed and that its response is accurate and in good faith. V. The Dismissal of this Case is Not in the Tenants’ Best Interest As discussed at length above, the Debtor proposes to sell the Property to a purchaser willing to commit, upon information and belief, in excess of $1.3 million to the rehabilitation and redevelopment of the Property. The Debtor has a Sale Contract with the purchaser, subject to Bankruptcy Court approval, and is seeking an expedited confirmation process for the Plan to implement the sale. The long-term living conditions of the tenants will drastically improve under the Debtor’s proposal. The Debtor has been and remains willing to discuss its proposal with the District of Columbia and the tenants, and to address any questions or concerns that they may have. The Debtor also has communicated its willingness to engage with the District and the tenants to resolve any outstanding or alleged housing code violations or other safety issues with the Property while the sale process moves forward. In fact, on April 25, 2017, the Debtor agreed to the appointment of a receiver with limited powers, subject to Bankruptcy Court approval, to 10 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 11 of 23 Desc Main make any necessary additional repairs to bring the Property up to code and to ensure the safety and habitability of the Property through the sale pursuant to the Plan. The District’s desired result, in contrast, will result in the indefinite continuation of the status quo. The receiver sought by the District in the Superior Court Litigation is not a long-term solution. Under D.C. law, a receiver is permitted by statute only to cure any violations of the housing code and to maintain the Property at that minimum level. D.C. Code § 42–3651.01 (“The receiver shall not take actions inconsistent with this purpose or take actions other than those necessary and proper to the maintenance and repair of the rental housing accommodation.”). The tenants undoubtedly do not wish to be provided with the bare minimum accommodations required by law for the indefinite future. Unlike the Debtor, the District has put forth no proposal or plan that represents a long-term solution. The result sought by the District is not in the best interest of the tenants. Conclusion This bankruptcy case presents an opportunity to address the Debtor’s worsening financial issues, evidenced by its deepening cash flow insolvency and rapidly decreasing equity, while maximizing the value of the estate and substantially improving the living conditions for the tenants. These are legitimate purposes for a chapter 11 case. The litany of “evidence” cited by the District in support of its allegations of bad faith is nothing but groundless speculation and conjecture unsupported by actual facts. The Debtor’s sale proposal set forth in the Plan and proposed immediate repairs to the Property best serves the interests of the bankruptcy estate, the Debtor’s creditors, and the tenants. It is a long-term solution that will benefit all parties. Granting the Motion, in contrast, will at best perpetuate a status quo of bare minimum compliance with DC housing codes. Such a result is not in the best interest of any parties in this case. The Motion should be denied. 11 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 12 of 23 Desc Main WHEREFORE, the Debtor requests that the Court enter an Order (a) denying the relief requested in this Motion and (b) granting such other and further relief as is just and appropriate under the circumstances. Dated: April 26, 2017 Respectfully submitted, /s/ Brent C. Strickland WHITEFORD, TAYLOR & PRESTON L.L.P. Brent C. Strickland, Bar No. 452880 Nelson C. Cohen, Bar No. 192344 7501 Wisconsin Avenue, Suite 700W Bethesda, Maryland 20814-6521 410.347.9402 Fax: 410.223.4302 Email: bstrickland@wtplaw.com Proposed Counsel for the Debtor CERTIFICATE OF SERVICE I certify that on April 26, 2017 copies of the foregoing pleading were served electronically to all parties receiving electronic notices pursuant to the Court’s cm/ecf system.. /s/ Brent C. Strickland Counsel 12 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 13 of 23 Exhibit A 13 Desc Main Case 17-00175 Doc 64 OneSite Rents v3.0 03/29/2017 2:13:38PM Filed 04/26/17 Entered 04/26/17 16:50:02 Desc Main Document of 23 Oakmont ManagementPage Group -14 Terrace Manor Page 1 of 4 RENT ROLL DETAIL mgt-521-003 As of 03/29/2017 Parameters: Properties - ALL;Show All Unit Designations or Filter by - ALL;Subjournals - ALL;Exclude Formers? - Yes;Sort by - Unit;Report Type - Details + Summary;Show Unit Rent as - Market + Addl.; Details Unit/Lease Unit Unit Floorplan Designation Status Name 652 Vacant VACANT 1130 Occupied SQFT 41-B1 2x1 WD 41-101 3x2 LRG 41-201 3x2 LRG N/A 1130 Vacant 41-301 3x2 LRG N/A 1130 Vacant 43-101 3x2 LRG N/A 1130 43-201 3x2 LRG N/A 1130 43-301 3x2 LRG N/A 45-B1 2x1 HC N/A 45-101 3x2 LRG 45-201 3x2 LRG N/A N/A N/A Move-In Lease Lease Move-Out Start End 09/01/2000 08/30/2001 Market Trans Lease + Addl. Journal Code Rent Sub 1,300.00 09/01/2000 1,755.00 0.00 * RESIDENT RENT 1,157.00 Other Charges/ Credits 1,157.00 550.00 319.74 1,091.00 100.00 0.00 944.00 0.00 2,114.84 0.00 590.00 0.00 1,261.39 0.00 332.00 0.00 3,556.19 407.00 0.00 407.00 435.00 695.00 (1,501.12) 0.00 VACANT 0.00 * 0.00 * VACANT 1,755.00 0.00 * 0.00 * Vacant VACANT 1,755.00 0.00 * 0.00 * Vacant VACANT 1,755.00 0.00 * 0.00 * 1130 Vacant VACANT 1,755.00 0.00 * 0.00 * 740 Vacant VACANT 1,300.00 0.00 * 0.00 * Vacant VACANT 1,755.00 0.00 * 0.00 * N/A 1130 03/04/2005 Occupied 03/04/2005 03/30/2006 1,755.00 RESIDENT RENT 1,091.00 0.00 45-301 3x2 LRG N/A 1130 Vacant VACANT 1,755.00 0.00 * 0.00 * 47-B1 1x1 N/A 565 Vacant VACANT 1,056.00 0.00 * 0.00 * 47-101 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 47-102 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 47-201 2x1 N/A 620 Occupied 47-202 2x1 N/A 620 47-301 2x1 N/A 620 47-302 2x1 N/A 49-B1 2x1 49-101 05/01/2003 05/01/2003 04/30/2004 1,300.00 RESIDENT RENT 944.00 0.00 Vacant VACANT 1,300.00 0.00 * 0.00 * Vacant VACANT 1,300.00 0.00 * 0.00 * 620 Vacant VACANT 1,300.00 0.00 * 0.00 * N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 49-102 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 49-201 2x1 620 Occupied 49-202 2x1 N/A N/A 620 Occupied 06/18/2003 06/18/2003 04/07/1998 04/07/1998 06/17/2004 1,300.00 RESIDENT RENT 590.00 04/30/1999 1,300.00 RESIDENT RENT 332.00 SUB SUBRENT 407.00 0.00 49-301 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 49-302 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 51-101 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 51-102 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 51-201 2x1 Vacant VACANT 1,300.00 0.00 * 0.00 * 51-202 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 51-301 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 51-302 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 53-B1 1x1 HC N/A 565 Vacant VACANT 1,056.00 0.00 * 0.00 * 53-101 3x2 LRG N/A 1130 Occupied * Indicates amounts not included in detail totals N/A 620 01/16/1997 01/16/1997 01/15/1998 1,755.00 RESIDENT RENT 435.00 Dep Balance On Hand 0.00 * 1,755.00 1130 Total Billing 0.00 Case 17-00175 Doc 64 OneSite Rents v3.0 03/29/2017 2:13:38PM Filed 04/26/17 Entered 04/26/17 16:50:02 Desc Main Document of 23 Oakmont ManagementPage Group -15 Terrace Manor Page 2 of 4 RENT ROLL DETAIL mgt-521-003 As of 03/29/2017 Parameters: Properties - ALL;Show All Unit Designations or Filter by - ALL;Subjournals - ALL;Exclude Formers? - Yes;Sort by - Unit;Report Type - Details + Summary;Show Unit Rent as - Market + Addl.; Details Unit/Lease Unit Unit Floorplan Designation Move-In Lease Lease Move-Out Start End Market Trans Lease + Addl. Journal Code Rent SQFT Status Name VACANT 1,755.00 VACANT 1,056.00 Sub SUB 53-201 3x2 LRG N/A 1130 Vacant 70-101 1x1 WD N/A 565 Vacant SUBRENT 636.00 Other Charges/ Credits 0.00 0.00 * 0.00 * 0.00 * 0.00 * 942.00 0.00 942.00 0.00 2,097.94 1,300.00 Occupied 06/14/2010 06/14/2010 06/15/2010 1,056.00 RESIDENT RENT 736.00 0.00 736.00 815.00 4,643.70 Occupied 07/02/2009 07/02/2009 07/01/2010 1,300.00 RESIDENT RENT 944.00 0.00 944.00 0.00 (555.37) Occupied 01/01/2014 01/01/2014 08/31/2015 1,056.00 RESIDENT CONC/SPECL 0.00 (803.00) 0.00 0.00 0.00 803.00 0.00 971.00 825.00 1,312.45 Occupied 70-201 1x1 WD N/A 565 70-202 2x1 WD N/A 652 70-301 1x1 WD N/A 565 , RESIDENT RENT 70-302 2x1 WD N/A 652 Vacant VACANT 1,300.00 0.00 * 0.00 * 71-101 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 71-102 2x1 N/A 620 Occupied 71-201 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 71-202 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 71-301 2x1 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 71-302 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 72-101 3x2 SML N/A 954 Vacant VACANT 1,755.00 0.00 * 0.00 * 72-201 3x2 SML N/A 954 Vacant VACANT 1,755.00 0.00 * 0.00 * 72-301 3x2 SML N/A 954 Vacant VACANT 1,755.00 0.00 * 0.00 * 73-101 2x1 WD N/A 652 Vacant VACANT 1,300.00 0.00 * 0.00 * 73-102 2x1 WD N/A 652 Vacant VACANT 1,300.00 0.00 * 0.00 * 73-201 2x1 Vacant VACANT 1,300.00 0.00 * 0.00 * 73-202 2x1 620 05/01/2006 10/01/2007 Occupied 05/01/2006 10/01/2007 04/30/2007 09/30/2008 1,300.00 RESIDENT RENT 1,300.00 RESIDENT RENT 1,300.00 RESIDENT RENT 971.00 901.00 923.00 0.00 0.00 73-301 2x1 N/A 620 Occupied 73-302 2x1 N/A 620 Vacant VACANT 1,300.00 0.00 * 0.00 * 76-101 1x1 N/A 565 Vacant VACANT 1,056.00 0.00 * 0.00 * 76-102 1x1 N/A 565 Vacant VACANT 1,056.00 0.00 * 0.00 * 76-201 1x1 N/A 565 Vacant VACANT 1,056.00 0.00 * 0.00 * 76-202 1x1 Vacant VACANT 1,056.00 0.00 * 0.00 * 0.00 * 0.00 * 0.00 * 0.00 * N/A 565 09/01/1994 09/01/1994 08/31/1995 76-301 1x1 N/A 565 Vacant VACANT 1,056.00 76-302 1x1 N/A 565 Vacant VACANT 1,056.00 Totals: * Indicates amounts not included in detail totals 636.00 08/30/2005 652 N/A 0.00 09/01/2004 N/A 620 636.00 09/01/2004 2x1 WD N/A Dep Balance On Hand RESIDENT RENT 70-102 N/A Total Billing 82,986.00 11,812.00 0.00 (803.00) 901.00 99.00 2,463.35 923.00 550.00 30,411.80 11,009.00 3,634.00 Case 17-00175 Doc 64 OneSite Rents v3.0 Filed 04/26/17 Entered 04/26/17 16:50:02 Desc Main Document of 23 Oakmont ManagementPage Group -16 Terrace Manor Page 3 of 4 RENT ROLL DETAIL mgt-521-003 03/29/2017 2:13:38PM As of 03/29/2017 Parameters: Properties - ALL;Show All Unit Designations or Filter by - ALL;Subjournals - ALL;Exclude Formers? - Yes;Sort by - Unit;Report Type - Details + Summary;Show Unit Rent as - Market + Addl.; Amt / SQFT: Market = 44,139 SQFT; Leased = 9,544 SQFT; Average Floorplan Average Market Average Leased Market + Addl. Amt / SQFT Leased Amt / SQFT Units Occupied Units # Units SQFT Occupancy % Available 1x1 7 565 1,056.00 1.87 0.00 1x1 HC 1 565 1,056.00 1.87 0.00 0.00 0.00 7 0.00 0.00 1x1 WD 3 565 1,056.00 1.87 769.50 1.36 2 66.67 1 1 2x1 29 620 1,300.00 2.10 844.67 1.36 6 20.69 23 2x1 HC 1 740 1,300.00 1.76 0.00 0.00 0.00 1 2x1 WD 6 652 1,300.00 1.99 943.00 1.45 2 33.33 4 3x2 LRG 11 1,130 1,755.00 1.55 1,106.33 0.98 3 27.27 8 3x2 SML 3 954 1,755.00 1.84 0.00 0.00 Totals / Averages: 61 724 1,360.43 1.88 908.62 1.26 Occupancy and Rents Summary for Current Date Unit Status Market + Addl. Occupied, no NTV 17,777.00 # Units 13 Potential Rent 11,812.00 Occupied, NTV - 0 - Occupied NTV Leased - 0 - Vacant Leased - 0 - Admin/Down - 0 - Vacant Not Leased 65,209.00 48 65,209.00 Totals: 82,986.00 61 77,021.00 Summary Billing by Sub Journal for Current Date Sub Journal RESIDENT Amount 9,966.00 SUB 1,043.00 Total: 11,009.00 Summary Billing by Transaction Code for Current Date Code CONC/SPECL Amount (803.00) 13 0.00 3 21.31 48 Case 17-00175 Doc 64 OneSite Rents v3.0 03/29/2017 2:13:38PM Filed 04/26/17 Entered 04/26/17 16:50:02 Desc Main Document of 23 Oakmont ManagementPage Group -17 Terrace Manor Page 4 of 4 RENT ROLL DETAIL mgt-521-003 As of 03/29/2017 Parameters: Properties - ALL;Show All Unit Designations or Filter by - ALL;Subjournals - ALL;Exclude Formers? - Yes;Sort by - Unit;Report Type - Details + Summary;Show Unit Rent as - Market + Addl.; Summary Billing by Transaction Code for Current Date Code RENT Amount 10,769.00 SUBRENT 1,043.00 Total: 11,009.00 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 18 of 23 Exhibit B 14 Desc Main Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 19 of 23 Desc Main Terrace Manor Apartments Income Statement March 31, 2017 Month Ending March 31, 2017 Year To Date March 31, 2017 Actual Actual Income Rental Income Net Rental Income 4010.000 - Rent 4030.000 - Rent from Subsidy / Third Party Total Net Rental Income 75,978.00 1,043.00 77,021.00 227,934.00 3,129.00 231,063.00 (191.18) (191.18) 76,829.82 (5,425.05) (5,425.05) 225,637.95 (65,209.00) (803.00) (66,012.00) (195,627.00) (2,409.00) (198,036.00) 0.12 332.18 332.30 0.12 1,004.05 1,004.17 11,150.12 28,606.12 Payroll & Related 6020.000 - Payroll - Office and Clerical 6100.000 - Payroll Taxes 6210.000 - Group Health Insurance 6230.000 - Workers' Compensation Total Payroll & Related 5,701.77 465.60 42.43 0.00 6,209.80 13,969.83 1,361.48 140.95 (489.30) 14,982.96 Management & Professional Fees 5610.000 - Management Fees 5630.000 - Legal Services 5640.000 - Other Professional Services Total Management & Professional Fees 3,050.00 25,000.00 518.63 28,568.63 9,150.00 25,290.54 1,716.45 36,156.99 0.00 366.53 79.13 60.44 0.00 506.10 260.25 1,144.60 243.53 60.44 (157.41) 1,551.41 1,065.34 1,187.25 2,252.59 3,664.82 2,999.27 6,664.09 209.26 209.26 679.38 679.38 1,659.45 1,947.08 Adjustments to Rental Income 1200.000 - Accounts due from Residents Total Adjustments to Rental Income Total Rental Income Vacancy, Concessions & Collection Losses 4510.000 - Vacancy Loss 4540.000 - One-Time Special or Allowance Totals Vacancy, Concessions & Collection Losses Other Income 4710.000 - Interest Income 4810.000 - Late Charges Total Other Income Total Income Expenses Administrative Expenses 5160.000 - Office Supplies and Equipment 5170.000 - Data Processing and Software 5175.000 - Bank Charges 5120.000 - Office Equipment Rental 5140.000 - Telephone and Yellow Pages Total Administrative Expenses Utilities 7510.000 - Utilities - Electricity 7530.000 - Utilities - Water Total Utilities Contract Services 7610.000 - Contract - Trash Disposal Total Contract Services Repairs & Maintenance 7020.000 - Supplies/Spare Parts Created on: 04/17/2017, 01:47 PM Page 1 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 20 of 23 Desc Main Terrace Manor Apartments Income Statement March 31, 2017 Month Ending March 31, 2017 Actual 7100.000 - HVAC 7110.000 - Contract Repair Services 7140.000 - Plumbing Supplies and Services 7150.000 - Electrical Supplies and Services 7190.000 - Window and Door Repairs 7200.000 - Keys and Locks Total Repairs & Maintenance Miscellaneous Expense 5725.000 - Parking Expense Total Miscellaneous Expense Taxes & Insurance 8010.000 - Ad Valorem (Property) Taxes 8030.000 - Other Taxes 8120.000 - Liability Insurance Total Taxes & Insurance Total Expenses Net Operating Income (Loss) Debt Services 8080.000 - Mortgage Interest Total Debt Services Non-Operating Income/Expenses 9020.000 - Penalties and Fines Total Non-Operating Income/Expenses Net Income (Loss) Created on: 04/17/2017, 01:47 PM Year To Date March 31, 2017 Actual 52.26 1,200.00 1,275.72 0.00 0.00 0.00 4,187.43 926.55 1,200.00 1,714.07 380.00 5.25 7.38 6,180.33 0.00 0.00 2.31 2.31 2,312.09 250.00 1,843.42 4,405.51 6,936.27 250.00 5,530.26 12,716.53 46,339.32 78,934.00 (35,189.20) (50,327.88) 12,933.77 12,933.77 26,729.79 26,729.79 0.00 0.00 1,500.00 1,500.00 (48,122.97) (78,557.67) Page 2 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 21 of 23 Exhibit C 15 Desc Main Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 22 of 23 Desc Main Terrace Manor Apartments Income Statement December 31, 2016 Month Ending December 31, 2016 Year To Date December 31, 2016 Actual Actual Income Rental Income Net Rental Income 4010.000 - Rent 4030.000 - Rent from Subsidy / Third Party Total Net Rental Income 76,167.00 854.00 77,021.00 905,032.61 15,506.26 920,538.87 Adjustments to Rental Income 1200.000 - Accounts due from Residents 2200.000 - Prepaid Accounts - Residents Total Adjustments to Rental Income Total Rental Income (7,057.33) (3,387.49) (10,444.82) 66,576.18 (15,508.98) (1,284.00) (16,792.98) 903,745.89 Vacancy, Concessions & Collection Losses 4510.000 - Vacancy Loss 4540.000 - One-Time Special or Allowance 4560.000 - Write-Off Uncollectable 4590.000 - Miscellaneous Credit Totals Vacancy, Concessions & Collection Losses (65,209.00) (803.00) 0.00 0.00 (66,012.00) (774,533.11) (9,636.00) (4,376.00) (3,545.50) (792,090.61) 0.13 289.82 289.95 0.51 2,133.72 2,134.23 854.13 113,789.51 Payroll & Related 6020.000 - Payroll - Office and Clerical 6040.000 - Payroll - Maintenance 6050.000 - Payroll Fees 6100.000 - Payroll Taxes 6120.000 - Employer FUTA 6130.000 - Employer SUTA 6140.000 - Employer Medicare 6210.000 - Group Health Insurance 6220.000 - Other Employee Benefits 6230.000 - Workers' Compensation Total Payroll & Related 5,215.09 0.00 0.00 363.77 0.00 0.00 0.00 56.09 0.00 0.00 5,634.95 63,668.10 189.26 204.82 3,597.68 71.79 325.60 1,162.53 873.39 27.03 952.77 71,072.97 Management & Professional Fees 5610.000 - Management Fees 5620.000 - Accounting Services 5630.000 - Legal Services 5640.000 - Other Professional Services 5645.000 - Move-out/Vacate Expense Total Management & Professional Fees 3,050.00 0.00 12,972.50 338.17 0.00 16,360.67 36,600.00 1,600.00 30,484.77 7,520.80 132.77 76,338.34 58.90 324.79 79.14 37.71 0.00 75.60 576.14 1,595.44 4,109.14 655.15 37.71 2,293.20 752.08 9,442.72 Other Income 4710.000 - Interest Income 4810.000 - Late Charges Total Other Income Total Income Expenses Administrative Expenses 5160.000 - Office Supplies and Equipment 5170.000 - Data Processing and Software 5175.000 - Bank Charges 5180.000 - Postage, Courier, and Freight 5130.000 - Dues and Subscriptions 5140.000 - Telephone and Yellow Pages Total Administrative Expenses Created on: 04/19/2017, 04:05 PM Page 1 Case 17-00175 Doc 64 Filed 04/26/17 Entered 04/26/17 16:50:02 Document Page 23 of 23 Desc Main Terrace Manor Apartments Income Statement December 31, 2016 Utilities 7510.000 - Utilities - Electricity 7530.000 - Utilities - Water Total Utilities Month Ending December 31, 2016 Year To Date December 31, 2016 Actual Actual 681.32 906.01 1,587.33 11,501.15 47,893.72 59,394.87 238.85 0.00 0.00 0.00 5.09 164.83 408.77 8,960.35 1,362.78 968.58 (256.40) 98.40 4,507.45 15,641.16 319.34 1,528.60 0.00 0.00 58.59 0.00 0.00 0.00 175.00 2,081.53 16,341.67 10,405.18 11,819.67 4.02 (1,296.24) 1,565.30 2,900.00 365.87 525.00 42,630.47 13.52 0.00 0.00 13.52 13.52 28.59 14.71 56.82 2,141.29 0.00 0.00 632.50 2,773.79 25,695.48 2,544.70 250.00 7,590.00 36,080.18 29,436.70 310,657.53 (28,582.57) (196,868.02) Debt Services 8080.000 - Mortgage Interest Total Debt Services 12,933.77 12,933.77 146,955.25 146,955.25 Non-Operating Income/Expenses 8510.000 - Depreciation Expense 9020.000 - Penalties and Fines Total Non-Operating Income/Expenses 35,404.00 0.00 35,404.00 35,404.00 2,705.00 38,109.00 (76,920.34) (381,932.27) Contract Services 7610.000 - Contract - Trash Disposal 7620.000 - Contract - Pest Control 7630.000 - Contract - Landscape / Yard Care 7640.000 - Contract - Security Patrol 7650.000 - Contract - Call Center 7660.000 - Contract - Turnover Services Total Contract Services Repairs & Maintenance 7020.000 - Supplies/Spare Parts 7100.000 - HVAC 7110.000 - Contract Repair Services 7130.000 - Paint and Painting Services 7140.000 - Plumbing Supplies and Services 7150.000 - Electrical Supplies and Services 7170.000 - Roof Repairs 7190.000 - Window and Door Repairs 7210.000 - Carpet and Floor Cleaning / Repair Total Repairs & Maintenance Miscellaneous Expense 5700.000 - Meals & Entertainment 5720.000 - Vehicle Expense 5725.000 - Parking Expense Total Miscellaneous Expense Taxes & Insurance 8010.000 - Ad Valorem (Property) Taxes 8020.000 - Fees and Duties 8030.000 - Other Taxes 8120.000 - Liability Insurance Total Taxes & Insurance Total Expenses Net Operating Income (Loss) Net Income (Loss) Created on: 04/19/2017, 04:05 PM Page 2