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Full title: Objection to confirmation of plan (RE: related document(s)700 Chapter 11 plan) filed by Creditor Spirit Realty, L.P.. (Krystinik, Jay)

Document posted on Mar 9, 2021 in the bankruptcy, 6 pages and 1 tables.

Bankrupt11 Summary (Automatically Generated)

Debtor Movie Grill Concepts XXXVIII, LLC and Spirit Realty, L.P. are parties to that certain lease of real property consisting of a 48,787 square foot, 11 auditorium movie theater located at 40 Powers Ferry Road, Marietta, Georgia 30062 (the “Lease”).Spirit objects to the Cure Amount proposed by the Debtors to be paid in connection with the assumption and assignment of the Lease, which does not reflect all amounts required to be paid to cure all defaults and compensate Spirit for all pecuniary losses sustained as a result of such defaults.As a condition to the assumption of an unexpired lease, § 365(b) requires that the trustee: (A) cures, or provides adequate assurance that the trustee will promptly cure, such default; (B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and (C) provides adequate assurance of future performance under such contract or lease.Although the Lease and Georgia law allow Spirit to recover its reasonable attorneys’ fees, Spirit is not seeking to recover such amounts from the Debtor at this time.The Debtors are required to pay accruing postpetition rent and charges on a timely basis as required by § 365(d)(3) and Spirit reserves its rights and remedies against the Debtors and their assignees as to any such additional sums.

List of Tables

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Keith M. Aurzada (SBN 24009880) Michael P. Cooley (SBN 24034388) Jay L. Krystinik (SBN 24041279) REED SMITH LLP 2501 N. Hardwood Street, Suite 1700 Dallas, Texas 75201 T: 469.680.4200 F: 469.680.4299 kaurzada@reedsmith.com mpcooley@reedsmith.com jkrystinik@reedsmith.com Attorneys for Spirit Realty, L.P. IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In re: § Chapter 11 § STUDIO MOVIE GRILL § HOLDINGS, LLC, et al. § Case No. 20-32633-11 § Debtor. § Jointly Administered LIMITED OBJECTION OF SPIRIT REALTY, L.P. TO DEBTORS’ SECOND AMENDED JOINT PLAN OF REORGANIZATION FOR STUDIO MOVIE GRILL HOLDINGS, LLC AND JOINTLY ADMINISTERED DEBTORS Spirit Realty, L.P. (“Spirit”) files this limited objection (the “Objection”) to the Debtors’ Second Amended Joint Plan of Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors [Docket No. 700] (the “Plan”)1 and the Debtors’ Notice of Filing of Second Supplement to the Second Amended Joint Plan of Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors [Docket No. 705] (the “Plan Supplement”) and respectfully state as follows: 1 Capitalized terms used but not defined herein have the meanings assigned to them in the Plan.

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1. Debtor Movie Grill Concepts XXXVIII, LLC and Spirit Realty, L.P. are parties to that certain lease of real property consisting of a 48,787 square foot, 11 auditorium movie theater located at 40 Powers Ferry Road, Marietta, Georgia 30062 (the “Lease”). 2. The Plan Supplement indicates that the Debtors intend to assume the Lease, and that the Lease will be an Assumed Contract under the Plan. See Plan Supplement, at Ex. L-2. The Plan Supplement further states that the cure amount due at emergence is $543,943 (the “Cure Amount”). Id. 3. This amount is incorrect. 4. Spirit objects to the Cure Amount proposed by the Debtors to be paid in connection with the assumption and assignment of the Lease, which does not reflect all amounts required to be paid to cure all defaults and compensate Spirit for all pecuniary losses sustained as a result of such defaults. Bankruptcy Code § 365(b) governs the financial obligations of a debtor that wishes to assume and assign a lease. As a condition to the assumption of an unexpired lease, § 365(b) requires that the trustee: (A) cures, or provides adequate assurance that the trustee will promptly cure, such default; (B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and (C) provides adequate assurance of future performance under such contract or lease. 11 U.S.C. § 365(b)(1) (emphasis added). 5. As one court has held, “Section 365(b)(1) is intended to provide protection to the non-debtor lessor to insure that he receives the full benefit of his bargain in the event of assumption.” In re Bon Ton Restaurant & Pastry Shop, Inc., 53 B.R. 789, 793 (Bankr. N.D. Ill. 1985);

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accord, In re Valley View Shopping Center, L.P., 260 B.R. 10, 25 (Bankr. D. Kansas 2001); In re Mushroom Transportation Co., Inc., 78 B.R. 754, 759 (Bankr. E.D. Pa. 1987). Indeed, “the cost of assumption is nothing short of complete mutuality and requires performance in full as if bankruptcy had not intervened.” In re Frontier Properties, Inc., 979 F.2d 1358, 1367 (9th Cir. 1992). Bankruptcy Code section 365(b)(1)(A) “clearly and unambiguously” requires the cure of all defaults before an unexpired lease of nonresidential real property may be assumed. In re Building Block Child Care Centers, Inc. (9th Cir. BAP 1999) 234 B.R. 762, 765; accord, In re Fifth Taste Concepts Las Olas, LLC, 325 B.R. 42, (Bankr. S.D. Fla. 2005) (“The purpose of § 365(b)(1)(A) is to preserve the entirety of an unexpired lease upon assumption and cure any defaults.” [emphasis in original]). Bankruptcy Code section 365(b)(1) measures defaults as of the “time of assumption.” See, e.g., In re Rachels Industries, Inc., 109 B.R. 797, 811-812 (Bankr. W.D. Tenn. 1990). 6. The Cure Notice under-reports the amounts necessary to cure existing defaults under the Lease and to compensate Spirit for its actual pecuniary losses. 7. As set forth below, the actual amount necessary to cure all defaults and assume the Lease identified in the Cure Notice (the “Actual Cure Amount”) is as follows:
Table 1 on page 3. Back to List of Tables
Proposed
Cure
Amount
Actual
Cure
Amount
$543,943 $750,340.76
8. The Actual Cure Amount is comprised of $552,597.99 owed as of the Petition Date, and no less than $197,742.77 that has become due under the Lease postpetition. The amounts owed to Spirit as of the Petition Date are as follows:

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Obligation Amount March 2020 Rent 72,974.27 April 2020 Rent 74,068.88 May 2020 Rent 74,068.88 June 2020 Rent 74,068.88 July 2020 Rent 74,068.88 August 2020 Rent 74,068.88 September 2020 Rent 74,068.88 October 2020 Rent (10/1-10/22) 52,565.01 Less: Rent Paid (17,354.57) Total Owed to Spirit as of Petition Date $552,597.99 9. The amounts that have become due under the Lease after the Petition Date are as follows: Date Category Amount 10/23/2020 - 10/31/2020 Rent 21,503.87 10/31/2020 Property Taxes (City of Marietta) 102,022.09 12/31/2020 Franchise Tax Reimbursement 147.93 March 2021 Rent 74,068.88 TOTAL: 197,742.77 10. These amounts are calculated through March 9, 2021 and do not include any (a) additional pecuniary losses incurred by Spirit but not yet identified as of the date hereof, (b) additional amounts due after March 9, 2021, and (c) year-end adjustments for common area maintenance, taxes, and percentage rent that may have accrued but have not yet become due and

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payable. Although the Lease and Georgia law allow Spirit to recover its reasonable attorneys’ fees, Spirit is not seeking to recover such amounts from the Debtor at this time. 11. Bankruptcy Code § 365(b)(1) measures defaults as of the “time of assumption.” See, e.g., In re Rachels Industries, Inc., 109 B.R. 797, 811-812 (Bankr. W.D. Tenn. 1990). Further, the sum identified above does not include rent and charges that may accrue after March 9, 2021, or may have accrued already but will not yet become due and payable until after such date. The Debtors are required to pay accruing postpetition rent and charges on a timely basis as required by § 365(d)(3) and Spirit reserves its rights and remedies against the Debtors and their assignees as to any such additional sums. 12. Spirit therefore objects to the Plan and the Plan Supplement to the extent the Debtors do not intend to pay the Actual Cure Amount in full. CONCLUSION AND PRAYER 13. Spirit respectfully requests the Court sustain this Objection, and grant Spirit such other relief to which they may be entitled. Dated: March 10, 2021 Respectfully submitted, REED SMITH LLP By: /s/ Jay L. Krystinik Keith M. Aurzada (SBN 24009880) Michael P. Cooley (SBN 24034388) Jay L. Krystinik (SBN 24041279) 2850 N. Harwood St., Ste. 1500 Dallas, Texas 75201 T: 469.680.4200 F: 469.680.4299 kaurzada@reedsmith.com mpcooley@reedsmith.com jkrystinik@reedsmith.com Attorneys for Spirit Realty, L.P.

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CERTIFICATE OF SERVICE The undersigned certifies that, on March 10, 2021, a true and correct copy of the foregoing document was served via the Court’s Electronic Case Filing (ECF) system upon all parties registered to receive electronic notices in this case, including counsel to the Debtors, counsel to the Committee, and the Office of the United States Trustee. Additionally, a copy will be emailed to the following: (i) counsel to the Debtors (frank@fjwright.law and jeff@fjwright.law); (ii) counsel to the Agent (bwallander@velaw.com and bfoxman@velaw.com); (iii) counsel to the Committee (jpomerantz@pszjlaw.com, rfeinstein@pszjlaw.com, sgolden@pszjlaw.com, and ryan.manns@nortonrosefulbright.com); and (iv) counsel to Crestline (jemazey@jonesday.com, mschneidereit@jonesday.com, and nmorin@jonesday.com). /s/ Jay L. Krystinik Jay L. Krystinik