Fairfield Residential is moving through its bankruptcy at record speed. The San Diego-based multifamily real estate operating company announced earlier this week that its official committee of unsecured creditors and Capmark, a lender, have signed off on a plan for Och-Ziff Real Estate Acquisitions, an affiliate of New York based Och-Ziff Capital Management Group, and the California State Teachers’ Retirement System (CalSTRS) to inject $125 million into the company’s reorganization plan.
“This is a very fast track for a case to get basically rocket shot out of bankruptcy,” says Ancela Nastasi, special counsel to the bankruptcy group at Golenbock Eiseman Assor Bell & Peskoe, a New York-based law firm. “This really points to a classic organization. That is something that is very rare in this day and age of restructuring and bankruptcy.”
Fairfield says the investments will allow it to make payments to unsecured creditors, support operations, and even provide the ammunition for future real estate acquisitions once Fairfield emerges from bankruptcy protection.
“A significant amount of time and effort has been put into discussions with Fairfield’s creditors and new equity partners, as well as the development of the plan of reorganization, to ensure the company successfully emerges from the Chapter 11 process, maximizes value for all stakeholders and maintains continuity of Fairfield’s property management, asset management, construction services, and general partner functions,” a Fairfield spokesperson told Multifamily Executive via email. “Under the plan of reorganization, the current management team will also remain with the company and will be investors in the new Fairfield.”
Ron Glass, whose Atlanta-based firm GlassRatner Advisory & Capital Group is the financial advisor to the official committee of unsecured creditors, says Fairfield did a lot of upfront work to push the case along. “[Fairfield] did a lot of the work before they filed, which is to their credit,” Glass says. “It looks like it might turn out pretty well.”
According to several market watchers, the move makes it even less likely that Fairfield will have to dump assets in a firesale, especially when it’s hinting at making acquisitions. It may execute opportunistic dispositions and acquisitions, but, under the plan, there won’t be a forced liquidation.
“We expect the company will maintain its current operating platform following emergence from the Chapter 11 process,” the spokesperson said. “The new money investment and the plan of reorganization are intended to allow us to emerge with a strong operating platform as well as continue to pursue unique opportunities for growth in the multifamily sector.”
The next step for Fairfield is its bankruptcy court’s hearing on the company’s disclosure statement on February 23, 2010. If that plan is passed, all of the creditors will vote on the reorganization plan. Creditors will be able to vote to vote to accept to reject the plan. The committee speaks on behalf of them. “It’s not a lock [the creditors accept the plan], but it [the committee approval] is a big hurdle to overcome,” Nastasi says. “The big hurdle, which was getting a confirmable plan on the table, has cleared.”
If the creditors approve the plan, it should go before the court on April 12. The company will determine its date of emergence from bankruptcy if it receives confirmation of its reorganization plan on that day.
Fairfield eagerly awaits this date. “We look forward to moving forward with this process, obtaining confirmation from the court of our plan of reorganization and emerging from Chapter 11 on an expedited basis,” said Christopher Hashioka, Fairfield’s president and CEO in a statement.