Galleria 2425 Owner files Chapter 11 plan of reorganization

By Sarah Lizee

Olympia, Wash., Sept. 22 – Galleria 2425 Owner LLC filed a Chapter 11 plan of reorganization and disclosure statement Thursday with the U.S. Bankruptcy Court for the Southern District of Texas.

As a reminder, the case involves a single real estate asset located at 2425 West Loop South, Houston.

Under the plan, class 1 priority claims will be paid in full.

Class 2 claims are impaired. The debtor will pay the claims on the effective date, or when taxes become due and payable under the laws of the applicable taxing jurisdiction, or with quarterly deferred cash payments including applicable interest over a period of up to two years from the petition date of a value, as of the effective date, equal to the allowed claim.

The allowed secured claim of Caz Creek will be allowed in the amount of $698,006.68 and will be paid through 120 payments with interest at a rate of 10.95% for a monthly payment of $9,595.30.

The allowed secured claim of the National Bank of Kuwait, SAKP, New York Branch (NBK) will be paid in full within 10 years of the effective date by either the refinancing of the remaining unpaid portion of the allowed secured claim or the sale of the property.

Until the remaining unpaid portion of the allowed secured claim of NBK is refinanced or otherwise satisfied, which will occur by no later than 120 months from the effective date, the reorganized debtor will make monthly payments to NBK comprised of interest at the rate of 6% per annum along with principal amortized over a 30-year term.

The allowed secured claim of NBK will be determined by the value of NBK’s interest in the collateral securing the claim, which will be determined by agreement of the parties or by the bankruptcy court following a valuation proceeding.

The debtor said it believes the property is worth $18.6 million. As such, and because the respective taxing authorities and tax lenders hold a higher priority lien on the properties, the company believes that NBK’s allowed secured claim will be an amount equal to the difference between the value of the properties less the outstanding property taxes and senior debt owed with respect to the property, or about $16 million.

As such, the debtor believes NBK’s claim is under-secured and that NBK will have a deficiency claim against the debtor’s estate, which will be included and treated as a class 7 general unsecured claim under the plan.

Likewise, the allowed secured claim of 2425 WL, LLC will be determined by the value of its interest in the collateral securing its claim. The debtor believes 2425 WL is wholly unsecured and will be treated as class 6 claims under the plan.

Allowed class 6 unsecured claims arising from the provision of repair or maintenance services to the property will be paid 100% of the allowed amount without interest in eight consecutive equal quarterly payments.

Allowed class 7 general unsecured claims will receive a pro rata share of 11 equal quarterly payments, each in the amount of $200,000.

The allowed interests of the equity interest holders will be canceled and terminated on the effective date. Equity will be reissued to the new equity holder based on a $2.5 million contribution of new equity. The equity contribution is being made by an affiliated investor.

The Houston-based single-asset real estate company filed Chapter 11 bankruptcy on July 5 under case number 23-60036.

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