Motion for Order Approving, 1) Sale of Glen Ivy Golf Course, 2) Overbid

Transcription

Case 2:14-cv-02334-JFW-MRW Document 413 Filed 02/10/16 Page 1 of 21 Page ID #:8523
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DAVID R. ZARO (BAR NO. 124334)
TED FATES ~AR NO. 227809)
TIM C. HSU BAR NO. 279208)
ALLEN MAT INS LECK GAMBLE
MALLORY & NATSIS LLP
515 South Figueroa Street, Ninth Floor
Los Angeles~Califomia 90071-3309
Phone: (213 622-5555
Fax: (213) 20-8816
E-Mai1: [email protected]
[email protected]
[email protected]
Attorneys for Court-appointed Receiver
KRISTAL. FREITAG
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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WESTERN DIVISION
12 SECURITIES AND EXCHANGE
COMMISSION,
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Plaintiff,
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v.
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WORLD CAPITAL MARKET INC.;
16 WCM777 INC.; WCM777 LTD. d/b/a
WCM777 ENTERPRISES, INC.; and
17 MING XU a/k/a PHIL MING XU,
Case No. CV-14-2334-JFW-MRW
NOTICE OF MOTION AND MOTION
FOR ORDER APPROVING: ( 1) SALE
OF GLEN IVY GOLF COURSE, (2)
OVERBID PROCEDURES, AND (3)
REAL ESTATE BROKER'S
COMMISSION; MEMORANDUM OF
POINTS AND AUTHORITIES
Date:
Time:
Ctrm:
Judge:
Defendants,
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March 14, 2016
1 :30 p.m.
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Hon. John F. Walter
19 KINGDOM CAPITAL MARKET, LLC;
MANNA HOLDING GROUP, LLC;
20 MANNA SOURCE INTERNATIONAL,
INC.; WCM RESOURCES, INC.;
21 AEON OPERATING, INC.; PMX
JEWELS, LTD.; TOPACIFIC INC.;
22 TO PACIFIC INC.; VINCENT J.
MESSINA; and INTERNATIONAL
23 MARKET VENTURES,
Relief Defendants.
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TO ALL INTERESTED PARTIES:
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PLEASE TAKE NOTICE that on March 14, 2016, at 1:30 p.m. in
28 Courtroom 16 of the above-entitled Court, located at 312 North Spring Street, Los
LAW OFFICES
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Allen Matkins Leck Gamble
Mallory & Natsis LLP
I 034556.07 /LA
NOTICE OF MOTION AND MOTION FOR ORDER APPROVING AND
AUTHORIZING SALE OF GLEN IVY GOLF COURSE
1 Angeles, California 90012, Krista L. Freitag (the "Receiver"), the Court-appointed
2 permanent receiver for Defendants World Capital Market Inc.; WCM777 Inc.;
3 WCM777 Ltd. d/bla WCM777 Enterprises, Inc.; and Relief Defendants Kingdom
4 Capital Market, LLC; Manna Holding Group, LLC; Manna Source
5 International, Inc.; WCM Resources, Inc.; ToPacific Inc.; To Pacific Inc.; and their
6 subsidiaries and affiliates (collectively, "Receivership Entities"), will and hereby
7 does move the Court for an Order Approving: (1) Sale of Glen Ivy Golf Course, (2)
8 Overbid Procedures, and (3) Real Estate Broker's Commission.
9
This Motion is based on this Notice of Motion and Motion, the attached
10 Memorandum of Points and Authorities, the Declaration of Krista L. Freitag, the
11 documents and pleadings already on file in this action, and upon such further oral
12 and documentary evidence as may be presented at the time of the hearing.
13
Procedural Requirements: If you oppose this Motion, you are required to
14 file your written opposition with the Office of the Clerk, United States District
15 Court, 312 North Spring Street, Los Angeles, California 90012 and serve the same
16 on the undersigned not later than twenty-one (21) calendar days prior to the hearing.
17
IF YOU FAIL TO FILE AND SERVE A WRITTEN OPPOSITION by the
18 above date, the Court may grant the requested relief without further notice. This
19 Motion is made following the conference of counsel pursuant to L.R. 7-3.
20
21 Dated: February 10, 2016
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ALLEN MATKINS LECK GAMBLE
DAVID R. ZARO
TED FATES
TIMC.HSU
By:
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Isl Tim C. Hsu
TIMC.HSU
Attorneys for Court-appointed
Receiver KRISTAL. FREITAG
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LAW OFFICES
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1034556.07/LA
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TABLE OF CONTENTS
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2
Page
3 I.
INTRODUCTION .......................................................................................... 1
4 II.
RELEVANT FACTS ...................................................................................... 2
5
A.
Background of Property and Operations .............................................. 2
6
B.
Neighboring Residential Development's Homeowner's
Association ........................................................................................... 3
C.
Adjacent Property Owners and Water Features ................................... 5
D.
The Receiver's Marketing Efforts ......................................................... 5
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III.
PURCHASE AND SALE AGREEMENT ..................................................... 7
IV.
PROPOSED OVERBID PROCEDURES ...................................................... 9
v.
NOTICE OF THE PROPOSED SALE ........................................................ 10
VI.
ARGUMENT ................................................................................................ 11
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VII.
A.
The Sale Subject to Overbid Should Be Approved ............................ 12
B.
Further Notices/Appraisals Should Be Waived ................................. 14
C.
Additional Relief ................................................................................ 15
CONCLUSION ............................................................................................. 16
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1034556.07/LA
(i)
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TABLE OF AUTHORITIES
Page(s)
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3
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5
6
Cases
Beet
0
3F~2<ls7~zsg(9tfc·i:.· 1~2~)~.~.~~.~~~.~~..~~:: .................................................... 13
Blakely Airport Joint Venture II v. Federal Sav. and Loan Ins. Corp.,
678 F. Supp. 154 (N.D. Tex. 1988) .............................................................. 13
7 Commodities Futures Trading Comm 'n. v. Topworth Int'l, Ltd.,
205 F.3d 1107 (9th Cir. 1999) ...................................................................... 12
8
9
First Nat'l Bank v. Shedd,
121 U.S. 74 (1887) ........................................................................................ 12
10 Gockstetter v. Williams,
9 F.2d 354 (9th Cir. 1925) ............................................................................ 13
11
Key bank Nat'l Ass 'n v. Perkins Rowe Assocs., L.L. C.,
12
2012 U.S. Dist. LEXIS 157828 (M.D. La. 2012) ......................................... 14
13
14
Miner~fF2~o{5rr;i[~~tJ~r[933 ~~~~~: .................................................................. 12
15
SEC v. American Cap)tal Invest., Inc.,
98 F.3d 1133 ~9th Cir. 1996), cert. denied 520 U.S. 1185 ........................... 12
16
SEC v.3~t~~3~ ~33s(~[{;(Sf~.~~~S) ........................................................................ 11
17
18
SEC v. Elliot,
953 F.2d 1560 (11th Cir. 1992) .................................................................... 11
19 SEC v. Elliott
953 F.2d 1560 (11th Cir. 1992) .................................................................... 12
20
SEC v. HardJ!.,
21
803 F.2d 1034 (9th Cir 1986) ....................................................................... 11
22 SEC v. Wencke,
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622 F.2d 1363 (9th Cir. 1980) ...................................................................... 11
US. v. Heasley_,
24
283 F.2d 422 (8th Cir. 1960) ........................................................................ 15
25 US. v. Little,
2008 U.S. Dist. LEXIS 93467 (E.D. Cal. 2008) ........................................... 15
26
US. v. Peters,
27
777 F.2d 1294 (7th Cir. 1985) ...................................................................... 15
28
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Page(s)
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Statutes
3 28 U.S.C. § 2001 ............................................................................................... 14, 15
4 28 U.S.C. § 200l(a) ................................................................................................. 15
5 28 U.S.C. § 2001(b) .......................................................................................... 14, 15
6 28 U.S.C. § 2002 ..................................................................................................... 15
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Rules
8 Local Rule 66-7 ....................................................................................................... 15
Treatises
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..~(~~~~.~~.~~~..~. ~.~? ................. 12
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13 2 Ralpf J~~~1 iJ2)1~'.. ~~.~~:!~~.~~.~~~.~~~.:.~~~~:~~ ~(~~~~·i·~.~~~ ~.~~~
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2 Ralph Ewing Clark, Treatise on Law and Practice ofReceivers § 344
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(3d ed. 1992) ................................................................................................. 13
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16 2 Ralph Ewing Clark, Treatise on Law and Practice ofReceivers §
17
(tJ~~. 1992) ................................................................................................. 13
18 2 Ralpf3J~~~1iJ2)~'..~~.~~~~~~.~.~.~~~.~~~.~~~~:~~~..~.~.~~.~~~~~~~.~.. :~:. ......... 12, 13
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..~(~~~~·i·~.~~~..~. ~.~?................ 13
2 Ralp8 J~~~1 iJ2)1~,..~~.~~:!.~~ .~~ .~~~ .~~~.:.~~~~:~~..~(~~~·~·i·~~~~..~. ~?..~ ............... 13
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1034556.07/LA
(iii)
MEMORANDUM OF POINTS AND AUTHORITIES
1
2 I.
INTRODUCTION
3
Pursuant to the TRO and Preliminary Injunction Order issued by the Court at
4 the outset of the case, the Receiver took possession of and assumed authority and
5 control over all assets of the Receivership Entities, including the golf course
6 facilities and associated amenities commonly known as the Glen Ivy Golf Club
7 ("Glen Ivy Golf Course") and located at 24400 Trilogy Parkway, Corona,
8 California. (Declaration of Krista L. Freitag ("Freitag Deel."), ii 3.) This is a
9 Motion for the sale of the Glen Ivy Golf Course, which is an 18-hole, par-72, daily
10 fee golf course facility and includes all improvements, furniture, fixtures,
11 equipment, and other tangible and intangible property 1 associated therewith
12 (together, the "Property"). (Id.) The Property was purchased by Defendant
13 Kingdom Capital Market, LLC ("KCM") in August 2013 for $6.5 million. 2 (Id.)
14
The Receiver engaged real estate broker W Realty Group ("Broker"), who
15 worked with the Receiver to diligently market the Property through commercially
16 reasonable and customary channels. As a result of the Broker and the Receiver's
17 combined marketing efforts, the Receiver secured a ready, willing and able buyer,
18 Sunland Properties, Inc. ("Buyer"), and accepted an offer from Buyer to purchase
19 the Property for $3.9 million on an "AS IS, WHERE IS" basis, subject to Court
20 approval and the overbid procedures described herein. This offer is the highest and
21 best offer received in the "Best and Final Offer Round", after providing for more
22 than 90 days of due diligence to approximately 30 prospective purchasers.
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2
The specific property items that are included as part of the proposed sale of the
golf course facilities are as indicated in Section 1.2 of the Purcbase and Sale
Agreement and Joint Escrow Instructions dated January 4, 2016 (the "Purchase
and Sale Agreement"), attached as Exhibit 2 to the Freitag Deel. filed in support
of this Motion.
Title to the Pro2erty was originally taken in the name of Defendant World
Capital Market Inc., and was deeded shortly thereafter to KCM. (Freitag Deel.
ii 3.)
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1034556.07/LA
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Based upon the present facts and circumstances, and absent an overbid, the
2 Receiver believes $3 .9 million is the best price attainable and respectfully requests
3 the Court grant the Motion and approve: (1) the sale of the Property; (2) the
4 proposed overbid procedures; and (3) payment of Broker's commission.
5 II.
RELEVANT FACTS
6
A.
7
KCM purchased the Property in August 2013 for $6.5 million. (Freitag Deel.
8
if 3.)
Background of Property and Operations
The Property is approximately 226 acres (per a boundary survey) and features
9 an 18-hole, daily fee golf course, driving range, practice green and other golf-related
10 structures and facilities, including a clubhouse/pro shop, .restaurant, and
11 maintenance/cart facilities. (Id.)
12
After taking control of Glen Ivy Golf Course upon her appointment, the
13 Receiver discovered an overall lack of organizational and management oversight,
14 including but not limited to lack of bank reconciliations, business plans, due
15 diligence materials, operating budgets for the golf course, and the commingling of
16 expenses with other properties owned by the Receivership Entities. (Id. at if 4.) In
17 addition, although there were existing operations personnel for the facility, these
18 individuals lacked formal qualifications. (Jd.)
19
Since her appointment, the Receiver sought and obtained authority to engage
20 an independent third-party management company to assist in improving operations
21 and performance of the golf course, and in preparing the Property and obtaining due
22 diligence information necessary to maximize the value in a sale. (Dkt. No. 42.) The
23 Receiver also engaged a third-party to improve the agronomy and maintenance
24 operations of the golf course, and to improve the maintenance and utility costs of the
25 Property all while maintaining the playability standards of a highly rated Southern
26 California golf course. (Freitag Deel.
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if 5.)
In anticipation of the sale, in July 2015, the Receiver commissioned several
28 broker's opinions of value ("BOV") for the Property. One such BOV was conducted
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1 by John Knudson of Insight Land & Investments ("Insight"). (Id. at i-f 6.) In
2 preparing the BOY, Insight considered the specific characteristics of Glen Ivy Golf
3 Course, including its circumstances, market factors and customary valuation
4 methods for golf courses of this nature. (Id.) The BOY concluded that the Property
5 has a market value between $4,000,000 and $4,500,000, in line with the $3,900,000
6 offer submitted by B.uyeL (Id.)
7
Empirical evidence, including the property's 2013 and 2014 assessed values,
8 show that $6.5 million paid by KCM for the purchase of the property in 2013 was
9 not likely a market value for the Property at the time. (Id.
at~
7.) In fact,
10 supplemental tax bills received following KCM's purchase increased the real
11 property taxes by 37%, and the buyer for the Property preceding KCM's purchase
12 had paid only $4.6 million in November 2011. (Id.) Meanwhile, the property's
13 revenues decreased from 2012 to 2013, and recent market comparables also support
14 the highest and best offer presented by Buyer, not the $6.5 million previously paid
15 by KCM. (Id.)
16
B.
17
There is an ongoing dispute with the local neighboring residential
Neighboring Residential Development's Homeowner's Association
18 development, the Trilogy Glen Ivy Maintenance Association ("Trilogy"), over water
.19 rights. Glen Ivy Golf Course receives its irrigation water from the Temescal Valley
20 Water District ("District"); the irrigation water comes into the golf course through
21 the golf courses' water system ("Golf Course Water Lines"). (Freitag Deel. i-fi-1822 11.) The same water lines provide water to the local neighboring Trilogy residential
23 development, which draws such irrigation water from the Golf Course Water Lines
24 for use on certain common areas as designated in an existing water agreement
25 recorded in the County of Riverside. (Id.)
26
Under the water agreement, usage of water obtained through the Golf Course
27 Water Lines by Trilogy is restricted to certain defined common areas. (Id.) The
28 Receiver was informed by Trilogy and the District that for many years Trilogy has
1034556.07 /LA
-3NOTICE OF MOTION AND MOTION FOR ORDER APPROVING AND
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1 watered certain avocado groves, which are believed to be outside of the designated
2 common areas in the water agreement, with potable water from the District. (Id.)
3 The District has now told Trilogy to discontinue this practice and switch to
4 irrigation water. (Id.) Without putting in new infrastructure, the Receiver
5 understands Trilogy has no access to irrigation water other than through the Golf
6 Course Water Lines. (Id.)
7
Trilogy, therefore, approached the Receiver about expanding access to the
8 Golf Course Water Lines to irrigate the avocado groves and certain other areas not
9 designated in the water agreement. (Id.) Based on water usage data provided by
10 Trilogy, the volume of water for these new areas could nearly double the current use
11 by Trilogy of the Golf Course Water Lines.· (Id.) The Receiver has sought to
12 address Trilogy's request over many months, including providing Trilogy access to
13 assess the possibility of such expansion, but the parties have disagreed on one
14 central issue in that the Receiver is not willing to allow a large expansion of water
15 service to Trilogy via the Golf Course Water Lines for areas not designated in the
16 water agreement unless Trilogy agrees that if there were water delivery cutbacks in
17 light of the ongoing drought, this expanded water service would be subordinate to
18 the water needs of the golf course. The Receiver has also pushed for Trilogy to
19 contribute its pro rata share of the maintenance and replacement costs attributable to
20 its usage of the Golf Course Water Lines and related pumping equipment. (Id.)
21 Such equipment is impaired by Trilogy's usage thereof, however, Trilogy does not
22 currently contribute to any maintenance or replacements costs thereof. (Id.)
23
In light of this disagreement, Trilogy previously threatened to come onto the
24 Glen Ivy Golf Course without the Receiver's authorization to modify the existing
25 Golf Course Water Lines by installing submeters to allow for Trilogy's expanded
26 irrigation use. (Id.) The Receiver was prepared to move ex parte for a temporary
27 restraining order prohibiting Trilogy's unauthorized actions, but upon giving notice
28 to Trilogy's counsel, Trilogy indicated it would not enter the property until March
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Case 2:14-cv-02334-JFW-MRW Document 413 Filed 02/10/16 Page 10 of 21 Page ID
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1 31, 2016 at the earliest. (Id.) The Receiver and her Broker have, and will continue
2 to, keep Buyer and other prospective purchasers appraised of this dispute. (Id.) The
3 Receiver wishes to avoid further expenditure of administrative expenses on this
4 matter, but if the water rights issue with Trilogy is not resolved prior to the close of
5 this transaction in March 2016, it may become necessary to seek injunctive relief
6 until such time as the sale closes and the buyer can address the matter with Trilogy.
7 (Id.)
8
c.
9
Pursuant to an existing easement, certain pumping equipment for the Golf
Adjacent Property Owners and Water Features
10 Course Water Lines is located offsite on property adjacent to the golf course.
11 (Freitag Deel.
if 12.) The equipment is specifically situated on the boundary
12 between two adjacent properties, one of which is used as a junk yard while the other
13 is undeveloped land. (Id.) The Receiver has been informed by these property
14 owners and their representatives that a dispute may exist as to exactly where the
15 boundary lies between these properties and the validity and scope of the existing
16 easement for the pumping equipment. (Id.)
17
The Receiver has informed these owners of the anticipated sale of the
18 Property, but as of the date of this filing, the Receiver has not received any
19 indication that these parties intend to oppose the proposed sale. (Id.) The Receiver
20 has further disclosed the potential dispute to the Buyer and other prospective
21 bidders, non:e of whom have expressed any significant concern, and will continue to
22 keep these parties appraised of the potential dispute through the close of sale. (Id.)
23 The Receiver has also provided Buyer with prospective bids for repair of several
24 water features located throughout the Property. (Id.)
25
D.
The Receiver's Marketing Efforts
26
The Receiver, her staff and her Broker have diligently marketed the Property
27 through commercially reasonable and customary channels and successfully
28 generated a significant amount of interest in the Property through their efforts.
1034556.07/LA
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1 Specifically, since Broker was engaged in September 2015, it has worked with the
2 Receiver to introduce the Property to more than 3,000 prospective purchasers
3 through a national email campaign. (Freitag Deel. i-f 14.) In addition, Broker also
4 created a list of prospective purchasers from existing golf course owners and
5 investors in Southern California, and reached out to these owners and investors to
6 solicit interest in the Property. (Id.) Broker followed up with respondents and
7 provided prospective purchasers with due diligence materials 3 after securing
8 customary non-disclosure agreements. (Id.) The Property was also placed on
9 Loopnet.com, one of the leading online platforms for marketing commercial real
10 properties, and was also placed on Broker's websites for circulation. (Id.) Through
11 Loopnet, the Property was also advertised on national and local partner websites,
12 including the New York Times, Los Angeles Times, Chicago Tribune, Boston
13 Globe, and Washington Post, resulting in up to 815 searches within the last 30 days
14 of such advertising. (Id.)
15
As a result the marketing and sale efforts, 31 separate groups of investors
16 responded with serious inquiries, 30 of whom signed non-disclosure agreements and
17 17 of whom conducted due diligence for the Property. (Id. at i-f 15.) Ultimately,
18 letters of intent were received in response to the Broker's Call for Offers from
19 several different parties, including Buyer. (Id.) The Receiver then directed a
20 request for a highest and best offer from each based on the multiple offers received.
21 (Id.) In response, several parties each submitted their highest and best offers, one of
22 which was subsequently rescinded. (Id.) Buyer's offer was the highest and best
23 qualified offer received and the Receiver accepted its offer, subject to Court
24 approval, as reflected in the purchase and sale agreement described below. (Id.)
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Even though this is an "As Is-Where Is" sale, the Receiver populated the due
diligence 'war room' with a significant amount of due diligence materials
including a form purchase and sale agreement. (Freitag Deel. i-f 14.} Prospective,
qualified bu_yers were given more than 90 days to review same and inspect the
Property. (Id.)
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1
In addition to the parties that submitted highest and best offers, including the
2 Buyer, two other parties have expressed interest in participating in the overbid
3 process. (Id. at if 16.)
4 III.
PURCHASE AND SALE AGREEMENT
5
A copy of the Purchase and Sale Agreement for the sale to Buyer is attached
6 as Exhibit 2 to the Freitag Declaration. Its terms are summarized as follows: 4
7
Court Approval. All aspects of the Purchase and Sale Agreement and the
8 sale are subject to approval by the Court.
Purchase Price. $3,900,000. The estimated net proceeds to the receivership
9
10 estate after payment of the proposed Broker's commission of 4% (or $156,000) is
11 approximately $3,715,000 (factoring in estimated escrow, closing, and other costs12 primarily the property tax proration-of nearly $29,000).
13
Closing Date. Escrow to close within ten business days following Court
14 approval.
15
Deposit. Buyer has deposited $117,000 into escrow, refundable only ifthe
16 Court does not approve the sale to Buyer, or approves the sale to another party, or if
17 the Receiver defaults on the sale.
18
As Is/Where Is Purchase. Buyer agrees to purchase the Property on an "AS-
19 IS, WHERE-IS" basis.
20
Buyer's Representations and Warranties. Buyer represents and warrants
21 that it is qualified to own and operate the golf course on the Property. Buyer further
22 agrees to maintain the golf course in first class condition and state of repair
23 consistent with the standards and customs common in the industry for similar public
24 golf courses in Southern California.
25
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4
The terms of the Purchase and Sale Agreement are summarized herein for
convenience only. In the event of any conflict between the Purchase and Sale
Agreement and the summary provided herein, the Purchase and Agreement
governs and controls.
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1
Overbid Procedures. The sale is subject to the proposed overbid procedures
2 detailed herein. Pursuant to these procedures, if Buyer is not the highest qualified
3 bidder at the auction, its deposit will be returned.
4
Broker's Commission. By separate agreement, the Receiver has agreed,
5 subject to Court approval, to pay Broker a commission of 4% of the final purchase
6 price. (Freitag Deel.~ 13.) Pursuant to that agreement, Broker will compensate
7 cooperating and referring brokers, and thus would split the commission as
8 applicable. (Id.) In the case of Buyer, there will be no split in commission as Buyer
9 is also represented by Broker. (Id.) Based on the Receiver's extensive experience in
10 real estate transactions, the amount of the commission is commercially reasonable,
11 and was fully negotiated by the Receiver after reviewing proposed terms from five
12 other qualified brokers. 5 (Id.) Each of the other brokers interviewed by the Receiver
13 and her staff required higher commissions, and only one other broker offered to
14 accept a commission of 4%, but required 6% ifthe buyer is represented by a
15 separate broker. (Id.) This broker was also based out of Florida and would be
16 unable to personally service the transaction on a day-to-day basis. (Id.)
17
As explained above, since its engagement in September 2015, Broker has
18 invested substantial time in assisting the Receiver with the preparation of marketing
19 materials for the Property, locating potential purchasers, marketing the Property to
20 them, and negotiating terms. (Freitag Deel.~~ 14-16.) In addition, since the
21 Purchase and Sale Agreement with Buyer was signed, Broker has continued to
22 market the Property and provide notice of the opportunity to overbid in an effort to
23 promote active overbidding at the auction. (Id.) Based on the Receiver's extensive
24 experience in real estate transactions, and in light of the challenges presented, the
25 amount of the commission to Broker represents commercially reasonable
26
27
28
5
One of the other five brokers interviewed included Insight, who is working with
Broker and taking the lead on marketing the Property to out of state buyers, and
will be compensated by Broker directly. (Freitag Deel. ~ 11.)
1034556.07/LA
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1 compensation for the work required in order to secure a serious buyer and
2 prospective overbidders for the Property. (Id. at 13.)
3 IV.
PROPOSED OVERBID PROCEDURES
4
The Receiver requests that the following overbid procedures be approved:
5
(a) Qualified Bidders. To be determined a qualified bidder, a prospective
6
purchaser must: (i) provide a fully executed purchase and sale agreement for
7
the Property in a form substantially similar to the Purchase and Sale
8
Agreement, (ii) provide evidence, in a form reasonably acceptable to the
9
Receiver that the Qualified Bidder has the ability to pay at least the minimum
10
initial overbid amount set forth below, and (iii) provide an earnest money
11
deposit by wire transfer or cashier's check in the amount of 3% of their
12
respective purchase offer payable to the Receiver, which amount shall be non-
13
refundable to the qualified bidder with the highest and best bid at the auction
14
if for any reason (a) the highest and best bidder fails to close the sale or
15
(b) the highest and best bidder fails to provide the balance of the purchase
16
price to the Receiver on or before three business days after this Court's
17
approval of the auction. Buyer is a Qualified Bidder. Each Qualified Bidder
18
must provide the above-described executed purchase and sale agreement and
19
earnest money deposit to the Receiver no later than 7 business days before the
20
hearing. Qualified bidders shall appear at the hearing/auction in person, or
21
through a duly authorized representative. At that hearing, the Court will
22
conduct an auction of the Property among any qualified bidders. The highest
23
and best bidder's deposit shall be applied to the purchase price, if the sale is
24
approved by the Court.
25
(b) Due Diligence. All prospective bidders shall have had. the opportunity to
26
inspect the Property and any documentation relating thereto prior to the
27
auction.
28
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(c) Overbids. The initial overbid shall be at least $3,939,000. Subsequent
2
overbids shall be in increments of at least $10,000. If no Qualified Bidder
3
submits a bid in the amount of the initial overbid or higher, the Purchase and
4
Sale Agreement will be submitted to the Court for approval in its current
5
form.
6
( d) No Contingencies. The sale to any qualified bidder shall not be subject
7
to any contingencies, including without limitation, for financing, due
8
diligence or inspection.
9
( e) As Is/Where Is Purchase. The sale to any qualified bidder shall be on an
10
"AS-IS, WHERE-IS" basis as described in the Purchase and Sale Agreement.
11
These procedures were formulated by the Receiver with the goal of obtaining
12 the highest and best price for the Property, thus ensuring a maximum return to the
13 receivership estate.
14
15
v.
NOTICE OF THE PROPOSED SALE
The Receiver's counsel is concurrently serving this Motion by mail on all
16 parties to the action who do not already receive electronic service, as well as
17 Trilogy, and all known parties with potential interest in purchasing the Property.
18 The Receiver is also posting a copy of this Motion on the receivership website
19 (www.worldcapitalmarketreceivership.com), accompanied by the following notice
20 of the proposed sale and the opportunity to overbid at the hearing:
In the action pending in U.S. District Court for the Central
District of California, Southern Division, Case No. CV14-2334-JFW-MRW, Securities and Exchange
Commission v. World Capital Market Inc, et al., notice is
hereby given that the court-appointed Receiver has
contracted to sell the real property located at 24400
Trilogy Parkway, Corona, California along with the
related golf course facilities, associated amenities, and
personal property commonly known as the Glen Ivy Golf
Club for the amount of $3,900,000. Sale is subject to
overbid and Court confirmation. Hearing set for March
14, 2016 at 1:30 p.m., courtroom of the Honorable John F.
21
22
23
24
25
26
27
28
1034556.07 /LA
#:8538
1
Walter, United States Courthouse, 312 North Spring
Street, Los Angeles, California. Minimum overbid is
$3,939,000. Overbids must be received by 5:00 p.m.
Pacific Standard Time, at least 7 business days before the
scheduled hearing, by the Receiver at 355 S. Grand Ave.,
Suite 2450, Los Angeles, California, 90071 in order to be
considered. In addition, to be considered a qualified
bidder, a prospective purchaser must abide by the overbid
procedures as set forth in the sale motion, a copy of which
is available on this website. If interested in submitting an
overbid, please contact Geno Rodriguez at (619) 567-7223
or at [email protected] for the form of
Purchase and Sale Agreement and other information.
2
3
4
5
6
7
8
9
10 VI.
11
ARGUMENT
"The power of a district court to impose a receivership or grant other forms of
12 ancillary relief does not in the first instance depend on a statutory grant of power
l 3 from the securities laws. Rather, the authority derives from the inherent power of a
14 court of equity to fashion effective relief." SEC v. Wencke, 622 F.2d 1363, 1369
15 (9th Cir. 1980). The "primary purpose of equity receiverships is to promote orderly
16 and efficient administration of the estate by the district court for the benefit of
l 7 creditors." SEC v. Hardy, 803 F.2d 1034, 1038 (9th Cir 1986). As the appointment
l 8 of a receiver is authorized by the broad equitable powers of the court, any
l 9 distribution of assets must also be done equitably and fairly. See SEC v. Elliot,
20 953 F.2d 1560, 1569 (I Ith Cir. 1992).
21
District courts have the broad power of a court of equity to determine the
22 appropriate action in the administration and supervision of an equity receivership.
23 See SEC v. Capital Consultants, LLC, 397 F.3d 733, 738 (9th Cir. 2005). The Ninth
24 Circuit explained:
25
A district court's power to supervise an equity receivership
and to determine the appropriate action to be taken in the
26
administration of the receivership is extremely broad. The
district court has broad powers and wide discretion to
27
determine the appropriate relief in an equity receivership.
The basis for this broad deference to the district court's
28
supervisory role in equity receiverships arises out of the
-111034556.07 /LA
#:8539
fact that most receiverships involve multiple parties and
complex transactions. A district court's decis10n
concerning the supervision of an equitable receivership is
reviewed for abuse of discretion.
1
2
3
Id (citations omitted); see also Commodities Futures Trading Comm 'n. v. Topworth
4
Int'!, Ltd., 205 F .3d 1107, 1115 (9th Cir. 1999) ("This court affords 'broad deference'
5
to the court's supervisory role, and 'we generally uphold reasonable procedures
6
instituted by the district court that serve th[ e] purpose' of orderly and efficient
7
administration of the receivership for the benefit of creditors.").
8
Accordingly, this Court has broad equitable powers and discretion in
9
formulating procedures, schedules and guidelines for administration of the
10
receivership estate and disposition of receivership assets.
11
12
13
A.
The Sale Subject to Overbid Should Be Approved.
It is generally conceded that a court of equity having custody and control of
property has power to order a sale of the same in its discretion. See, e.g., SEC v.
14
Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992) (finding that the District Court has
15
16
broad powers and wide discretion to determine relief in an equity receivership).
"The power of sale necessarily follows the power to take possession and control of
17
and to preserve property." See also SEC v. American Capital Invest., Inc., 98 F .3d
18
1133, 1144 (9th Cir. 1996), cert. denied 520 U.S. 1185 (decision abrogated on other
19
grounds) (citing 2 Ralph Ewing Clark, Treatise on Law & Practice ofReceivers
20
§ 482 (3d ed. 1992) (citing First Nat'! Bankv. Shedd, 121 U.S. 74, 87 (1887)).
21
"When a court of equity orders property in its custody to be sold, the court itself as
22
vendor confirms the title in the purchaser." 2 Ralph Ewing Clark, Treatise on Law
23
and Practice ofReceivers § 487).
24
"A court of equity, under proper circumstances, has the power to order a
25
26
27
receiver to sell property free and clear of all encumbrances." Miners' Bank of
Wilkes-Barre v. Acker, 66 F.2d 850, 853 {2d Cir. 1933). See also, 2 Ralph Ewing
Clark, Treatise on Law & Practice ofReceivers § 500. To that end, a federal court
28
1034556.07/LA
----1
'
#:8540
1 is not limited or deprived of any of its equity powers by state statute. Beet Growers
2 Sugar Co. v. Columbia Trust Co., 3 F.2d 755, 757 (9th Cir. 1925) (state statute
3 allowing time to redeem property after a foreclosure sale not applicable in a
4 receivership sale).
5
Generally, when a court-appointed receiver is involved, the receiver, as agent
6 for the court, should conduct the sale of the receivership property. Blakely Airport
7 Joint Venture II v. Federal Sav. and Loan Ins. Corp., 678 F. Supp. 154, 156
8 (N.D. Tex. 1988). The receiver's sale conveys "good" equitable title enforced by an
9 injunction against the owner and against parties to the suit. See 2 Ralph Ewing
10 Clark, Treatise on Law and Practice ofReceivers§§ 342, 344, 482(a), 487, 489,
11 491. "In authorizing the sale of property by receivers, courts of equity are vested
12 with broad discretion as to price and terms." Gockstetter v. Williams, 9 F .2d 354,
13 357 (9th Cir. 1925).
14
Here, the proposed sale to Buyer for $3,900,000, subject to the proposed
15 overbid procedures, should be approved. In particular, the proposed overbid
16 procedures are designed to (a) induce Buyer to remain in place as the initial, or
17 "stalking horse" bidder, (b) allow qualified bidders to overbid, and (c) generate the
18 highest and best price for the Property. The proposed initial overbid of $3,939,000
19 is sufficient to make the net proceeds to the estate (after payment of the Broker's
20 commission, and estimated escrow, closing and repair costs) approximately $37,000
21 greater than under the Purchase and Sale Agreement. The subsequent bid
22 increments of $10,000 are also sufficient to ensure an orderly and efficient auction
23 at the hearing. The Receiver submits that these amounts are reasonable and fair to
24 all interested parties.
25
Although the proposed purchase price is substantially lower than what KCM
26 paid for the Property in August 2013, the Receiver believes, as discussed herein,
27 given a) the issues impacting the golf course, b) the relevant and current comparable
28 sales, and c) empirical evidence showing that the $6.5 million purchase price was
1034556.07/LA
#:8541
1 unlikely market value when KCM purchased the Property, that the price and terms
2 of the proposed sale to Buyer, negotiated at arm's length and secured through the
3 commercially reasonable and customary channels of marketing the Property with an
4 experienced broker, reflect the fair market value of the Property. In addition, and as
5 explained above, the Receiver and Broker have diligently marketed the Property for
6 sale through commercially reasonable and customary channels, resulting in serious
7 interest generated among 31 prospective purchasers, 30 of which signed non8 disclosure agreements and 17 of whom conducted due diligence. (Freitag Deel.
9 ilil 14-15.) From these parties, several competing offers were submitted, and a
10 second round of offers was solicited, ultimately resulting in the highest and best
11 offer submitted by Buyer in the amount of $3,900,000, which closely matches the
12 estimated fair market value of the Property as reflected in a BOY commissioned by
13 the Receiver. (Id. at 6, 14-15.) Accordingly, the Receiver believes, in her
14 reasonable business judgment, that the proposed sale to Buyer, subject to overbid, is
15 fair and reasonable, in the best interests of the receivership estate, and will generate
16 the highest and best value for the Property. (Id. at if 17.)
17
To ensure the highest and best price is obtained from sale of the Property, the
18 proposed sale to Buyer is subject to overbid by potential purchasers that qualify
19 themselves as bidders. The Receiver, with the assistance of Broker, has continued
20 to market the Property with the goal of promoting active overbidding in accordance
21 with the proposed overbid procedures described herein.
22
B.
23
Sales of real property out of federal receivership are governed by 28 U.S.C.
Further Notices/Appraisals Should Be Waived
24 § 2001, which provides that notice shall be given "by publication or otherwise as the
25 court directs .... " 28 U.S.C. § 200l(b). Thus, "[t]he statute on its face vests the
26 court with discretion in directing the terms and conditions of the public sale."
27 KeybankNat'l Ass'n v. Perkins Rowe Assocs., L.L.C., 2012 U.S. Dist. LEXIS
28 157828, *4 (M.D. La. 2012); see also US. v. Little, 2008 U.S. Dist. LEXIS 93467,
1034556.07/LA
I
#:8542
1 *4-5 (E.D. Cal. 2008) (finding that "[t]he Court has broad discretion in setting the
2 terms and conditions of a sale pursuant to 28 U.S.C. § 2001."); US. v. Heasley, 283
3 F.2d 422 (8th Cir. 1960) (finding that in the context of 28 U.S.C. § 2001(b), "the
4 matter of confirming a judicial sale rests in the sound judicial discretion of the trial
5 court ... "); US. v. Peters, 777 F.2d 1294 (7th Cir. 1985) (noting that 28 U.S.C.
6 § 2001 (a) authorizes a court to direct the terms and conditions of the sale).
Here, the proposed notices of sale provided by mail and publication on the
7
8 Receiver's website are reasonable given the extensive marketing efforts undertaken
9 by the Receiver and her Broker, which efforts included extensive advertisement of
10 the Property in commercially reasonable and customary channels, and the Receiver
11 and her Broker's continuing efforts to market and publicize the sale of the Property
12 and the opportunity to overbid. The Receiver submits that further mailing or
13 publication of notice and obtaining independent appraisals would impose significant
14 costs on the receivership estate with little or no corresponding benefit. Accordingly,
15 to the extent 28 U.S.C. §§ 2001, 2002 and Local Rule 66-7 require further mailing
16 or publication of notice, appraisals, or other procedures, such provisions should be
17 waived.
18
c.
19
Pursuant to its broad equitable powers with respect to the administration of
Additional Relief
20 receivership assets, the Receiver requests that the Court authorize payment from the
21 proceeds of sale of the Property, the valid liens, 6 taxes, and any other claims on the
22 Property, subject to any objections to such liens, taxes, or claims by the Receiver.
23 The Receiver also requests authority to pay Broker a commission in the amount of
24 4% of the final purchase price. Regardless of whether the ultimate buyer is
25
26
27
28
6
The Receiver is not aware of any valid monetary liens on the Property, which
was purchased by KCM with all cash. (Id. at ,-r 3.) However, there exists a lien
recorded by the county: which requires certain repairs to be performed [>y a lessee
of the Property. (Id.) The existing lien has been full;: disclosed to the Buyer and
will also oe disclosed to other potential purchasers. (Id.)
-15-
1034556.07/LA
AUTHORJZING SALE OF GLEN IVY GOLF COURSE
#:8543
1 represented by independent brokers, the commission paid to Broker will remain at
2 4% and any commissions to buyer's broker will be paid from those funds.
3
As explained above, Broker's commission is the lowest offered by competing,
4 comparable brokerage companies, and is fair and reasonable given that the sale of
5 the Property required considerable time and effort on the part of Broker. Based on
6 her extensive experience in real estate transactions, the Receiver believes that such
7 commission is commercially reasonable and consistent with the real estate industry
8 standard for sales of similar commercial property, and should be approved by this
9 Court. (Freitag Deel.~ 13.)
10 VII. CONCLUSION
11
For the reasons set forth herein, the Receiver respectfully requests entry of an
12 Order approving and authorizing: ( 1) sale of the Property to Buyer or the highest
13 and best bidder; (2) the proposed overbid procedures; (3) payment of the proposed
14 4o/o commission to Broker from the sale proceeds.
15
16 Dated: February 10, 2016
17
18
19
ALLEN MATKINS LECK GAMBLE
DAVID R. ZARO
TED FATES
TIMC.HSU
BY.:
20
21
/s/ Tim C. Hsu
TIMC.HSU
Attorneys for Court-appointed
Receiver KRISTAL. FREITAG
22
23
24
25
26
27
28
1034556.07/LA

Motion for Order Approving, 1) Sale of Glen Ivy Golf Course, 2) Overbid

Transcription

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