If cramdown failures are par for the course, why are we all so fascinated with them? One thing is certain: they always provide a good teaching moment for practitioners. Marlow Manor’s chapter 11 single asset real estate case
is no different. In Marlow Manor
, the Ninth Circuit Bankruptcy Appellate Panel held that the bankruptcy court did not err in (i) refusing to confirm the debtor’s chapter 11 plan, which improperly classified two unsecured and impaired deficiency claims of its lender in separate classes as secured and unimpaired, and (ii) rejecting an aspect of the plan, which treated the lender as if it had made a section 1111(b)(2) election.
Marlow Manor owned a portion of a high rise in downtown Anchorage. The high rise was subdivided by a developer (the debtor’s manager, Marc Marlow into a two unit condominium project: (i) Unit A was owned by an investor and (ii) Unit B was owed by Marlow Manor. Unit B was to be converted into a senior assisted living home and was financed by a $5.4 million construction loan. In 2007, the Alaska Housing Financing Corporation (“AHFC
”) refinanced the majority of the construction loan through two long term loans in the amount of $5.45 million (summarized in the chart below).