SITUATION

The Sailing Emporium is a 152-slip facility located on 10.62 acres in the Rock Hall harbor on Maryland’s Eastern. The owner had operated the facility for several years and had financed the facility as well as other properties with a local bank. Due to the Great Recession, the NOI had decreased to a level where it could no longer service the debt. The ownership entity declared Chapter 11 Bankruptcy with Debtor in Possession, with the approval by the Court and lender that it would be sold via a 363 process. LPA, who had previously provided a Pricing Proposal to the owner, was interviewed by the debtor’s bankruptcy council to run a 363 sales process. After numerous discussions with LPA about our process, debtor’s council obtained approval for LPA to represent the debtor in the sale of the property.

PROCESS

One of the challenges in this sale was that the owner had poor historical financial records. LPA created a marketing package that included a pro-forma business plan with cash flow projections in addition to the historical 2014 financials (the most recent available). The property was initially marketed for 2-3 months to secure a bidder who would serve as the “stalking horse” for the auction. A second marketing process of 30 days was executed after the stalking horse bidder was approved by the Court to encourage a qualified bidder to enter the auction and compete with the stalking horse. An auction was then executed with all qualified bidders present to determine the winning bidder of the auction.

RESULTS

The initial marketing process produced significant interest with over 30 parties signing confidentiality agreements to receive the Offering Memo in the initial marketing period, along with several tours. In March, we received an offer from a highly-qualified buyer, who agreed to be the stalking horse at $2,600,000. In July, after protracted contract negotiations between the stalking horse bidder and the debtor, the contract was submitted to the Court for approval. Once the stalking horse bidder was submitted to the court, a 30-day marketing effort was enacted to engage additional qualified bidders for the auction. This marketing process resulted in an additional buyer submitting a qualified bid on the bid deadline date. An auction took place in September between the two qualified bidders resulting in a winning bid of $3,800,000 and a back-up bidder at $3,650,000. In total, we received interest from 44 potential buyers and had nine tours. The winning bidder is expected to close the purchase by the end of October 2017.