Frisco Debtors
Chapter 11 Bankruptcy Filings—Frisco Debtors
On June 13, 2012 (the "Petition Date"), the Frisco Debtors filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Chapter 11 Cases"), in the United States Bankruptcy Court for the Eastern District of Texas (the "Bankruptcy Court"). The Chapter 11 Cases pertain only to the Frisco Debtors, and neither the Company nor any of its other wholly owned subsidiaries or joint ventures, either consolidated or unconsolidated, sought such protection.
The Frisco Debtors operated as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the order of the Bankruptcy Court. On October 22, 2012, the Frisco Debtors filed a Joint Consolidated Plan of Reorganization (the "Reorganization Plan"), which, after certain modifications and amendments, was confirmed by an order of the Bankruptcy court entered on December 20, 2012. Under the Reorganization Plan, all creditors are paid 100%: some immediately, and some over time. On December 27, 2012, pursuant to the Reorganization Plan, new equity interests were issued and as a result, the reorganized Frisco Debtors wholly own the Frisco property. On January 3, 2013, the Bankruptcy Court issued an order declaring the Reorganization Plan effective.
Pursuant to the Reorganization Plan, on December 27, 2012, the Frisco Debtors entered into an amended and restated loan agreement related to the BHFS Loans, a modification of the Theater Loan and executed a new guaranty agreement. See Note 9 Notes Payable for further information.
Pursuant to the Reorganization Plan, the Frisco Debtors agreed to settle claims made by the City of Frisco. Under the Frisco Square Development Agreement, as amended and supplemented (the "Development Agreement"), between certain predecessors-in-interest to the Frisco Debtors and the City of Frisco (the "City"), the City was to be reimbursed approximately $1.3 million on April 1, 2013 related to the costs and expenses associated with the construction of Frisco Plaza located at Frisco Square near the Frisco City Hall (the, "Plaza Obligation"). The City of Frisco issued $12.5 million of bonds that were used to make public improvements within the Frisco Square Management District (the, "MMD"). Under the Development Agreement, the predecessors-in-interest to the Frisco Debtors agreed to be responsible for 50% of the bond debt service (the, "Bond Obligation). At the time the real property value within the MMD reaches $125 million the Bond Obligation will be reduced by 0.5% for each $1 million above the $125 million threshold. At $225 million of real property values within the MMD the Bond Obligation is terminated. The total outstanding Bond Obligation at December 31, 2013 and 2012 was $5.6 million and $6.1 million, respectively.
The Development Agreement allowed that the Bond Obligation, the Plaza Obligation and other monetary obligations pursuant to the Development Agreement could be apportioned based upon the value of the real property and real property improvements if an association, as defined, is formed. The Frisco Square Property Owner's Association (the, "POA") was formed on October 5, 2007. The POA pays for salaries, maintenance, special events, capital improvements and bond payments related to land within its defined area. In turn, the POA assesses its members for these costs. We are not the sole member of the POA. The annual bond debt service assessed by the POA is approximately $491,000. The Frisco Debtors expensed approximately $328,000, based upon our estimate of our pro rata share, in each of the years ended December 31, 2013 and 2012, which is included in the accompanying consolidated statements of operations and other comprehensive loss.
Pursuant to the Reorganization Plan, the Frisco Debtors paid the $1.3 million Plaza Obligation to the City of Frisco on December 27, 2012. For the Bond Obligation, the Frisco Debtors agreed to escrow one year's worth of principal and interest payments. The Frisco Debtors also agreed to make the semi-annual interest and principal payments. For both the Plaza Obligation and the Bond Obligation, the Frisco Debtors expect to utilize the POA to assess its members and to be reimbursed pro-ratably. The $1.3 million was included in prepaid expenses and other assets in the December 31, 2012 balance sheet. We expensed the $1.3 million in April 2013.
Under the Development Agreement, 720 parking spaces in a minimum of two parking garages were required to be constructed by February 2012 (the "Parking Obligation"). The Reorganization Plan extends the date to build the garages until February 1, 2018.
On February 4, 2014, the City of Frisco amended the Parking Obligation with respect to its lien on the vacant land held by BHFS I, LLC. We currently have a Letter of Intent to sell 1.71 acres of land to the City of Frisco for a building and parking garage development (the “Gearbox” development). We are also in negotiations to develop a 3.5 acre site for a 250-unit multifamily project which includes a parking garage (the “Frisco Multifamily” development). Under the amended Parking Obligation, if we contribute land for the Gearbox garage, construct the Frisco Multifamily development and build a structured public parking garage, that, when combined with the Gearbox garage provides 108 parking spaces that are open and free to the public at all times, the City of Frisco will not require any further escrow of funds from the sale of BHFS I, LLC land and will release the lien on the BHFS I, LLC land. For the Bond Obligation, the City will release the lien on the land to be sold provided that the City is provided with substitute collateral worth the amount of property to be sold. As discussed above, the Bond Obligation will be reduced from time to time and terminated once property values reach $225 million within the MMD.
