Case 17-10243-LSS Doc 386 Filed 04/12/17 Page 1 of 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: EASTERN OUTFITTERS, LLC, et al., 1 Debtors. CHAPTER 11 Case No. 17-10243 (LSS) (Jointly Administered) Re: Docket Nos. 261, 272, and 273 OBJECTION OF REALTY INCOME CORPORATION TO NOTICE OF (I) POSSIBLE TREATMENT OF EXECUTORY CONTRACTS AND LEASES, (II) FIXING OF CURE AMOUNTS, AND (III) DEADLINE TO OBJECT Realty Income Corporation ( Landlord ) objects to the Notice of (I) Possible Treatment of Executory Contracts and Leases, (II) Fixing of Cure Amounts, and (III) Deadline to Object [D.I. 272], as amended by the Notice of Filing of Revised Exhibit A to Notice (I) Possible Treatment of Executory Contracts and Leases, (II) Fixing of Cure Amounts and (III) Deadline to Object [D.I. 273] (as amended, the Notice ). Specifically, Landlord objects to the cure amount relating to its Properties (as hereinafter defined) stated in the Notice. All terms not defined herein shall have the same meaning as set forth in the Notice. In support of this Objection, Landlord states the following: 1. On or about February 5, 2017, Eastern Outfitters, LLC, Subortis Retail Financing, LLC, Eastern Mountain Sports, LLC, Subortis IP Holdings, LLC, Bob s Stores, LLC ( Bob s Stores ), and Bob s/ems Gift Card, LLC (collectively, the Debtors ) each filed their respective voluntary petitions for relief under chapter 11 of 11 U.S.C. 101 et seq. Each of the Debtors has continued to operate their respective businesses and manage their respective properties as debtors-in-possession pursuant to 11 U.S.C. 1107(a) and 1108. 1 The Debtors and the last four digits of their respective federal taxpayer identification numbers, where applicable, are as follows: Eastern Outfitters, LLC (9164); Subortis Retail Financing, LLC (9065); Eastern Mountain Sports, LLC (9553); Subortis IP Holdings, LLC; Bob s Stores, LLC (4389); and Bob s/ems Gift Card, LLC (9618). Objection to Cure Claim (RIC)
Case 17-10243-LSS Doc 386 Filed 04/12/17 Page 2 of 7 2. Landlord owns that certain nonresidential real property including the buildings and improvements located thereon located at 114 Federal Road, Danbury, Connecticut (the Danbury Property ). Landlord leases the Danbury Property to Bob s Stores, pursuant to that certain Sublease dated as of July 1, 1996 by and between Danbury MRC, Inc., as predecessor in-interest to Landlord, as landlord, and Danbury Bob s, Inc. ( DBI ), as predecessor-in-interest to Bob s Stores, as tenant, as amended by (a) that certain Amendment No. 1 to Sublease Agreement dated as of January 18, 2001 between Landlord and DBI, as predecessor-in-interest to Bob s Stores, (b) that certain Lease Amendment and Estoppel Statement dated as of December 24, 2003 by and between Landlord and Alphabravo Corporation ( ABC ), as predecessor-ininterest to Bob s Stores, and (c) that certain Amendment to Sublease dated October 13, 2016 between Landlord and Bob s Stores, and assigned to and assumed by Bob s Stores pursuant to that certain Fifth Notice of Assumption and Assignment of Unexpired Leases and Executory Contracts filed at Docket No. 1008 (the A&A Notice ) in the jointly administered chapter 11 bankruptcy case of In re VRG Liquidating, LLC, et al., Case No. 16-10971 (LSS)(the VRG Case ) 2 and that certain Seventh Order Approving the Assumption and Assignment of Unexpired Leases and Executory Contracts After the Closing Date entered by this Court on November 7, 2016 at Docket No. 1080 (the A&A Order ) in the VRG Case (as assigned and collectively, as may have been renewed or otherwise amended, the Danbury Lease ). The Danbury Lease is currently effective, has not been effectively terminated, rejected, assigned (in this case) or otherwise rendered unenforceable or ineffective. Upon information and belief, Bob s Stores identifies the store located on the Danbury Property as Store No. 9. 2 The jointly administered debtors in the VRG Case included BS Liquidating, LLC (f/k/a Bob s Stores, LLC), the predecessor-in-interest by assignment of the Leases (as hereinafter defined) to Bob s Stores. Objection to Cure Claim (RIC) 2
Case 17-10243-LSS Doc 386 Filed 04/12/17 Page 3 of 7 3. Landlord also owns that certain nonresidential real property including the buildings and improvements located thereon located at 220 Hale Road, Manchester, Connecticut (the Manchester Property ; the Danbury Property and the Manchester Property are, each, a Property and, together, the Properties ). Landlord leases the Manchester Property to Bob s Stores, pursuant to that certain Lease Agreement dated as of July 1, 1996 by and between MRC Manchester DevCo, Inc., as predecessor-in-interest to Landlord, as landlord, and Manchester, CT, Bob s, Inc. ( MCBI ), as predecessor-in-interest to Bob s Stores, as amended by (a) that certain Amendment Number One to Lease Agreement dated as of January 18, 2001 by and between Landlord and MCBI, as predecessor-in-interest to Bob s Stores, (b) that certain Lease Amendment and Estoppel Statement dated as of December 24, 2003 by and between Landlord and ABC, as predecessor-in-interest to Bob s Stores, and (c) that certain Amendment to Sublease dated October 13, 2016 between Landlord and Bob s Stores, and assigned to and assumed by Bob s Stores pursuant to the A&A Notice filed, and the A&A Order entered, in the VRG Case (as assigned and collectively, as may have been renewed or otherwise amended, the Manchester Lease ; the Danbury Lease and the Manchester Lease are, each, a Lease and together, the Leases ). The Manchester Lease is currently effective, has not been effectively terminated, rejected, assigned (in this case) or otherwise rendered unenforceable or ineffective. Upon information and belief, Bob s Stores identifies the store located on the Manchester Property as Store No. 32. 4. Pursuant to the terms of the Notice and that certain Order (I) Approving Notice Procedures for the Sale of Substantially All of the Debtors Assets, (II) Scheduling a Sale Hearing and (III) Approving Procedures for (A) Assumption and Assignment of Executory Contracts and Unexpired Leases and Determining Cure Amounts and (B) Rejection of Executory Objection to Cure Claim (RIC) 3
Case 17-10243-LSS Doc 386 Filed 04/12/17 Page 4 of 7 Contracts and Unexpired Leases (the Procedures Order ) [D.I. 261], the Debtors seek permission to, among other actions, fixing the cure amounts due with respect to certain executory contracts and unexpired leases, including, potentially, the Leases. 5. Pursuant to Procedures Order, the Debtors filed the Notice. The Notice states that according to the Debtors books and records, the cure amount for the unpaid monetary obligations under (a) the Danbury Lease is $104,499.99 and (b) the Manchester Lease is $103,924.96. Notice (Amended Exhibit A), page 21, lines 12 and 13. 6. Contrary to the Notice and according to Landlord s books and records, as of the date hereof, the accrued past due amounts with respect to (a) the Danbury Lease is $296,645.53 (the Current Danbury Lease Cure Obligation ) and (b) the Manchester Lease is $176,357.50 (the Current Manchester Lease Cure Obligation ; the Current Danbury Lease Cure Obligation and the Current Manchester Lease Cure Obligation are, together, the Current Lease Cure Obligations ). The Current Lease Cure Obligations represents base rent, common area maintenance, administrative and repair reimbursement obligations that were not paid by Bob s Stores, as required under each of the Leases, and remain outstanding as of the date hereof. An itemization of the individual components of the Current Lease Cure Obligations is set forth on Exhibit A hereto. Under the terms of the respective Leases, Bob s Stores is responsible for the payment of, inter alia, all base rent, common area maintenance, administrative and repair reimbursement amounts attributable or related to the Properties. 7. Additionally, rent and other monetary obligations will become due and owing pursuant to each of the Leases from and after April 12, 2017 and must be paid by Bob s Stores when due or paid in connection with any assumption of the respective Leases. Landlord objects to an assumption of either Lease unless all base rent, real estate tax, common area maintenance, Objection to Cure Claim (RIC) 4
Case 17-10243-LSS Doc 386 Filed 04/12/17 Page 5 of 7 administrative, insurance and repair reimbursement amounts, percentage rent (if any) and other monetary obligations that become due pursuant to each of the Leases from and after the date hereof (a) are paid as and when due or (b) are paid in full in connection with an assumption of the respective Leases. 8. Additional monetary obligations may have accrued pursuant to each of the Leases but have not yet become the subject of an invoice or statement and may not become due prior to the entry of an Order approving the assumption of one or both of the Leases. Non-exclusive examples of these accrued, but not yet due, obligations are additional real property tax, insurance and common area maintenance obligations for the current year and percentage rent, as applicable, all of which must be paid by the lessee pursuant to each of the Leases. Bob s Stores, and any proposed assignee, must acknowledge, and any Order approving cure amounts and the assumption and assignment of one or both of the Leases must provide, (a) that the proposed assignee shall be liable for all amounts that have accrued but have not become the subject of a statement or other invoice without regard to whether such amounts are attributable to a prepetition or post-petition period, and (b) that payment of year-end adjustments, if any, will be made by the assignee as and when due pursuant to the terms of the respective Leases (and if the assignee is not responsible for the full amount of such adjustments, that Bob s Stores will escrow funds in an amount sufficient to pay the portion of the year-end adjustments attributable to the pre-assumption period of the year). The Landlord objects to any assignment of the respective Leases to the extent that the Order approving any assumption and assignment of either or both Leases does not obligate Bob s Stores or any assignee(s) to pay all obligations that have accrued under the subject Lease but have not yet become due and payable prior to the date an Order is entered approving the assumption of the applicable Lease. Objection to Cure Claim (RIC) 5
Case 17-10243-LSS Doc 386 Filed 04/12/17 Page 6 of 7 9. As set forth in each of the Leases, Landlord additionally asserts its right to be reimbursed as part of the cure payments for all of its actual pecuniary losses including, but not limited to, attorneys fees and costs expended with regard to Bob s Stores bankruptcy proceedings. Landlord further objects to the extent that all cure amounts are not immediately paid in full in advance of any assumption of either or both Leases including all of its actual pecuniary losses including, but not limited to, attorneys fees and costs expended with regard to Bob s Stores bankruptcy proceedings. 10. The Leases also provide that Bob s Stores must indemnify and hold Landlord harmless with regard to any and all claims suffered by Landlord and arising from Bob s Stores use and occupancy of the Properties. Any assignee of either or both Leases must assume all indemnification liabilities set forth in the respective Lease or Bob s Stores must be required to evidence, or obtain adequate insurance in order to guaranty, that its indemnity responsibilities will be met. Claims for indemnity may include, but are not limited to, claims for personal injuries which occur at the Properties where Bob s Stores or Landlord are joined as a party defendant, damage and destruction to the property by Bob s Stores or its agents, or claims for environmental damage or environmental clean up. Landlord objects to any assumption and assignment of either or both of the Leases to the extent that it does not obligate any assignee of the applicable Lease(s) to be responsible for all indemnification liabilities or obligate Bob s Stores to otherwise provide assurance that such indemnification obligations will be satisfied. 11. Bob s Stores has failed to demonstrate that any assumption or assumption and assignment of the Lease will fully comply with all of the requirements of 11 U.S.C. 365(b) including, but not limited to, (a) a cure of all defaults; and (b) adequate assurance of future performance with respect to all accrued, but not yet due, obligations under the Lease and the Objection to Cure Claim (RIC) 6
Case 17-10243-LSS Doc 386 Filed 04/12/17 Page 7 of 7 indemnity obligations. Landlord objects to any assumption and assignment of either or both Leases until such time as full compliance with Section 365(b) has been demonstrated. WHEREFORE, Landlord (a) objects to the Notice as set forth herein and requests that the cure amounts for the Danbury Lease and the Manchester Lease be set at the Current Danbury Lease Cure Obligation and the Current Manchester Lease Cure Obligation, respectively, together with attorneys fees, any additional actual pecuniary losses and such additional amounts as may become due prior to any assumption of the Danbury Lease and/or the Manchester Lease (collectively, the Lease Cure Amounts ); (b) objects to any assumption of the Danbury Lease and/or the Manchester Lease unless a complete and immediate payment of all Lease Cure Amounts with respect to the applicable Lease is made prior to the assumption of such Lease and such assumption otherwise adequately resolves the objections set forth above; and (c) requests such other and further relief as may be just and required under all of the circumstances. DATED: April 12, 2017 /s/ Christopher D. Loizides Christopher D. Loizides (No. 3968) LOIZIDES, P.A. 1225 King Street, Suite 800 Wilmington, DE 19801 Telephone: (302) 654-0248 Facsimile: (302) 654-0728 Email: loizides@loizides.com Counsel for Realty Income Corporation OF COUNSEL: Lisa M. Peters, Esquire KUTAK ROCK LLP 1650 Farnam Street Omaha, NE 68102-2186 Telephone: (402) 661-8609 Facsimile: (402) 346-1148 Email: lisa.peters@kutakrock.com Objection to Cure Claim (RIC) 7
Case 17-10243-LSS Doc 386-1 Filed 04/12/17 Page 1 of 2 EXHIBIT A Objection to Cure Claim (RIC)
Case 17-10243-LSS Doc 386-1 Filed 04/12/17 Page 2 of 2 ITEMIZATION OF CURRENT LEASE CURE OBLIGATIONS Danbury Lease January 2017 Base Rent $ 88,666.66 January 2017 Common Area Maintenance Escrow $ 1,711.02 January 2017 Administrative Fee Escrow $ 913.15 February 2017 Base Rent $ 88,666.66 February 2017 Common Area Maintenance Escrow $ 9,131.53 February 2017 Administrative Fee Escrow $ 913.15 March 2017 Common Area Maintenance Escrow $ 9,131.53 March 2017 Administrative Fee Escrow $ 913.15 April 2017 Common Area Maintenance Escrow $ 9,131.53 April 2017 Administrative Fee Escrow $ 913.15 Property Repairs (brick veneer repairs) $ 86,554.00 Total Current LHC Lease Cure Obligation $296,645.53 Manchester Lease January 2017 Base Rent $ 88,178.75 February 2017 Base Rent $ 88,178.75 Total Current Tucson Lease Cure Obligation $176,357.50 Objection to Cure Claim (RIC)
Case 17-10243-LSS Doc 386-2 Filed 04/12/17 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: EASTERN OUTFITTERS, LLC, et al., 1 Debtors. CHAPTER 11 Case No. 17-10243 (LSS) (Jointly Administered) CERTIFICATE OF SERVICE I, Christopher D. Loizides, hereby certify that on April 12, 2017, I did cause to be served true and correct copies of the foregoing OBJECTION TO NOTICE OF (I) POSSIBLE TREATMENT OF EXECUTORY CONTRACTS AND LEASES, (II) FIXING OF CURE AMOUNTS, AND (III) DEADLINE TO OBJECT on the parties listed on the attached service list as indicated thereon. DATED: April 12, 2017 /s/ Christopher D. Loizides Christopher D. Loizides (No. 3968) LOIZIDES, P.A. 1225 King Street, Suite 800 Wilmington, DE 19801 Telephone: (302) 654-0248 Facsimile: (302) 654-0728 E-mail: loizides@loizides.com 1 The Debtors and the last four digits of their respective federal taxpayer identification numbers, where applicable, are as follows: Eastern Outfitters, LLC (9164); Subortis Retail Financing, LLC (9065); Eastern Mountain Sports, LLC (9553); Subortis IP Holdings, LLC; Bob s Stores, LLC (4389); and Bob s/ems Gift Card, LLC (9618). Objection to Cure Claim (RIC)
Case 17-10243-LSS Doc 386-2 Filed 04/12/17 Page 2 of 2 SERVICE LIST VIA ELECTRONIC MAIL AND FIRST-CLASS MAIL Eastern Outfitters, LLC 160 Corporate Court Meriden, CT 06450 Attn: Daniel Bliss Email: dbliss@bobstores.com Bracewell LLP CityPlace I, 34 th Floor 185 Asylum Street Hartford, CT 06103 Attn: Mark E. Dendinger Email: Mark. Dendinger@bracewelllaw.com Lincoln Partners Advisors LLC 633 West Fifth Street, Suite 6650 Los Angeles, CA 90071 Attn: Alexander W. Stevenson Email: AStevenson@lincolninternational.com Greenberg Traurig, LLP 200 Park Avenue New York, NY 10166 Attn: Matthew L. Hinker, Esquire Email: hinkerm@gtlaw.com Drinker Biddle & Reath LLP 222 Delaware Avenue, Suite 1410 Wilmington, DE 19801 Attn: Steven K. Kortanek, Esq. Email: steven.kortanek@dbr.com Bracewell LLP 1251 Avenue of Americas New York, NY 10020-1104 Attn: Jennifer Feldsher Email: Jennifer.Feldsher@bracewelllaw.com Cole Schotz P.C. 500 Delaware Avenue, Suite 1410 Wilmington, DE 19801 Attn: Norman L. Pernick Attn: Marion M. Quirk Attn: Katharina Earle Email: NPernick@coleschotz.com Email: MQuirk@coleschotz.com Email: KEarle@coleschotz.com Office of the U.S. Trustee 844 King Street, Room 2207 Wilmington, DE 19801 Attn: Jane M. Leamy, Esq. Email: jane.m.leamy@usdoj.gov Cooley LLP 1114 Avenue of the Americas New York, NY 10036 Attn: Jay R. Indyke, Esq. Attn: Richelle Kalnit, Esq. Email: jindyke@cooley.com Email: rkalnit@cooley.com Drinker Biddle & Reath LLP 600 Campus Drive Florham Park, NJ 07932 Attn: Robert K. Malone, Esq. Email: Robert.malone@dbr.com Objection to Cure Claim (RIC) 2