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March | April | 2015 CCIM.com
By structuring new leases based on go-for-
ward tenancy in the building, a valuable asset
for the estate is created, which enables the
debtor or the acquirer to of er a fully leased
building to the investment marketplace.
Based in suburban Chicago, Qualteq was
a market leader in manufacturing plastic
credit and gif cards for companies such as
American Express, Visa, and MasterCard.
T e owner's personal f nancial dif culties
forced Qualteq into Chapter 11 in 2013.
T e bankruptcy trustee and his f nancial
advisers f rst stabilized the company, then
sold the business to Brazil-based Valid S.A.
through a Bankruptcy Code Section 363
bankruptcy sale. However, Valid had no
interest in purchasing the four buildings
Qualteq occupied.
Working in tandem with the bankruptcy
trustee and advisers, Hilco structured new,
f ve-year leases on each of the four buildings
with Valid as the tenant, based on the strong
balance sheet that was created with Valid's
purchase, enabling Qualteq to continue
operations in their current facilities.
Prior to the f nalization of the new leases
and with no certain commitment from Valid
to remain as a tenant, there was no immedi-
ate interest from the real estate investment
community for four potentially vacant
industrial buildings. Once the new leases
were f nalized, the leased buildings were then
put through a sale process by Hilco, which
garnered significant interest from third-
party investors. Stalking horse bidders were
obtained for each property, followed by an
auction. Hilco estimated the four buildings,
on an empty basis, were valued at approxi-
mately $10.5 to $12.5 million. When the gavel
came down, the auction resulted in total sales
of almost $19 million for the four fully occu-
pied buildings.
Utilizing the real estate as a vehicle to
enhance value further ensured that the estate
achieved maximum value of the Qualteq
business/assets and helped to secure a suc-
cessful transaction with Valid. Furthermore,
the added value created by selling buildings
occupied by a quality credit tenant resulted
in suf cient proceeds to fully pay all mort-
gage holders.
Whether a company in Chapter 11 reor-
ganizes and exits from bankruptcy on its
own or is acquired by a strategic or f nancial
buyer, the real estate occupied by the business
can be transformed into a value enhancer.
By recasting leases with a strong tenant and
aggressively marketing the properties, a sig-
nif cant amount of incremental cash can be
generated to benef t the bankruptcy estate
in a reorganization and/or a going-concern
sale. In bankruptcy, debtors and creditors
should regard companies' real estate as a
value-creation tool, not an illiquid liability.
Joel H. Schneider is senior vice president,
dispositions, for Hilco Real Estate, LLC, a unit
of Hilco Global. Contact him at jschneider@
hilcoglobal.com.
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