Oberlin Plaza One, LLC

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
OBERLIN PLAZA ONE, LLC 	Case Number 09-03686-8-JRL
Chapter 11
DEBTOR.
______________________________________________________________________________
ORDER
This matter came before the court on the debtor’s motion for authorization for mall
closure and decommissioning. A hearing on this matter was conducted on June 15, 2009 in
Raleigh, North Carolina.
The debtor filed for relief under Chapter 11 of the Bankruptcy Code on May 5, 2009.
The debtor operates a mall in Niagra Falls, New York, known as Summit Mall ( “mall”). When
the debtor took ownership of the mall in 2002, the mall was operating at a deficit. In an attempt
to revive the mall, the debtor undertook substantial maintenance and repair to the property.
Additionally, the debtor spent considerable sums of money to attract new tenants. However,
none of the efforts to make the mall viable were successful. The debtor seeks to close and
decommission the mall under the belief that such acts will aid in facilitating an orderly sale or
other transfer of the mall property.
SO ORDERED.
SIGNED this 19 day of June, 2009.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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At hearing, counsel for the debtor submitted a cash flow summary highlighting the
debtor’s dismal financial picture. The debtor further described the present state of the mall.
Currently, the mall houses only ten tenants, an occupancy rate of approximately 16%. Of those
ten tenants, only three are current on rent payments. The debtor further asserted that as the mall
stands, it has become a target for vandalism. 	Acts of vandalism, such as graffiti, tampering with
security equipment, and trashing of bathrooms continue to diminish its value. An expert in retail
development also testified on behalf of the debtor. In the opinion of the retail expert, closing the
mall was an exercise of good business judgment.
The debtor went on to detail its plans for closing and decommissioning the mall property.
The debtor intends for the closing and decommissioning to be a two stage process. First, the
debtor will close the mall to the public. The debtor further asserted that the closing will be
undertaken in full compliance with local and state authorities and regulations. While the mall is
closed, the debtor will continue to provide utility and water service to tenants as they make plans
to relocate. After all tenants have vacated the property, the debtor will begin the second stage,
decommissioning. Decommissioning will involve shutting off electric, water, sprinklers, and all
other utility services to the building. In addition, steps will be taken, such as boarding up
entrance ways and blocking off sections of the parking lot, to secure the property safely.
Counsel for three tenants, an adjacent property owner, and the creditors’ committee
appeared to make objections to the debtor’s motion. The overarching objection was the need for
more time to move inventory and relocate, and also for more specificity in the plans for
decommissioning. The largest opponent, Sears, had additional concerns. The Sears store
(“Sears”) predates the mall’s construction and is separately owned. The mall and Sears share a
common wall which contains an entranceway (the “mall gate”) between the properties. This
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entrance provides ingress and egress for Sears customers. Sears’ primary concern was that when
the debtor closes the mall and thus the mall gate, it will automatically place Sears in violation of
local safety and fire codes. Sears asked this court to reserve its decision until further information
could be gathered about available alternatives that will lessen the adverse effects to their
tenancy. 	The court concludes that the debtor appropriately used its business judgment in
deciding to close the mall, and that decision at this juncture is not premature. Closing the mall
is obviously a use of estate property outside the ordinary course of business for which court
approval is required under 11 U.S.C. § 363. The evidence presented shows that under the
debtor’s ownership the mall has never been profitable, and is in a perpetually declining state.
However, as with any debtor-in-possession operating under Chapter 11, the mall closing must be
in accordance with state and local law. While the debtor offered testimony that it intended to act
in such a manner, no probative evidence was proffered. Therefore, the court will authorize the
mall to be closed ten days after receipt of evidence documenting that the egress restrictions the
debtor intends to employ are in full compliance with any and all state and local
codes/regulations; and, that such closing will not prevent Sears or other free standing tenants
from continuing normal business operations. Decommissioning is not authorized at this time.
Based on the foregoing, the motion is APPROVED as to the closing of the mall,
contingent upon the court’s satisfaction with evidence of the debtor’s compliance with state and
local requirements. The motion is DENIED as to any acts of decommissioning until the court is
presented with a detailed and specific proposal demonstrating compliance with state and local
law and the impact on adjoining tenants.
END OF DOCUMENT
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