Auraria Student Lofts’ new plan ‘giant step backward,’ lender says

By Sarah Lizee

Olympia, Wash., July 20 – 5280 Auraria, LLC, which does business as Auraria Student Lofts, is facing motions from lender DB Auraria LLC and secured creditor Auraria Stub LLC to appoint a trustee to sell the debtor’s property, according to motions filed with the U.S. Bankruptcy Court for the District of Colorado.

DB Auraria called the debtor’s most recent Chapter 11 plan “a giant step backwards,” as it pushes creditor payments into early 2025 or longer, provides below prime cramdown interest, jettisons its promise to sell the property this year, and asserts a value for its assets at odds with its own previous testimony.

“The new plan says, in essence, ‘give me nineteen more months to find a refinancing source or a buyer, let me play the market while creditors bear the risk,’” DB Auraria said in its motion.

“Creditors will need to take a substantial haircut on their secured claim, and their cramdown interest rate, no matter what the value of the property turns out to be or the law otherwise provides, and equity will get a potentially significant windfall no matter what the absolute priority rule or bankruptcy code section 506(b) would otherwise provide.”

The lender said the improvement of value the debtor speculates it will have 16 months after confirmation – around $4 million – is far less than the cramdown interest expense the estate will incur during that same 16-month evaluation period.

The said the court should “put an end to this gamesmanship” and appoint a court-appointed fiduciary to sell the property or, in the alternative, allow DB Auraria to exercise its foreclosure rights.

“The debtor has had ample time to get something done, and it has failed to act in the interest of creditors,” the lender said.

Auraria Stub agreed, saying it fully supports DB Auraria’s request to appoint a trustee or other court-appointed fiduciary to conduct an organized sale of the debtor’s real property this year.

The San Clemente, Calif.-based company provides student housing in Denver. The company filed bankruptcy on June 9, 2022 under Chapter 11 case number 22-12059.

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