Credit: whyframeshot / Adobe Stock Cramdown Litigation: Considering COVID in Valuing Real Estate in Chapter 11 Cases
Valuation of real estate in Chapter 11 cases is challenging to begin with, and adding the effect of COVID-19 to the equation will make litigating valuation issues much more complicated. This article discusses a few cases that provide some guidance on what courts are looking at.
January 26, 2022 at 10:00 AM
10 minute read
Bankruptcy
Valuation of real estate in Chapter 11 cases is challenging to begin with, and adding the effect of COVID-19 to the equation will make litigating valuation issues much more complicated. Although it is clear COVID-19 has affected most facets of our economy, quantifying the impact on real estate will lead to increased valuation hearings and motions in limine challenging the data relied upon by appraisers and their ultimate opinions of value. Also, COVID-19 did not have the same effect on all assets classes, with industrial properties doing much better as the demand for warehouse space increased, while lodging took a substantial hit with soaring hotel vacancy rates. It is likely that the lifting of various COVID-19 moratoriums and the expiration of forbearance agreements will cause a spike in Chapter 11 filings, leading to epic cramdown battles between debtors and secured creditors.
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