Pier 1 Imports, Inc. and affiliates ask the U.S. Bankruptcy Court for the Eastern District of Virginia to authorize the private sale of the real property, together with that certain building, improvements, easements, hereditaments, fixtures, furniture, equipment (including office furniture, forklifts, racks, and racking), and appurtenances thereunto located in the City of Mansfield, County of Tarrant, and State of Texas to 2200 Heritage Owner, LLC for $18,005,250 million in cash, pursuant to their contract of sale agreement, as amended.
Pursuant to the Bidding Procedures Order, the Debtors, in the exercise of their reasonable business judgment may elect to exclude any Assets from the bidding procedures and sell such Assets at either a private or public sale, subject to Court approval of any alternative sale.
The Debtors believe that entry into the Purchase Agreement and approval of the Sale and Bid Protections will maximize the value of the Property. Specifically, the Purchase Agreement is not only the highest standalone offer for the Property, but also includes an additional offer for personal property (including furniture, fixtures and equipment) that the Debtors would need to otherwise sell (at an additional cost) or abandon. No other bidder wanted any of such property. Accordingly, they submit in their sound business judgment that the process they ran to propose a Sale was robust and any further process is unlikely to yield higher or better offers. In addition, the Buyer would like to close the transaction shortly after receiving Court approval of the transaction.
The Debtors have historically used Jones Lang LaSalle Brokerage, Inc. for assistance with disposition of their real property assets. JLL was originally engaged for the sale of Mansfield prior to September 2019. The terms of the contract provided the Broker with a standard Brokerage Fee of 4% upon consummation of the Sale, consistent with other agreements between the parties.
The Debtors ask approval to pay the Brokerage Fee earned by JLL in connection with the Sale on the grounds that it was reasonable and necessary to maximize the value of the property in their business judgment, and so as to avoid any statutory liens that may attach to Property under state law, should the Brokerage Fee be unpaid. If the Debtors do not pay the Brokerage Fee, and the Broker’s Lien does attach, the Buyer will not close the Sale and it will negatively affect their estates.
Following several months of standard market outreach, JLL received initial indications of interest from more than 30 parties. Based on these indications of interest, the Debtors determined that the bid of the Stalking Horse Bidder was the best available bid, and determined to enter into an agreement with the Stalking Horse bidder to ensure that their bid would set a price floor of $15 million for Mansfield. The Stalking Horse Bid was contingent upon the receipt of the Bid Protections (and subject to the post-facto court approval sought by this Motion). The Debtors believe that the Bid Protections are reasonable, provided a price floor for the Sealed Bid Auction, were appropriate under the circumstances, and benefitted the Debtors’ estate.
The Debtors, in consultation with JLL, determined that the most value-maximizing auction style to utilize under the circumstances was a sealed bid auction, whereby parties submit a highest and best bid to the Debtors, and the Debtors can choose from among such bids, call for additional rounds of bids, and/or negotiate with bidders to improve their bid. Ultimately, the Debtors ran a multi-round Sealed Bid Auction, resulting in the eventual selection of the Winning Bidder.
The Winning Bidder was to wire its Earnest Money Deposit in a sum to be set forth on the Property Page to the Title Company within 24 hours from receipt of the Contract signed by Seller. If the Winning Bidder failed or refused to deliver the Earnest Money Deposit within such two-day period, the offer would be deemed withdrawn. The balance of the Total Purchase Price, along with all other costs and/or fees, must be paid as required in the Purchase Agreement.
All sales were to close through the Title Company as set forth in the Contract. The actual scheduled closing date would be set by the Title Company pursuant to the terms and conditions of the Contract. The Winning Bidder was required to pay customary and normal closing costs, including, but not limited to, closing/escrow fees, recording fees, pro-rations of property taxes and assessments, lender’s title insurance premium and fees, loan fees, document preparation fees, and all documentary transfer taxes customarily paid by buyers, if applicable.
The Stalking Horse Bid offered $15 million as the purchase price for the Property, contingent upon the receipt of Bid Protections and subject to court approval. Although the Stalking Horse Bid ultimately was not selected through the Sealed Bid Auction, the Debtors ask, in their business judgment, court approval to pay the Bid Protections owing under the Stalking Horse Bid.
Over the course of the Sealed Bid Auction, JLL narrowed down a “short list” of buyers to 31, completed a detailed bid process for three rounds of bids with a binding contract, terms of sale, short-term leaseback and hard earnest money package that was sent to the “short list” of potential buyers. Further, JLL completed multiple tours with a short list of buyers and brokers.
Over the course of the three rounds of bidding, JLL created market competition to end at a high bid of $18,005,2506 submitted by the Buyer, which was ultimately selected as the winning bid.
The salient terms of the Purchase Agreement are:
a. Seller: Pier 1 Imports (U.S.), Inc.
b. Buyer: Lonejack II, LLC
c. Property: That certain tract of land located at 2200 Heritage Parkway, Mansfield, Texas 76063, and more particularly described or depicted on Exhibit A.
d. Purchase price: 18,005,250 – (i) $18,005,250 purchase price includes $17,123,663 for Mansfield and $881,587 for the FF&E therein, and (ii) $200,000 earnest money to be timely deposited (in immediately available funds) by the Buyer into escrow.
e. Bid Protection: 2% breakup fee and $25,000 due diligence expense reimbursement
The Debtors ask authority to (i) sell the Property free and clear of all interests, with any such interests to attach to the proceeds of the Sale; (ii) pay the Bid Protections to the Stalking Horse Bidder as a result of the Debtors electing to ultimately select another bidder’s offer as the winning bid; and (iii) pay the Brokerage Fee owed to JLL for services rendered in connection with the Sale, pursuant to the standard listing agreement between the Debtors and JLL.
Finally, to maximize the value received for the assets, the Debtors ask to close the Sale as soon as possible after the Hearing. Accordingly, they ask that the Court waives the 14-day stay period under Bankruptcy Rule 6004(h).
A copy of the Statement of Work is available at https://tinyurl.com/y9hddnh4 from PacerMonitor.com free of charge.
About Pier 1 Imports
Founded with a single store in 1962, Pier 1 Imports, Inc. (OTCPK: PIRRQ) is a leading omni-channel retailer of unique home decor and accessories. Its products are available through approximately 930 Pier 1 stores in the U.S. and online at pier1.com.
Pier 1 Imports and seven affiliates sought Chapter 11 protection (Bankr. E.D. Va. Lead Case No. 20-30805) on Feb. 17, 2020, to pursue a sale of the assets.
Pier 1 Imports disclosed $426.6 million in assets and $258.3 million in debt as of Jan. 2, 2020.
Judge Kevin R. Huennekens oversees the cases.
A&G Realty Partners is assisting Pier 1 Imports with its previously announced store closures and lease modifications. Pier 1 Imports landlords are encouraged to contact A&G Realty Partners through its website, http://www.agrep.com/
Kirkland & Ellis LLP and Osler, Hoskin & Harcourt LLP serve as legal advisors to Pier 1 Imports and its affiliated debtors in the U.S. and Canada, respectively. The Debtors tapped AlixPartners LLP as restructuring advisor; Guggenheim Securities, LLC as investment banker; and Epiq Bankruptcy Solutions as claims agent.