Fairfield Residential, one of the nation’s largest developers of apartment communities, filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on December 13, 2009. According to an affidavit filed by Fairfield’s Chief Restructuring Officer (the “Affidavit”), the company employs approximately 2,000 individuals and operates in 40 real estate markets throughout the United States. (A copy of the Affidavit is available here). In the months leading up to bankruptcy, Fairfield listed assets of $958 million against liabilities of $835 million. These figures are down considerably compared to 2008 when Fairfield’s assets were valued at $1.2 billion, against liabilities of $978 million.
Fairfield attributes its filing for bankruptcy to the “unprecedented collapse in the real estate and capital markets [which] have dramatically affected the Debtors.” Like with many other developers, Fairfield relies on its ability to refinance or sell investments to generate capital. Capital markets began to tighten lending starting in the fourth quarter of 2008. With high concentrations of properties in California, Nevada and Florida, Fairfield also experienced loss in value of their properties. The drop in property values triggered defaults under various loans, in some cases releasing the lenders’ obligations to fund payments to Fairfield. See Affidavit, pp. 19-20.
Objectives in Bankruptcy
As stated in Fairfield’s Affidavit, the company hopes to win Court approval of a disclosure statement and plan of reorganization on an expedited basis. Pursuant to the proposed plan, a “New Fairfield” will be created that will assume certain executory contracts and operating liabilities of various rental properties. Those assets not transferred to the New Fairfield will be transferred to a liquidating trust that will liquidate the non-transferred assets for the benefit of unsecured creditors. See Affidavit, p. 29.
Fairfield has begun filing motions to assume executory contracts relating to its construction and development business. According to a recent motion to assume contracts, the company is required to assume certain contracts and agreements before January 27, 2010. (Read Fairfield’s Twelfth Motion to Assume Executory Contracts and Leases here.)
This bankruptcy proceeding is before the Honorable Brendan L. Shannon.