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OLSHAN FROME WOLOSKY LLP 1325 Avenue of the Americas New York, New York 10019 Adam H. Friedman, Esq. Jonathan T. Koevary, Esq. 212.451.2300 SCHWARTZ SLADKUS REICH GREENBERG ATLAS LLP 270 Madison Avenue New York, New York 10016 Bruce S. Klein, Esq. 212.743.7000 Counsel to Third Nassau Corp.

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK

In re: SEASONS CORPORATION, et al.,

Debtors.1

Chapter 11 Case No. 18-45284 (NHL) (Jointly Administered)

OBJECTION OF THIRD NASSAU CORP. TO DEBTORS’ PROPOSED ASSUMPTION AND ASSIGNMENT OF LEASE AND RESERVATION OF RIGHTS

Landlord Third Nassau Corp. (“Third Nassau” or “Landlord”) by and through its

undersigned counsel, for its objection to the above captioned debtors’ and debtors in possession’s

(the “Debtors”) proposed assumption and assignment of its lease and reservation of rights (the

“Objection”) states as follows:

1 The Debtors in these Chapter 11 cases, together with the last four digits of each Debtor’s federal tax identification number, are as follows: Blue Gold Equities LLC (7766), Central Avenue Market LLC (7961), Amsterdam Avenue Market LLC (7988), Wilmot Road Market LLC (8020), Seasons Express Inwood LLC (1703), Seasons Lakewood LLC (0295), Seasons Maryland LLC (1895), Seasons Clifton LLC (3331), Seasons Cleveland LLC (7367), Lawrence Supermarket LLC (8258), Upper West Side Market LLC (8895) and Seasons Corporate LLC (2266). The mailing address for the Debtors, solely for purposes of notices and communications, is: 5 Doughty Boulevard, Inwood, NY 11096.

Case 1-18-45284-nhl Doc 205 Filed 11/28/18 Entered 11/28/18 16:25:14

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BACKGROUND

1. Debtor Lawrence Supermarket LLC2 (the “Debtor Tenant”), as assignee, is the

current tenant of certain non-residential real property located at 292-330 Central Avenue,

Lawrence New York (the “Premises”) pursuant to a lease agreement between the Debtor

Tenant’s predecessor and Landlord dated February 24, 2009, as amended from time to time (the

“Lease”). A copy of the Lease, inclusive of all riders, an extension agreement and the

corresponding assignment is attached as Exhibit A hereto.

2. On September 16, 2018 (the “Petition Date”), the Debtors, including the Debtor

Tenant, filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code

(the “Bankruptcy Code”).

3. The Debtors seek approval to sell substantially all of their assets and assign

certain executory contract and unexpired leases to SSNS Express LLC (“SSNS”) see, e.g.,

Docket No. 156. Among the leases being assigned to SSNS, included is the lease of the Landlord

herein. On November 15, 2018 [Docket No. 171], Landlord filed a cure objection to the

assumption and assignment. Among other things, the cure objection alleged $235,578.15

representing approximately nine months’ rent past due and owing, and a security deposit

deficiency of $17,932.

4. The proposed assumption and assignment of the Third Nassau’s Lease should not

be approved. SSNS has not timely provided any financial information to the Landlord nor has it

been cooperative or forthcoming with such information. Indeed, although SSNS advised that it

would provide its adequate assurance package on November 21, Landlord received no

information whatsoever until November 27, 2018 – two days before the adequate assurance

2 The Notice listed Debtor Central Avenue Market LLC (“Central Avenue”) as the tenant. Upon information and belief, however, Central Avenue is merely an operating entity.


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objection deadline – when after much inquiry, Landlord received SNSS’s “Company Resume”

(the “Resume”) that was supplied under a confidentiality agreement. The Resume merely

included biographies of its principals and limited financial information.

5. The “financial information” provided by the Resume is incomplete and grossly

inadequate by any standard, and nowhere near what is required by the Bankruptcy Code. No

projections whatsoever have been provided. None. The only financial information whatsoever

that has been provided is an unverified cash balance – with no explanation of where the cash

came from, nor how it will be used.

OBJECTION

6. SSNS has not provided adequate assurance of future performance, as required by

sections 365(b)(1)(C) and 365(f)(2) of the Bankruptcy Code. The Debtors may not assume and

assign the Landlord’s Lease unless there is adequate assurance of future performance under the

Leases. Providing adequate assurance of future performance is an affirmative duty of the Debtors

and the Debtors bear the ultimate burden under Section 365. See In re Rachels Indus., Inc., 109

B.R. 797, 802 (Bankr. W.D. Tenn. 1990); see also Richmond Leasing Co. v. Capital Bank, N.A.,

762 F.2d 1303, 1309 (5th Cir. 1985).

7. Courts require a specific factual showing through competent evidence to

determine whether a debtor demonstrates adequate assurance of future performance including

documentary evidence beyond projections. See e.g., In re Haute Cuisine, Inc., 58 B.R. 390

(Bankr. M.D. Fla. 1986) (even though experts presented cash flow projections, the court found

that insufficient documentary evidence had been presented). To determine whether a party

provides adequate assurance of future performance, courts have looked to sufficient economic


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backing, economic conditions, certificates, credit reports, escrow deposits or other similar forms

of security or guarantees. In re Belize Airways, 5 B.R. 152 (Bankr. S.D. Fla. 1980); In re

Lafayette Radio Electronics Corp., 9 B.R. 993 (Bankr. E.D.N.Y. 1981).

8. “In determining adequate assurance of future performance, courts have

considered some of the following factors: the [assignees’] payment history; presence of a

guarantee; presence of a security deposit; evidence of profitability; a plan which would earmark

money exclusively for the landlord; the general outlook of the [debtors’/assignees’] industry; and

whether unexpired lease is at, or below, the prevailing rate.” 3 COLLIER ON BANKRUPTCY

365.06. (Alan N.Resnick & Henry J. Sommer eds., 16th ed.)

9. As set forth above, the only documentation provided was the Resume – and the

only financial information contained therein – was an unverifiable cash balance. A review of the

applicable factors against the Resume unquestionably reveals that no assurances have been

provided in this matter:

Adequate Assurance Factor Application of Factor

The [assignees’] payment history None. There is no payment history for this start-up entity.

Presence of a guarantee None.

Presence of a security deposit None. As set forth in the Landlord’s cure objection dated November 15, 2018, the existing security deposit is not fully funded under the Lease nor was such funding offered as a cure.

Evidence of profitability None provided.

Earmarked money exclusively for the landlord

None.


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The general outlook of the [debtors’/assignees’] industry

The industry faces significant challenges.

Whether unexpired lease is at, or below, the prevailing rate

Lease is market rate.

10. Moreover, because the Lease is in a shopping center, the Bankruptcy Code places

additional burdens upon the Debtor-Tenant to demonstrate adequate assurance. See In re Joshua

Slocum Ltd., 922 F.2d 1081, 1086 (3d Cir. 1990); see also L.R.S.C. Co. v. Rickel Home Centers, Inc.

(In re Rickel Home Centers, Inc.), 209 F .3d 291, 299 (3d Cir. 2000). The additional adequate

assurance must provide:

A. The source of rent and assurance that the financial condition and operating performance of the proposed assignee and its guarantors, if any, must be similar to the financial condition and operating performance of the debtor and its guarantor(s), if any, as of the time the debtor became the lessee. See 11 U.S.C. § 365(b)(3)(A);

B. That any percentage rent due under the lease will not decline substantially. See 11 U.S.C. §

365(b)(3)(B);

C. That assumption and assignment of the lease is subject to all provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach of any such provision in any other lease, financing agreement, or master agreement relating to such shopping center. See 11 U.S.C. § 365(b)(3)(C); and

D. That assumption and assignment of the lease will not disrupt the tenant mix or balance in the shopping center. See 11 U.S.C. § 365(b)(3)(D).

11. It is clear that none of the regular or heightened factors applicable here have been

satisfied. As part of adequate assurances, courts often consider whether unaudited financials are

sufficient and also whether a financial backer has supplied the assignee with a guarantee or

similar credit support. Unaudited financial projections are not sufficient to establish adequate

assurances. As a result, courts often examine whether guarantees or similar credit support are

provided in the provision of adequate assurances. Here, there aren’t even unaudited financials,

let alone offered guarantees from the principals or third parties.


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12. In In re Serv. Merch. Co., 297 B.R. 675, 682, (Bankr. M.D. Tenn. 2002), the

landlord objected to the assignment of its lease, including for lack of adequate assurances. The

court, as part of its ruling, judged adequate assurance by the strength of the assignee’s backers

due to the rent guarantees provided therefor. The Service Merchandise court approved the

assignment after a thorough review of the strength of the assignees backers and their business

operations and where the principals of the assignee, “Kimco and Schottenstein both provided

absolute guarantees to [the landlord] for one year of rent following default.” Id. at 684.

13. Here, the only piece of financial information whatsoever set forth in the Resume

is an unverified and unaudited cash balance and there is no telling whether that cash will remain

with the start-up entity for operations, whether it will be used solely with respect to operations of

the premises, or is simply a temporary deposit under the guise of demonstrating adequate

assurance.

14. SSNS apparently relies solely on the business experience of its principals. But

none of those principals have offered any guarantee. Absent a guarantee and reliable protections,

at bare a minimum, SSNS, as a start up entity, should be required to post six months’ security

deposit under Bankruptcy Code section 365(l) (requiring substantially the same security as

would have been required by the landlord upon the initial leasing to a similar tenant).

Regardless, without supplying projections – and giving Landlord reasonable time and discovery

as necessary to verify same, the Debtors cannot meet their burden.


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JOINDER IN OBJECTIONS OF OTHER LANDLORDS

15. To the extent not inconsistent with this Objection, Landlord joins in objections to

Debtors’ proposed assumption and assignment asserted by other landlords and contract

counterparties.

RESERVATION OF RIGHTS

16. Third Nassau reserves its right to take discovery, supplement or amend this

Objection in writing or at any hearing, including with respect to the adequacy of untimely

information that may be provided prior to the hearing or with respect to information concerning

SSNS or any alternate entity to whom the Debtor-Tenant may seek to assign the Lease, including

with respect to the adequate assurance required by Bankruptcy Code section 365(b)(3)

concerning shopping centers. In addition, Landlord fully reasserts and incorporates its cure

objection filed on November 15, 2018 [Docket No. 171], as if fully set forth herein.

WHEREFORE, Third Nassau requests that the Court (i) deny the assumption and

assignment of the Lease; and (ii) grant Third Nassau such other relief as may be warranted.


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Dated: New York, New York OLSHAN FROME WOLOSKY LLP November 28, 2018 By: /s/ Jonathan T, Koevary Adam H. Friedman

Jonathan T. Koevary 1325 Avenue of the Americas New York, New York 10019 212.451.2265

SCHWARTZ SLADKUS

REICH GREENBERG ATLAS LLP Bruce S. Klein

270 Madison Avenue New York, New York 10016 212.743.7000 Counsel for Third Nassau Corp.


EXHIBIT A

Case 1-18-45284-nhl Doc 205-1 Filed 11/28/18 Entered 11/28/18 16:25:14

Case 1-18-45284-nhl Doc 205-1 Filed 11/28/18 Entered 11/28/18 16:25:14

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