DR Omnibus Reply to Oppo

8/9/2019 DR Omnibus Reply to Oppo

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UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

In re:

NNN 123 NORTH WACKER, LLC, et al.,1

Debtors.

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Chapter 11

Case No. 13-39210 (JBS)

(Jointly Administered)

DEBTORS’ OMNIBUS REPLY IN SUPPORT OF THEIR MOTION FOR ORDERAPPROVING ENTRY INTO (A) POST-PETITION RESTRUCTURING SUPPORT

AGREEMENT, (B) CONSENT AND PARTICIPATION AGREEMENT WITHCO-OWNERS OF PROPERTY AND (C) CERTAIN RELATED RELIEF

NNN 123 North Wacker, LLC (“TIC 0”) and NNN 123 North Wacker Member, LLC

(“TIC Member”), debtors-in-possession herein (collectively, the “Debtors”), hereby submit this

reply (this “Reply”) to the two objections (the “Objections”)2 filed in response to the Debtors’

motion (the “Motion”)3 [Docket No. 104] for authority to enter into the RSA, the TIC Consent

and the Initial Release (collectively, the “RSA Documents”). For the reasons stated herein, the

Debtors request that the Court overrule the Objections in their entirety and grant the Motion.

PRELIMINARY STATEMENT

1. For the 33 tenants in common or “TICs” that own fee title to the Property (the

largest of which is Debtor TIC 0), the facts are clear, uncontroverted and stark:

• the $135 million mortgage loan is in default and needs to be restructured;

1 The Debtors, along with the last four digits of each Debtor’s federal tax identification number, are: NNN 123 North Wacker, LLC (4336) and NNN 123 North Wacker Member, LLC (7290).

2 Specifically, reference is made to: (i) the objection of the Non-Debtor TICs [Docket No. 134] (the “TICObjection”), and (ii) the response of Troy Thomas (“Thomas”, and, with the Non-Debtor TICs, the “Objectors”)[Docket No. 135] (the “Thomas Objection”, and, with the TIC Objection, the “Objections”).

3 Capitalized terms not defined herein have the meaning ascribed to such terms in the Motion.

Case 13-39210 Doc 148 Filed 03/24/14 Entered 03/24/14 19:24:08 Desc Main Document Page 1 of 25


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• the TICs’ interests in the Property are substantially underwater and have no value;

• the TICs are jointly and severally liable for the full mortgage debt;

• the current occupancy rate, 68%, is too low to support the Property and needs to

increase, which is going to require a new manager, an intense leasing effort, and asubstantial investment to fund capital improvements and leasing commissions;4

• but for the Debtors’ bankruptcy cases, the lender could initiate a foreclosure, whichwould have significant adverse tax consequences for the Non-Debtor TICs.5

2. Faced with this dilemma, the Debtors filed for bankruptcy protection, and, over

the last several months, have negotiated with the secured lender and two proposed equity

investors, ND Investment and Sovereign, to develop a restructuring scenario that will provide

meaningful benefits to the Debtors’ estates, the Property and the Non-Debtor TICs .

3. The Non-Debtor TICs had ample opportunity to develop their own restructuring

plan; in fact, they reportedly engaged the lender in discussions for a year prior to these cases,6

and discussions continued in the first six months of these cases. Their efforts did not result in an

agreement. The RSA was signed on February 21, 2014. A week later, the Non-Debtor TICs

filed a last-ditch term sheet proposal. [Docket No. 109] The proposal would have required the

secured lender to modify its loan on terms that the lender deemed less favorable than those in the

RSA. The lender rejected the proposal and determined to move forward under the RSA.

4. With no consensual deal with the lender, the only way for the Non-Debtor TICs to

4 Under the RSA, ND Investments and Sovereign would invest at least $12-15 million in the Property. Under the

Non-Debtor TICs’ proposal, discussed infra, the capital investor was allegedly going to invest $20 million.

5 Continuing their tax deferrals is of tantamount importance to Non-Debtor TICs. See TIC Obj. at § 4(“[M]aintaining those tax benefits is extremely important and valuable to [Non-Debtor TICs]”); at § 40(“Retention of such tax benefits is extremely important to avoid significant damage to [Non-Debtor TICs]”).

6 See January 27, 2014 Hearing Transcript, 12:13-15 (attached hereto as Exhibit A) (Counsel for the Non-DebtorTICs: “We actually were negotiating a year in advance with the same lenders[.]”)



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pursue their proposal would be to try and confirm a “cram up” plan over the lender’s objection.7

Under the circumstances, where equity is clearly out of the money, pursuit of that option would

have a low probability of success. The Non-Debtor TICs have cited to no cases in which a

tenant in common owner, whose equity is underwater, successfully confirmed a plan of

reorganization over the secured lender’s objection, nor are the Debtors aware of any such cases.

5. At the initial hearing on the Motion, the Court asked the parties if there were any

fatal flaws -- in the Court’s words, a “silver bullet” -- that might preclude approval of the RSA.

The Objectors failed to articulate any fatal flaws at the hearing, nor are there any magic “silver

bullets” anywhere in the Objections. The Objectors resort, instead, to inflammatory rhetoric,

replete with unfounded allegations of “insider” conspiracies, “self-dealing” and asset “hijacking”

-- all based on distortions, and, in some cases, fundamental misstatements, of the facts.

6. There is no basis to delay the RSA any further and risk losing a consensual plan

that restructures the existing mortgage on terms approved by the lender, pumps in $12-15 million

of new equity, and removes the Property from its onerous tenancy in common structure.8

SUMMARY OF RSA TREATMENT9

7. Lost in the Objectors’ myriad arguments is the fact that the equity has no value

and, thus, the Objectors are not entitled to recover anything on behalf of their interests. In spite

7 Counsel for the Non-Debtor TICs represented at the initial hearing on the Motion that this was an option theywere considering. See Tr. of 2/28/14 Hrg. at 21:23 - 22:4 (attached hereto as Exhibit B).

8 To be clear, the Motion is not seeking a determination, today, that the plan of reorganization contemplated bythe RSA should be confirmed under section 1129 of the Bankruptcy Code. The narrow issue presented in the

Motion is whether the Debtors should be allowed to embark on the restructuring path outlined in the RSA.

9 As proposed, the RSA would provide valuable consideration to parties such as the Non-Debtor TICs and theDebtors’ equity holders, none of whom are entitled to recover anything on account of their interests. However,the parties to the RSA are incurring substantial costs in this litigation, and the delay is affecting the Property,which may render the economics supporting the RSA unworkable. If that happens, the parties may need toamend the RSA to revise or even remove the consideration proposed to flow to the Non-Debtor TICs or theDebtors’ equity holders, and, thus, the Debtors reserve the right to amend the RSA pursuant to its terms.



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of that fact, the RSA would give consenting Non-Debtor TICs limited interests in the Parent,

intended to allow them to continue their tax deferrals and share in the upside if the Property

recovers. The Non-Debtor TICs would further benefit from a covenant not to sue that releases

them and their principals from claims based on the defaulted loan arising prior to the closing.

8. The other Objector, Thomas, is a broker who invested $25,000 to acquire a small

equity stake, 0.345%, in TIC Member. TIC Member owns TIC 0, and TIC 0’s only asset is its

13.917% interest in the Property; thus, Thomas owns, indirectly, a 0.048% interest in the

Property. As is the case with the TICs, Thomas’ equity has no value and he is not entitled to a

recovery. The Debtors could simply cancel the equity; however, the RSA currently proposes to

allow the equity to survive bankruptcy. TIC 0 would be treated as a consenting TIC -- TIC 0

would exchange its interest for a pro rata share of limited interests in the Parent. Consequently,

if the transactions contemplated by the RSA are consummated, Thomas and the other equity

holders of TIC Member would own, indirectly, reorganized TIC 0’s allocation of limited

interests in the Parent, and share in the potential upside with the consenting TICs.

DEBTORS’ REPLY

I. The Debtors Should be Authorized to Enter into the RSA DocumentsApplicable Legal Standard -- § 363(b)

9.

The Debtors are seeking authority to enter into the RSA Documents pursuant to

section 363(b) of the Bankruptcy Code. The traditional test is whether the Debtors’ entry into

the transaction was based on a sound business purpose. See Mot. at ¶¶ 33-35. In the case of a

transaction benefiting insiders, courts may apply heightened scrutiny.10 Here, Sovereign is not,

10 In the Firstmark case cited in the Motion, the Seventh Circuit cited with approval the District Court’s commentthat “sale of a debtor's property to an insider is subject to close scrutiny. However, it is not bad faith per se” andonly constitutes bad faith if there is a breach of the duty of full disclosure. See In re Firstmark Corp., 46 F.3d653, 656 (7th Cir. 1995). That reasoning was adopted in a subsequent case, Hower v. Molding Sys. Eng'g

(continued...)



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as the Objectors allege, an “insider” of the Debtors within the meaning of section 101(31)(B) of

the Bankruptcy Code. See infra at ¶ 21. Nonetheless, under either test, the “business judgment”

test or the heightened scrutiny applied to insider transactions, the Debtors easily satisfy the

requirements, and the Objectors offer no evidence, only wild allegations, to support their claim

that entry into the RSA Documents would be improper.

The RSA is the Best Option Available to the Debtors

10. There is no dispute that the mortgage loan is in default and the Debtors and Non-

Debtor TICs have no equity in the Property. At the time that the Debtors’ filed these bankruptcy

cases, the mortgage loan had gone into monetary default and was about to be transferred to

special servicing. As a result, the Debtors were sufficiently concerned about the direction of the

Property and the possibility that the lender could initiate foreclosure proceedings.

11. Nor is there any dispute that the mortgage lender is a necessary party to any

restructuring of the Property, and that the lender has no interest in pursuing the alternative

proposal put forward by the Non-Debtor TICs (“I can tell you categorically we would not

consent to that term sheet. I can also tell you, although I am always careful about referring to

negotiations, that we have indicated consistently, my business representative, that type of

proposal is unacceptable...”). See February 28, 2014 Hearing Transcript, 14:7-14.11

Corp., 445 F.3d 935, 938-939 (7th Cir. 2006), where the Seventh Circuit, relying on Firstmark, affirmed thesale of a debtor’s assets to insiders, the former president and shareholder. In so holding, the Seventh Circuitstated that in order to encourage debtors to continue operating and generating revenue for creditors, bankruptcylaw permits a debtor to sell assets to former officers or shareholders so long as the insider involvement is

adequately disclosed. Sovereign is not an insider of the Debtors (see infra at ¶ 21); however, even it if were, theRSA would clearly satisfy the standard set forth in Hower -- Sovereign’s participation in these bankruptcycases, and in the RSA, has been fully disclosed. Also, in Hower , the Seventh Circuit found it significant thatthe secured creditors in that case strongly supported the proposed sale. Obviously, here, the RSA has thesecured lender’s full support. Moreover, like in Hower , the Objectors’ allegations of bad faith and self-dealingare not supported by documents, testimony, personal knowledge or anything other than accusations.

11 A true and correct copy of the relevant section of the transcript is attached hereto as Exhibit C.



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12. With those facts in mind, the Objectors’ criticisms of the RSA make little sense.

They argue that the RSA is “unnecessary” and that the Debtors should proceed directly to a plan

and disclosure statement. (TIC Obj. at ¶ 21; Thomas Obj. at p.12). However, to the contrary, the

RSA provides substantial benefits to the Debtors’ estates. First and foremost, the RSA binds the

lender to support the restructuring and, if the Proposed Purchaser acquires the Property, to

reinstate the existing mortgage loan as modified in the manner negotiated by the parties to the

RSA. Second, the RSA commits the proposed investors, ND Investment and Sovereign, to

contribute new equity of $12-15 million if the Proposed Purchaser acquires the Property.

13.

The alternatives to the restructuring outlined in the RSA are limited at best. The

Debtors are aware of no cases in this District or elsewhere where a tenant in common whose

interests are underwater successfully confirmed a “cram up” plan over the lender’s objection. It

is more likely that contested litigation with the lender would trigger a “parade of horribles” --

fights over the use of cash collateral that could disrupt operations; potential requests by the

lender to modify the automatic stay or dismiss or convert these cases, and possible foreclosure

proceedings outside of these cases that would have adverse consequences on the Property.

14. Without a substantial investment of new money in the near term, the Property will

continue to decline in value. That money will fund capital improvements that are long overdue

and finance efforts to sign new leases, including payment of leasing commissions and costs.

Further delay will make it more difficult to sign new leases, as prospective tenants are generally

averse to leasing space in distressed building that require significant investment.

The RSA Reflects a Set of Integrated Compromises

15. The parties to the RSA have agreed to a transaction that, if consummated, permits

consideration to flow to junior classes of debt and equity and the Non-Debtor TICs. The



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summary below underscores the arm’s length nature of the negotiations and the potential upside

for Non-Debtor TICs, whose interests have no value and are not entitled to a recovery.

Non-Debtor TICs

Concessions BenefitsLoss of direct tenant in common ownershipinterest in the Property.

Right to invest its pro rata portion of $1.5million in the Property alongside the proposedequity investors (and to receive a 15% rate ofreturn on the investment).

Provide the Noteholder with a Final Release(and in the case of the Debtors, an InitialRelease and a Final Release).

Receipt of limited membership interest in theParent of the Proposed Purchaser, with potential to participate in the upside if theProperty is sold or refinanced (after required payments to the Noteholder (which may be less

than the full debt) and payment of the $12-15million of equity plus the 15% rate of return).

Continued deferral of built in gains on its TICinterest and prior real estate investments.

The Non-Debtor TICs and their principals will be beneficiaries of a covenant not to sue fromthe Noteholder with respect to the originaldefaulted Loan and personal guaranties for the period prior to the closing of the transaction.

Equity Owners of TIC Member

Concessions Benefits

None Retention of existing membership interests.

TIC 0 will be treated as a Participating TIC Non-Investor and receive a limitedmembership interest in Parent. Members ofTIC Member will be entitled to a pro rata share

of any distribution with respect to such limitedmembership interest.



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Noteholder


The Loan is being restructured to lower thecurrent pay interest rates for 2 years and extend

the maturity date for 3 years.

The Property is being infused with up to $15million of equity to support the Noteholder’s

collateral.

The Loan is being restructured to provide that,upon a sale or refinancing of the Propertywithin 90 days of its maturity, the ProposedPurchaser (including any Electing TICs) will be repaid their investment plus a 10% rate ofreturn after $105 million (of a $135 million principal loan) is repaid to the Noteholder (i.e.,the Noteholder is subordinating payment on$30 million of principal amount of the Loan).

The Property is no longer owned in a tenant incommon structure.

Noteholder is providing the TICs and their principals with a “covenant not to sue” on theirexisting guaranties of the Loan through theclosing date, in each case, to the extent suchTIC consents to the transaction.

Payment of certain fees and costs by theProposed Purchaser, including (i) $100,000 forexpenses incurred by the lender, which was paid upon execution of the RSA, (ii) a$750,000 restructuring fee payable to the loanservicer, C-III Asset Management LLC, uponclosing, and (iii) an extension fee of $336,376 payable to the lender upon closing.

The Loan will be reinstated, as modified, and

in good standing, and the Noteholder will not pursue its remedies based on the Loancurrently in default, including a possible saleof the Property “free and clear” of the TICs.

Receipt of Initial Release and Final Release.



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ND Investment


Invest $10.8- $13.5 million of new capital for,among other things, capital improvements,

tenant improvement allowances, leasingcommissions and expenses of the modificationand assumption of the loan.

The potential for a 15% internal rate of returnon the new equity investment in the Property.

Provide the Non-Debtor TICs, who are out ofthe money, with the opportunity to own 10% ofthe new equity in the Property.

Provide the TICs who participate (includingTIC 0) with a no-cost opportunity to ownlimited membership interests in the Parent of

the Proposed Purchaser, which interests may provide the TICs with (i) the right to continueto defer built in gains from its TIC interest andany applicable prior real estate transactions,and (ii) a potential participation in upside if theProperty is sold or refinanced (after payment ofthe required amounts to the Noteholder (whichmay be less than the full debt)).

ND Investment to provide the Noteholder withan Initial Release and Final Release.

Sovereign/SIMCO


Backstop the $1.5 million new equitycommitment of the TICs so that if no TICselect to invest, Sovereign is required to investup to the full $1.5 million.

After the amounts required to be paid to the Noteholders are paid, and the $12-$15 millioninvestment of the Proposed Purchaser is paid infull with a 15% return, if funds are available,SIMCO is entitled to receive a $1 million promote fee and a .35% disposition fee upon asale or refinancing of the Property.

Provide a new guaranty for the entire amountof the Loan (with the financial wherewithal ofSovereign having been reviewed andunderwritten by the Noteholder).

SIMCO will become the Property manager.

Sovereign and SIMCO to provide the Noteholder with Initial and Final Release.



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16. Rather than viewing the RSA as a series of integrated compromises, the Objectors

pick and chose terms in an effort to characterize the restructuring as a set of transactions that

inure solely to the benefit of “insiders” and the mortgage lender. Thomas, for example, contends

that the RSA provides the mortgage lender with “unusually favorable terms,” citing a release to

be granted by the Debtors, the principal amount of debt maintained post-confirmation, and

because the tenancy in common structure is being transitioned into a multiple-member limited

liability company structure. See Thomas Obj. at pp. 10-11. Thomas glosses over the lender’s

compromises, including: (i) a reduction of the A Note and B Note current pay interest rates

effective as of October 1, 2013 through October 1, 2015, (ii) a three-year extension of the

maturity date on the mortgage loan from October 1, 2015 to October 1, 2018, (iii) a modification

of the payment waterfall to provide a return of capital and a 10% rate of return to new equity

after payment of only $105 million of the principal amount of the loan upon a sale or refinance

within 90 days of the loan’s maturity date, and (iv) their agreement to provide a “covenant not to

sue” consenting Non-Debtor TICs and their owners based on defaults on the mortgage loan and

related personal guaranties that arise prior to closing of the transactions in the RSA.

17. With respect to the Initial Release, the Debtors have investigated the mortgage

and related fixture filings and do not dispute that they are properly perfected security interests.

Based on the information available to them, the Debtors do not believe they have any colorable

claims against the lender, nor have the Objectors articulated any such potential claims.12

18. Similarly, the Objectors’ criticism regarding Sovereign’s involvement with the

12 The Non-Debtor TICs argue, mistakenly, that the Debtors do not disclose whether the Initial Release providedin connection with the RSA purports to release claims that the Non-Debtor TICs may have against the lender.(TIC Obj. at ¶ 18). The Non-Debtor TICs do not state what potential claims they think they may have againstthe lender but, in any event, the Non-Debtor TICs are not parties to the Initial Release.



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RSA is unwarranted. These objections are premised on wholly inaccurate statements regarding

the relationships between the Debtors, Sovereign and their respective affiliates.13

19. The Debtors will not respond in kind to the rhetoric in the Objections; however,

the Objectors’ mischaracterizations of an alleged relationship between NNN Realty Investors,

LLC (“NNN Realty”) and Sovereign must be corrected. Thomas asserts that Sovereign is

“acting through its affiliate, NNN Realty [Investors, LLC] . . . [to] obtain an equity interest in the

New Borrower through its equity interest in 123 North Wacker Sovereign/TIC, LLC, apparently

without any requirement to invest any money . . .” Thomas Obj. at pp.15-16. That is not correct.

20.

Sovereign is not an “affiliate” of NNN Realty (which is the manager of TIC

Member) or the Debtors because Sovereign does not “directly own[], control[], or hold[] the

power to vote, 20 percent or more of the outstanding voting securities of the debtor.” 11 U.S.C.

§ 101(2)(A). In the event that Sovereign ultimately obtains an equity interest in the restructured

ownership vehicle, it will be in consideration of Sovereign’s contributions to the restructuring in

the RSA, including its agreement to guaranty the full mortgage debt and backstop the $1.5

million of equity to be offered to investing TICs.

21. Nor is Sovereign an “insider” of NNN Realty or the Debtors within the meaning

of section 101(31)(B) of the Bankruptcy Code. While Sovereign and NNN Realty share a

13 The Non-Debtor TICs accuse the Debtors of trying to “cut out the TIC Members while keeping control of theProperty for the benefit of Daymark and its affiliates.” See TIC Obj at ¶ 26. They make those accusationswithout any basis in fact, and the accusations are simply untrue. If the restructuring is effectuated, the ownersof the Property will be ND Investment (90%) and those Non-Debtor TICs that elect to invest additional funds inthe Property (10%), with Sovereign committing to acquire any portion of the 10% equity not acquired by the

TICs. Daymark Realty Advisors, Inc. (“Daymark”) is an affiliate of NNN Realty. Daymark is not an affiliateof Sovereign. Moreover, under the RSA, Daymark will have no involvement with the Property. Moreover, NDInvestment, the 90% investor, will have control over the Property if the transactions in the RSA areconsummated. This makes the Non-Debtor TICs’ obsession with Daymark all the more strange; in particular,the out of context quote from the [unpublished] NNN Realty Parkway 400 26 , in which the Court commentedon the fact that the debtor’s expert in that case failed to make an evidentiary showing as to the solvency ofDaymark because the expert merely reported that Daymark had a website and was involved in some litigation.(TIC Obj. at ¶ 28) Daymark, and the proceedings in that case, have no relevance here.



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controlling officer, control by a common individual does not, in and of itself, confer “insider”

status. See 11 U.S.C. § 101(31)(B) (an insider of the debtor is a director of the debtor, officer of

the debtor, person in control of the debtor, partnership in which the debtor is a general partner,

general partner of the debtor, relative of a general partner, director, officer, or person in control

of the debtor--none of which applies to Sovereign); see also In re Salience Assocs., Inc., 371

B.R. 578, 586 (Bankr. D. Mass. 2007) (whether commonly controlled entities are insiders of one

another is a question of fact and cannot be determined based upon common control alone).

22. The Objectors also take issue with Sovereign’s promote fees,14

and the selection

of SIMCO as the new property manager for the Property. Even if one were to conclude that

Sovereign exercises the required degree of control to qualify as an insider of NNN Realty and the

Debtors, the negotiation process surrounding the RSA was arm’s-length, hard fought, and

involved more than just Sovereign and the Debtors. To imply that Sovereign engaged in self-

dealing and is getting a “sweetheart deal” (Thomas Obj. at pp. 15-16) would necessarily imply

that ND Investment and the Noteholder were somehow complicit in that alleged scheme. As set

forth in Hower, 445 F.3d at 938-39 (7th Cir. 2006). The Objectors must come forward with more

than just unfounded accusations.

23. Substantively, the fees that may eventually be paid to Sovereign are commercially

reasonable and reflect the consideration that Sovereign is bringing to the proposed transaction.

Sovereign is a sophisticated asset manager that provided the framework and structure for the

14 The Non-Debtor TICs argue that the property management fees payable to the new property manager, SIMCO,

are not disclosed. See TIC Obj. at ¶ 17; see also TIC Obj. at ¶ 26 (arguing that SIMCO, as property manager,will be paid “undisclosed fees”). That is not correct. The fees are set forth in a fully-negotiated propertymanagement agreement that was provided to both Objectors and, in fact, Thomas discusses the precise propertymanagement fees payable to SIMCO, which are market terms, in his Objection. (Thomas Obj. at p. 16)



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RSA transactions.15 Additionally, Sovereign is agreeing to provide a new guaranty for the entire

amount of the $135 million mortgage loan. The lender would not agree to the RSA transactions

but for the new guaranty provided by Sovereign.16

As further consideration, Sovereign has

agreed to backstop the TICs’ obligation to fund $1.5 million of new equity into the Property.

24. In exchange for its contributions, Sovereign is being granted the potential upside

of a $1 million “promote fee” that is payable only upon a sale or refinancing of the Property that

results in consideration sufficient to (i) make the required payments to the mortgage lender and

(ii) return the $12-$15 million of new equity, plus a 15% return on such investment, to the

proposed equity investors. The $1 million promote fee will be junior to all existing creditors of

the Property as well as to all proposed equity providers.17

25. An affiliate of Sovereign, SIMCO, was selected by the mortgage lender, the

Debtors and ND Investment to act as the new property manager for the Property. A change was

necessary in light of the Property’s current leasing condition and high vacancy rate. SIMCO is a

qualified property manager and currently manages 21 properties in 13 different markets,

including another Class A office building in the Chicago Loop that is similar to the Property.

SIMCO’s fees were heavily negotiated with the mortgage lender and are consistent with those

charged by managers of Class A buildings in Chicago.

15 Thomas made his investment of $25,000 in 2005. Thomas holds himself out to the public as an attorney, a broker-dealer in the tenant-in-common industry, and proprietor of a “TIC Help” website, http://tichelp.com/.

16 Notably, the Non-Debtor TICs that consent to the restructuring transaction will be granted the covenant not to

sue discussed above (¶ 9); in effect, Sovereign is providing direct credit support to the Non-Debtor TICs.

17 Sovereign is also entitled to a subordinated promote fee equal to 33.34% of the 75% of the funds that flow, if atall, to the new equity investors after payment in full of the mortgage loan, the repayment of $12-15 million ofnew equity (plus the 15% rate of return), and payment of the Sovereign $1 million promote fee. The other 25%of such funds accrue to the benefit of the limited members of Parent (i.e., the TICs who participate in thetransaction but do not invest new equity). Accordingly, Sovereign’s subordinated promote fee is pari passu with the TICs, who are out of the money and are not providing additional consideration to this restructuring.



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26. The transaction fees charged by C-III and Sovereign are consistent with, and, in

some instances, significantly less than, the fees charged by the “Investment Manager” in the

Non-Debtor TIC’s proposal.18

The Non-Debtor TICs’ proposal included the following fees:

• Asset Management Fee: A quarterly fee of 1% per annum of the gross collectedrevenues of the Property. For comparison’s sake, the RSA transactions donot include an “Asset Management Fee.”

• Loan Restructure Fee: A fee of 1% of the restructured A-Piece, or $850,000, payable at closing of the proposed transaction. By contrast, Sovereign’s $1million promote fee is paid on a future disposition or refinance of theProperty, and is subordinated to the required payment to the lender andreturn of the $12-15 million of capital with the 15% return.

•

Disposition Fee: 1% of the net sale proceeds of the Property. By contrast,Sovereign’s fee is only 0.35% on a future disposition of the Property, and issubordinated to amounts payable to the lender.

Property Management Fees: Undisclosed in the Non-Debtor TIC proposal.Under the RSA, SIMCO would be paid a property management fee equal to2% of gross revenues, 3% of tenant improvement or capital improvementprojects performed by a non-affiliate, and 1% of tenant improvementprojects performed by a tenant.19

• Loan Restructure Fee. There is no such fee for the lender in the Non-Debtor TIC

proposal. Under the RSA, C-III Asset Management LLC will receive a$750,000 restructure fee, as servicer of the mortgage loan, which fee wasearned in connection with months of work to modify the loan. In addition,at closing, the Noteholder will receive a loan extension fee of $336,376.

18 Unlike the Non-Debtor TICs’ “Investment Manager,” Sovereign has expended significant resources and time tonegotiate and document the transactions provided for in the RSA Documents. Other than a non-binding termsheet proposal, it is unclear what value, if any, the “Investment Manager” would bring to the table.

19

Thomas alleges that the property management fees “are expected to amount to at least $3 million per year.”(See Thomas Obj. at p. 16, para. 3(d)) Thomas offers nothing to support that conclusion, and his estimate is farin excess of the project management fees projected for SIMCO. By way of example, per the most recent cashcollateral budget, the projected gross receipts for the Property for February 2014 were $1,207,000/mo. SeeAgreed Order Authorizing Use of Cash Collateral, entered on January 29, 2014 [Docket No. 98]. Under the property management fee arrangement proposed for SIMCO, the property management fee of 2% would equal$24,140/mo. or, on an annualized basis, only $289,680/yr. This pales in comparison to Thomas’ estimate of property management fees of $3 million, which was overstated by a magnitude of as much as 10x.



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27. Based on the foregoing considerations, under either the “business judgment” test

or the heightened scrutiny applied to insider transactions, the Debtors have provided ample

evidence of their considered judgment in determining to enter into the RSA Documents.

II. Objections Premised on Alleged Breach of FiduciaryDuties or Alleged Lack of Authority are Without Merit

28. The Non-Debtor TICs have alleged repeatedly that the Debtors are in breach of

their fiduciary duties, and Thomas, joining the refrain, contends that the Debtors’ chapter 11

cases, filed six months ago, were not properly authorized by all required corporate acts. These

arguments are inconsistent with the operative facts, and do not stand as a matter of law.

Debtors Have Fulfilled Their Fiduciary Obligations20

29. Thomas alleges that the Debtors breached fiduciary duties owed to him as an

equity holder because Sovereign may be entitled to certain fees and because, allegedly, the

transaction “leads to nothing for the Debtor’s members.” (Thomas Obj. at pp.12-15)21

30. A debtor in possession owes fiduciary duties to the Debtors’ estate as a whole.

See In re Schipper , 933 F.2d 513, 515 (7th Cir. 1991). A debtor has a duty to use reasonable

care in making decisions, but once those decisions are made, a debtor is protected by the

business judgment rule. See In re Schipper , 109 B.R. 832, 836 (Bankr. N.D. Ill. 1989) (holding

that there must be some business justification for debtor's actions in bankruptcy). Courts have

found that “[o]fficers and directors [of a debtor] should have broad latitude to balance competing

20 Thomas also asserts, in summary fashion, that the Debtors have not acted in good faith. See Thomas Objection, p. 14-15. This conclusory allegation has no legal or factual support and should be dismissed.

21 The Non-Debtor TICs argue that the Debtors owe them fiduciary duties. (TIC Obj. at p. 23). That is not thelaw. As support for their contention, they cite to a single case for the non-controversial proposition that adebtor owes fiduciary duties to all creditors and equity holders. (TIC Obj. at p. 23). The Non-Debtor TICs arenot creditors or equity holders of the Debtors, nor did they file proofs of claims in these cases. Rather, they aresimply co-owners of the Property along with one of the Debtors, TIC 0. Moreover, the operative document, theTIC Agreement, sets forth the TICs’ respective rights and obligations, and nowhere does it provide that theTICs owe any fiduciary obligations to one another. (See TIC Agreement, attached hereto as Exhibit D).



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interests in a bankruptcy case in order to make decisions that are in the best interests of the

estate.” LaSalle Nat’l Bank v. Perelman, 82 F. Supp. 279, 293 (D. Del. 2000).

31. There is no dispute that the lender is substantially undersecured,22

and the Non-

Debtor TICs and the Debtors’ equity holders, such as Thomas, are out of the money.

32. At one point, Thomas alleges that the “projected sales price” of the Property is

$165 million. See Thomas Obj. at p. 6 (“[T]he projected sales price of the Property is $165

million[.]”). Thomas offers nothing to support that “projection” and the statement is misleading

in a number of respects. First, as clear from contradictory statements later in his brief,23

Thomas

is not arguing that the current value is $165 million. Second, Thomas does not say how far off in

the future the “projected sale” would need to take place,24 or what his underlying assumptions

are, or on what basis he made them (e.g., how much the occupancy rate would need to increase

to achieve that price, and how much money would have to be invested to fund the capital

improvements and leasing costs required to achieve that price).

33. Both Objections argue that the limited interests consenting TICs would receive in

the restructuring outlined in the RSA will be of no value. See, e.g., TIC Obj. at ¶ 27 (Non-

Debtor TICs get “no recovery whatsoever after all senior fees and expenses are paid”). That

reflects a fundamental misunderstanding on the Objectors’ part of the economics in the RSA.

22 See Non-Debtor TICs’ Motion to Dismiss Bankruptcy Case [Docket No. 25] (conceding that the mortgage loanis undersecured (¶ 3), the lender has a “substantial unsecured deficiency claim” (¶ 3), and, in the Non-DebtorTICs’ estimation, there is no possibility of recovery by anyone other than the lender (¶ 8)).

23 For example, Thomas alleges, in conclusory fashion, that the Property’s value is depressed as a result ofdecreased cash flow because the Property is in the “low point of its leasing cycle.” (Thomas Obj. at p. 11).Elsewhere, he argues that the Debtor’s hard-fought “fiduciary out” is “illusory” because the Debtor can onlyterminate the RSA to pursue another transaction that would pay the mortgage loan in full, and that “if that were possible, this bankruptcy case and the RSA would be entirely unnecessary.” (Thomas Obj. at p. 13)

24 Later in the brief, Thomas alleges, in conclusory fashion, that it will take “at least five years” for the Property tofully stablilize and recover lost value, so perhaps this is his projected timeframe. (See Thomas Obj. at p. 11).



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34. The RSA contemplates that the Debtors’ priority and unsecured creditors will be

satisfied in accordance with applicable law and that the membership interests of the 159 equity

owners of TIC Member will remain in place. See Approved Plan Terms, Exhibit A to the RSA.

The Non-Debtor TICs will have the option to participate in 10% of the new equity of the

Property and own a limited membership interest in the Parent. Even if a TIC chooses not to

invest new money in the transaction, all TICs that consent to the transaction will receive a

limited membership interest in Parent. In addition, TIC 0 would receive a limited membership

interest in the Parent, which is the same treatment afforded to all consenting TICs. TIC 0 would

hold that interest for the ultimate benefit of TIC Member’s 159 owners, including Thomas.

35.

The Debtors’ managers fulfilled their fiduciary obligations in connection with the

RSA. They properly considered the interests of the Debtors’ estates and all restructuring options

available. After months of negotiations, and substantial give and take (including an ongoing

dialogue with the Non-Debtor TICs’ representatives to keep them advised of developments and

solicit input on issues that may affect the TICs), it was determined that the Debtors’ estates, as

well as the Property, were best served by entry into the RSA. At this juncture, the Debtors have

no duty to “shop” the RSA any further.25

36. The Objectors’ remaining criticisms of the RSA are easily dismissed. The RSA

does not serve as a “bar to consideration of alternative proposals.” (Thomas Obj. at p. 9). First,

25 See, e.g., In re PWS Holding Corp., 228 F.3d 224, 247–48 (3d Cir. 2000) (holding that a debtor has no duty to

market a plan); In re Crusader Energy Grp., Inc., No. 09-31797 (Bankr. N.D. Tex. Oct. 7, 2009) (plan processis not required to be run as auction and that plan process itself allows parties with economic interest in debtor’s bankruptcy to be heard); In re Marshall, 298 B.R. 670, 676 (Bankr. C.D. Cal. 2003) (debtor need not considerevery feasible alternative form of plan, so long as proposed plan meets requirements of 1129(a)); see also, In reGlobal Crossing Ltd., 295 B.R. 726, 744-45 S.D.N.Y. 2003) (“In the absence of failures to comply with the keyduties—the requisite care, disinterestedness and good faith—[case law does] not authorize bankruptcy courts todictate the means to achieve that objective, nor, in particular, [does it] provide authority for a court to substituteits business judgment as to the appropriate means for that of a board.”) (emphasis in original).



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the RSA preserves optionality for the Non-Debtor TICs. The Bid/Sale Procedures contemplated

in the RSA provide for a “TIC Auction” for those TICs who determine not to consent to the

restructuring set forth in the RSA. In the TIC Auction, the non-consenting TICs will have the

opportunity to bid for the Property in accordance with their rights under section 363(i) of the

Bankruptcy Code. That mechanism will provide a market check if TICs believe that the Property

is being undervalued and want to submit their own bid or partner with a third party investor.

37. Second, the RSA contains a “fiduciary out.” See RSA § 5(d)(iii). The RSA’s

fiduciary out authorizes the Debtors to trigger a termination if the Debtors determine, reasonably

and in good faith, in consultation with counsel, that the taking or not taking of any action

required in connection with the RSA would be inconsistent with their fiduciary duties under

applicable law. If the lender disputes an election in good faith within three business days of such

election, the parties will submit the dispute to the Court. The provision essentially permits the

Debtors to pursue an alternative transaction if it would satisfy the lender’s existing mortgage

loan in full and that alternative transaction has a sufficient likelihood of closing.26

The Debtors Have All Required Approvalsto Sell Their TIC Interest in the Property

38. Thomas argues that the Debtors lack authority to propose the RSA because the

manager of TIC Member, NNN Realty, is not the duly authorized manager. (See Thomas Obj. at

p. 8). That is not correct. Thomas concedes that, when he invested, Triple Net Properties, LLC

(“Triple Net”) was the duly authorized manager of TIC Member; however, he argues that the

26 The RSA’s fiduciary out is readily distinguishable from the one that the Court found fault with in In re Innkeepers USA Trust , 442 B.R. 227 (Bankr. S.D.N.Y. 2010). The operative distinction is that in Innkeepers,the Debtors entered into a lock-up with a creditor that had claims in only 20 of 92 debtors’ cases. Id. at 235.The Innkeepers court found that the fiduciary out was improper because it “prevent[ed] the Debtors fromelecting to fully exercise their fiduciary duties to maximize the value of each of the Debtors’ estates.” Id. (emphasis added). Here, no value can matriculate to other classes of claims or interests unless and until themortgage loan is satisfied in full. The RSA’s fiduciary election does not alter that dynamic.



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consent of the other members was required to change the manager and, since there was never a

vote, NNN Realty cannot be the duly authorized replacement to Triple Net. (See Thomas Obj. at

p. 8). On that basis alone, Thomas leaps to the incorrect conclusion that the transactions in the

RSA are “utterly defective” (Thomas Obj. at p. 1) and that NNN Realty and Sovereign have

“hijacked” the Debtors “to reap the benefits of this unauthorized control” (Thomas Obj. at p. 8).

39. The foregoing is an example of the depths to which the Objectors will reach in an

effort to derail the RSA. In 2008, Triple Net changed its name to Grubb & Ellis Realty

Investors, LLC. In 2011, the name was changed again from Grubb & Ellis Realty Investors,

LLC to NNN Realty Investors, LLC. The identity of the property manager has not changed; its

name changed.27 Thus, NNN Realty remains the duly authorized manager of TIC Member.

40. Thomas further alleges that his vote, as an equity holder, is required to authorize a

sale of TIC 0’s interest in the Property, notwithstanding the pendancy of the Debtors’ bankruptcy

cases. (Thomas Obj. at pp.5, 9) That is not the law.28

In the analogous context of a corporation

proposing to sell substantially all of its assets in bankruptcy, it is axiomatic that the debtor in

possession “has the authority to sell estate property out of the ordinary course of business

without shareholder approval.” In re Entz, 44 B.R. 483, 484 (Bankr. D. Ariz. 1984).29

27 Attached hereto as Exhibit E and Exhibit F are true and correct copies of the name change certificates.

28 The two cases relied on by Thomas are readily distinguishable and of little relevance. The first, Saxon Indus. Inc. v. NKFW Partners, 488 A.2d 1298 (Del. 1985), concerns the election of a debtor’s board of directors. The

second, In re Am. Media Distributors, LLC , 216 B.R. 486 (Bankr. E.D.N.Y. 1998), concerns the right of adebtor to initiate arbitration proceeding to assert governance rights under its operating agreement.

29 Although not a requirement, the Debtors did contact the vast majority of members of TIC Member to solicittheir input on the treatment of equity holders in the proposed restructuring. The overwhelming response to dateis positive. So far, members of TIC Member holding roughly 70% of such interests, or over $5 million of thetotal invested of roughly [$7.2 million], support a restructuring on the terms outlined in the RSA. Thomas, thelone equity owner to file an objection to the RSA, invested $25,000 and holds a 0.345% equity stake.



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The Debtors Had All Required Approvals to File These Cases

41. These cases were filed on October 4, 2013. On October 28, 2013, the Non-Debtor

TICs filed a motion to dismiss [Docket No. 25] alleging that the Debtors’ lacked authority to file

these cases. The Non-Debtor TICs withdrew that motion on January 23, 2014 [Docket No. 93].

Now, six months later, Thomas is raising similar allegations in a dispute over the Debtors’ entry

into the RSA. The Debtors do not believe this issue is properly addressed in this context;

however, in any event, the Debtors took all the proper steps to file these chapter 11 cases.

42. As a threshold issue, Thomas’ argument is premised on an unsigned operating

agreement for TIC 0 that was attached to the Thomas Declaration as Exhibit 1-B. It is unclear

where Thomas’ document came from; however, he contends that it was included with the Private

Placement Memorandum (“PPM”) that Grubb & Ellis used to solicit investors when it originally

structured the acquisition of the Property as a tenancy in common structure in 2005.

43. Thomas’ argument rests on Section 18.3 of his draft of the LLC agreement, which

he argues requires the consent of all members for TIC 0 to file bankruptcy. Notably, however,

there is no such provision in the signed version of the operative agreements of TIC 0 (the “TIC 0

Operating Agreement”) or TIC Member (the “TIC Member Operating Agreement”). True and

correct copies of those agreements are attached hereto as Exhibit G and Exhibit H.

44. Thomas appears to be a sophisticated investor. He is an attorney, and a broker-

dealer who, upon information and belief, solicited investors when the deal was syndicated in

2005. Thus, any reliance on Thomas’ part on an unsigned draft is misplaced. The PPM even

contains an express disclosure that the draft LLC operating agreement attached thereto was

subject to “revision and approval.” See PPM, page 62. As a result, Thomas’ argument, which is



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based entirely upon language found only in an unsigned draft, is of no consequence.30

45. A review of the final, executed versions of the TIC 0 Operating Agreement and

TIC Member Operating Agreement establishes that the Debtors followed the proper procedures

and acted with appropriate corporate authority. With respect to TIC 0, the TIC 0 Operating

Agreement provides that a bankruptcy case may be filed upon approval of TIC 0’s Independent

Manager and the vote of its member. See TIC 0 Op Agt, Section 2.01(b). Prior to filing these

cases, TIC 0’s Independent Manager and TIC 0’s sole member, TIC Member, executed the Joint

Written Consent Of the Sole Member and the Independent Manager of NNN 123 North Wacker,

LLC , dated as of October 3, 2013 (the “TIC 0 Consent”), authorizing the filing of these cases.

31

Similarly, the only consent required for a TIC Member bankruptcy was procured when NNN

Realty (f/k/a Triple Net) executed the Written Consent of the Sole Manager of NNN 123 North

Wacker Member, LLC (the “TIC Member Consent”), authorizing the filing of these cases.32

III. Miscellaneous Objections Premised on Approval of Sale ProceduresContract Rejection or Ultimate Confirmation of a Plan are Premature

The Sale-Related Objections Are Premature

46. The Non-Debtor TICs argue that the RSA cannot go forward because the Property

30 The operating agreements provide that the parent, TIC Member, is a multi-member limited liability company,which is owned by the 159 members of TIC Member, including Thomas. TIC 0 is a single-member limitedliability company owned by TIC Member. In February, in connection with the Debtors’ review of proofs ofclaim filed in these cases, it was observed that a number of the members of TIC Member had attachedsubscription agreements and membership certificates purportedly signed by TIC 0. At this point in the Debtors’review, it is unclear whether certificates were in fact issued in contravention of the clear terms of the governingoperating agreements or whether there is another explanation. Either way, this appears to be a distinctionwithout a difference. The provision, Section 18.3, in the draft agreement relied on by Thomas is not found in

the signed agreements, and the signed agreements control, so the Debtors took all appropriate steps to file thesecases. Further, the Debtors have one principal asset, the 13.917% stake in the Property, and so whether theequity holders own that asset directly or indirectly is of no consequence. Most importantly, regardless of wherethe equity holders reside, the equity of both Debtors is hopelessly underwater and has no value.

31 The TIC 0 Consent was attached to the TIC 0 bankruptcy petition and is also attached as Exhibit I hereto.

32 The TIC Member Consent was attached to the TIC Member petition and is also attached as Exhibit J hereto.



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cannot be sold free and clear of their interests. (See TIC Obj. at pp. 11-13 ¶¶ 37-46). To the

contrary, that is exactly what is contemplated by the express language of section 363(h) of the

Bankruptcy Code, and the Debtors have filed an adversary complaint, as required pursuant to

Bankruptcy Rule 7001(3), to compel the sale “free and clear” of non-consenting TIC interests.

47. If the Non-Debtor TICs dispute the sale, it is more appropriate in the context of

the newly-filed adversary proceeding. They will also have opportunities to raise those arguments

at the disclosure statement and plan confirmation stages. For purposes of the RSA, the Debtors

have made a sufficient showing of their ability to satisfy section 363(h) to move forward.

48.

The Non-Debtor TICs argue that they have claims against TIC 0 under the TIC

Agreement. (TIC Obj. at p. 3, ¶10). That argument is belied by the fact that the general bar date

was January 3, 2014, and, as far as the Debtors can tell, no Non-Debtor TICs filed claims.

The TIC Agreement is Not Implicated

49. In addition, the Non-Debtor TICs argue that the TIC agreement is an executory

contract that was “effectively” rejected by the Debtors, giving them a “substantial” rejection

damages claim. (TIC Obj. at sec. 10, 34-36). They argue that the Debtors rejected the TIC

Agreement by failing to comply with a call mechanism in Section 10 of the TIC Agreement that

would have required TIC 0 to offer its interest in the Property to the other TICs for essentially no

consideration upon the filing of its bankruptcy case. That provision is an unenforceable ipso

facto clause. See In re Strata Title, LLC , Case No. 12-24242, 20132 WL 1773619 (Bankr. D.

Ariz. April. 25, 2013) (a purchase right triggered solely by the filing of a bankruptcy petition is

an unenforceable ipso facto clause); Sheehan v. Warner (In re Warner), 480 B.R. 641 (Bankr.

N.D. W. Va. 2012) (“The Bankruptcy Code disapproves of statutory and contractual provisions

which are triggered by the commencement of a bankruptcy case.”).



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50. The Non-Debtor TICs argue further that the Debtors rejected the TIC Agreement

by proposing a sale transaction. This does not give rise to any “ de facto” rejection of the TIC

Agreement, and the Non-Debtor TICs have offered no authority to support their position.

51. The Debtors have not determined if the TIC Agreement is executory or not, nor

are they required to make that determination at this stage. Moreover, the Debtors’ dispute the

Non-Debtor TIC’s contention that upon a rejection of the TIC Agreement they would have a

“substantial” rejection damages claim. First, it is not clear whether a rejection by the Debtors

would be a rejection of the entire TIC Agreement or whether the TIC Agreement would remain

in force and effect as to all parties other than the Debtors. Second, the Non-Debtor TICs have

conceded that their interests in the Property have no value, so they will have suffered no

damages if the Property is sold free and clear of their interests. The Non-Debtor TICs argue that

the RSA is fatally flawed because it fails to provide how the debtors intend to pay their

“substantial” rejection damages claim. Any such claim would be contingent, unliquidated,

disputed – and certainly not “substantial.” That is not a basis to decline to approve the RSA.

Non-Debtor TICs’ Concerns about Tax Treatment are Unavailing

52. The Non-Debtor TICs attack the RSA on the basis that it does not indicate how it

will allow the TICs to continue their tax deferrals; they even make the incredible argument that

Debtors’ counsel should be required to issue an opinion letter on that subject to the Non-Debtor

TICs. (TIC Obj. at ¶ 40). The Debtors have designed the structure with the intent to enable the

Non-Debtor TICs to continue their tax deferrals; however, every Non-Debtor TIC’s tax situation

is unique and, as is the case with any plan of reorganization, they will need to consult with their

own advisors on personal taxes. Debtors’ counsel does not represent the Non-Debtor TICs and

the law does not require delivery of an opinion on their tax treatment.



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Objections Relating to Viability of Proposed Investors Have No Merit

53. The Non-Debtor TICs argue that the Debtors have provided no information about

ND Investment’s or Sovereign’s financial wherewithal to fund the new equity of $12-15 million.

(TIC Obj. at p. 8, ¶ 28).33 This makes no sense. The Debtors are satisfied with ND Investment’s

ability to fund its 90% of the $12-15 million, and if there are questions about ND Investment’s

viability, they can be addressed at confirmation. The other investor, Sovereign, is limited to a

maximum investment of 10%, or up to $1.5 million, and Sovereign will only invest if those TICs

who consent to the deal elect not to invest the $1.5 million themselves. The Debtors are satisfied

that Sovereign has the financial ability to fund up to $1.5 million, and if there is a bona fide

dispute about Sovereign’s viability, it, too, can be addressed at the plan confirmation stage.

The TIC Consent Should Be Approved

54. The Non-Debtor TICs argue that the TIC Consent is “draconian.” See TIC Obj. at

¶¶ 47-48. Its terms are certainly not draconian. Moreover, it provides the means by which TICs

may consent to the transaction, and receive the valuable consideration offered to them that they

would not otherwise be entitled to given that their interests have no value. The Non-Debtor TICs

do not have to consent to the transactions in the RSA. If they would prefer, they can continue to

oppose the restructuring reflected in the RSA, and they will have multiple opportunities to be

heard, including in the adversary proceeding commenced by the Debtors to compel the sale of

the Property free and clear of tenant in common interests, at the hearing on approval of the

disclosure statement, which has not yet been filed, and at the plan confirmation stage.

33 In the same paragraph, the Non-Debtor TICs argue “[c]ertainly [ND Investment and Sovereign] will unlikely to be able [sic] to call upon Daymark for assistance.” (TIC Obj. at pp. 8-9, ¶ 28). Daymark has no affiliation with ND Investment or Sovereign and will have no involvement with the Property under the RSA. See infra n .13.



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Plan Releases are a Confirmation Issue

55. Finally, the Non-Debtor TICs argue that the plan releases and exculpations

outlined in the RSA are improper. See TIC Obj. at ¶¶ 49-50. Those proposed releases and

exculpations comply with the law of this District. In any event, it is premature to address an

issue like this that is more appropriately raised, if at all, at the plan confirmation stage.

Waiver of Rule 6004 is Appropriate

56. If the Court approves the RSA Documents, there should be no need for further

delay. The parties to the RSA should have the right to move forward with the restructuring. The

objecting parties will have ample opportunities to object to the ultimate relief, including at the

hearings on approval of the disclosure statement and confirmation of the plan.

WHEREFORE, the Debtors respectfully request that this Court overrule the Objections

and grant the relief requested in the Motion approving the RSA Documents.

Dated: March 24, 2014

Chicago, Illinois

Respectfully submitted,

NNN 123 NORTH WACKER, LLC ANDNNN 123 NORTH WACKER MEMBER, LLC

KAYE SCHOLER LLP

By: /s/ D. Tyler NurnbergD. Tyler NurnbergAnthony G. StamatoDaniel J. HartnettSeth J. Kleinman70 West Madison Street, Suite 4200Chicago, IL 60602Telephone: (312) 583-2300Facsimile: (312) 583-2360

Attorneys for the Debtors
