## Facts

- Omni Lion’s Run, L.P. and Omni Lookout Ridge, L.P. (the debtors) owned adjacent apartment complexes in Harker Heights, Texas: the “Lion’s Property” and the “Lookout Property,” and each was a single-asset real estate debtor under 11 U.S.C. § 101(51B).
- Both properties were managed through Omni GP, LLC. Gregory Hall was a limited partner in both debtors, the sole member of the general partner entity, and the guarantor on the secured notes owed to the secured lenders.
- In January 2016, a fire destroyed a building at the Lookout Property, leaving 24 units uninhabitable. Omni Lookout Ridge hired Belfor USA Group, Inc. to repair and rebuild the building.
- The insurer paid more than $1 million in insurance proceeds, but the Lookout lender refused to release the proceeds to pay Belfor, leading to a mechanic’s lien and state-court litigation risk (including the possibility that foreclosure would wipe out Belfor’s lien).
- After the fire, Omni Lookout Ridge filed a prior Chapter 11 case. That case stalled: there was no plan or disclosure statement, management was not appropriate, Hall did not contribute capital, and rent proceeds were used to pay Hall’s personal mortgage payments. The bankruptcy court lifted the stay in that earlier case.
- In 2017, both loans went into default. The lenders accelerated the notes and commenced foreclosure proceedings; Lion’s Property was placed into a state-court receivership.
- Omni Lion’s Run filed Chapter 11 on May 2, 2017, and Omni Lookout Ridge filed Chapter 11 on June 6, 2017, shortly before the scheduled foreclosures. The cases were later jointly administered.
- In the 2017 cases, Hall and the debtors took steps not present in the earlier case: they filed disclosure statements and reorganization plans, provided monthly operating reports, contributed additional capital, and paid the lenders more than $20,000 per month in adequate protection.
- Hall replaced Lookout’s prior property manager with Brian Blaylock, an experienced manager who made property improvements and increased occupancy.
- Despite these steps, the secured lenders moved for relief from the automatic stay under 11 U.S.C. § 362(d)(1) and (2) to proceed with foreclosure.

## Issues

1. Whether “cause” existed under 11 U.S.C. § 362(d)(1) to lift the automatic stay based on alleged bad faith (including the timing of the filings and the prior failed Lookout bankruptcy) and asserted case-administration concerns.
2. Whether “cause” existed under § 362(d)(1) because the lenders allegedly lacked adequate protection or faced collateral decline.
3. Whether relief was required under 11 U.S.C. § 362(d)(2) because the debtors lacked equity in the properties and the properties were not necessary to an effective reorganization within a reasonable time.

## Decision

- The court denied both motions for relief from the automatic stay.
- The court found no “cause” under § 362(d)(1), concluding the 2017 filings reflected a real effort to reorganize and were meaningfully different from the earlier Lookout case.
- The court found the lenders were adequately protected by substantial monthly payments and evidence that operations and occupancy were improving rather than deteriorating.
- The court rejected the argument that the normal costs of administering a legitimate Chapter 11 case, standing alone, justified stay relief.
- Even assuming the debtors lacked equity, the court held the properties were necessary to an effective reorganization and that a successful reorganization was reasonably possible within a reasonable time.

## Legal Principles

- Under § 362(d)(1), “cause” to lift the automatic stay may include bad faith or lack of adequate protection, but the determination is fact-intensive and depends on the totality of circumstances.
- A prior unsuccessful bankruptcy filing does not require stay relief in a later case if current conditions show material differences, such as credible management changes, capital contributions, and concrete plan progress.
- Adequate protection can be shown through regular payments and evidence that the secured creditor’s collateral position is not being impaired by declining value.
- Under § 362(d)(2), once lack of equity is shown, the debtor must show the property is necessary to an effective reorganization by demonstrating a reasonable possibility of a successful reorganization within a reasonable time (the Timbers standard).

## Conclusion

The court kept the stay in place because the 2017 cases were not a repeat of the earlier failed filing: the debtors showed changed conditions through new management, capital contributions, filed plan materials and operating reports, and significant adequate protection payments, supporting a reasonable likelihood of reorganization with the apartment complexes as the estates’ key assets.


In re Omni Lion's Run, L.P., 578 B.R. 394 (2017)