## Facts

- Vanderveer Estates Holding, LLC owned Vanderveer Estates, a 59-building, 2,496-unit low-income apartment complex in Brooklyn, its principal asset.
- A state-court receiver controlled the property prepetition and continued postpetition with the debtor’s consent under 11 U.S.C. § 543(d).
- The debtor and its principal secured creditor, VE Apartments LLC, proposed competing Chapter 11 plans, making the property’s value central to plan treatment of VE’s secured claim.
- The debtor’s Fourth Amended Plan proposed to satisfy VE’s allowed secured claim through a new note and mortgage amortized over 25 years at 5.5%, maturing in 10 years with a large balloon payment to be refinanced at maturity.
- VE objected that the debtor’s plan was not feasible because refinancing the balloon payment would be unlikely under typical loan-to-value limits and because foreclosure proceeds might not satisfy required payments to administrative and priority creditors.
- The court held a multi-day evidentiary valuation hearing featuring competing appraisals and testimony about operating income, subsidies (including Section 8 and the Scatter Site Program), expenses, and repair needs.
- The debtor’s appraiser used a direct-capitalization approach and valued the property at roughly $106 million.
- VE’s appraiser used a discounted cash flow (DCF) approach and valued the property in the mid-to-high $70 million range.

## Issues

1. What valuation methodology and assumptions should be used to determine the present value of Vanderveer Estates for purposes of evaluating competing Chapter 11 plans?
2. Given expected changes in subsidy-related income and other property revenues and costs, whether a DCF approach is more appropriate than direct capitalization.
3. What property value should be fixed on this record to inform later determinations concerning plan feasibility and treatment of the secured creditor’s claim.

## Decision

- The court adopted a DCF methodology as the general framework for valuing the property because the property’s income stream was expected to change over time.
- The court rejected adopting either party’s appraisal wholesale and instead adjusted inputs based on the evidentiary record.
- The court accepted the debtor’s evidence on immediate repair costs while adopting more conservative assumptions advanced by VE on items such as future garage income and the anticipated phase-out of Scatter Site-related income.
- The court fixed the value of Vanderveer Estates at approximately $78,902,062 for use in subsequent plan-confirmation analysis.

## Legal Principles

- In Chapter 11 valuation disputes, the bankruptcy court may choose among accepted appraisal methodologies and is not required to accept any expert’s valuation in full.
- A discounted cash flow analysis may be preferred where projected income and expenses are expected to vary materially over time, including due to time-limited or changing subsidy programs.
- Valuation inputs must be grounded in credible, fact-supported assumptions; unfamiliarity with key revenue programs and operational facts can diminish an expert’s reliability.
- Collateral valuation can be a predicate to plan-confirmation determinations, including feasibility under 11 U.S.C. § 1129(a)(11) and compliance with required payments under 11 U.S.C. § 1129(a)(9).

## Conclusion

The bankruptcy court valued the debtor’s subsidized housing complex at about $78.9 million by applying a DCF framework with court-selected assumptions supported by the record, establishing a valuation baseline for assessing competing plans and feasibility-related objections.


In re Vanderveer Estates Holding, LLC, 293 B.R. 560 (Bankr. E.D.N.Y. 2003)