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City Opposes 417 Rentals Bankruptcy Plan

SPRINGFIELD, Mo. -- Owing more than $19 million to various creditors, Springfield landlord Christopher Gatley has filed for bankruptcy and hopes to sell some of the 453 properties he owns to fund a company reorganization.

But the city of Springfield and many of his other creditors are not convinced Gatley -whose 417 Rentals company has been the subject of numerous complaints - can "turn over a new leaf."

Under the reorganization plan filed by Gatley's attorneys, the landlord would retain his position with 417 Rentals as the company's sole manager.

All 13 creditors with significant claims listed in the reorganization plan have filed objections to the plan, with other entities - such as the city - filing additional objections.

"If there is some way for 417 (Rentals) to turn over a new leaf and serve the public with properties that are clean, safe and inhabitable - if we can see something in an amended plan that will address those concerns - it may be that we could not resist the plan," said Duke McDonald, assistant city attorney.

In its objection, the city states that Gatley's company failed to properly maintain its properties, allowed trash and overgrowth to accumulate and residences to sit in disrepair.

Gatley, on the other hand, claims in court documents that "problem tenants" damaged his rental units and stopped paying rent, and that when he attempted to evict the tenants, repair the damage and lease the units to other tenants, the city "complicated" these efforts through various enforcement actions, including demolition, that delayed or prevented the leasing of the units.

These "problems" began in 2015, the same time, according to court documents, that Gatley started having financial problems. He was unable to pay on several loans to various financial institutions. He filed for bankruptcy in August to prevent pending foreclosure actions and to reorganize his financial affairs.

"Some of these loans have matured. Some of them - the interest rates were not realistic because of a change in the market," said Gatley's attorney, Ron Weiss, with the Berman, DeLeve, Kuchan & Chapman law firm in Kansas City. "Some of the properties, it was 417's desire to sell them, so the chapter 11 reorganization is a vehicle for all of that to happen."

Gatley's creditors - 13 individual banks - objected to his company reorganization plan because of concerns about how he managed the business in the past.

Weiss said it was "protocol" for creditors to file objections so they can protect themselves if there are unresolved issues in the future.

"The plan fails to propose any significant changes in the debtor’s management structure, which has been demonstrably inadequate to oversee and maintain approximately 500 rental units," one bank's objection states.

According to court documents, Gatley owns 453 properties comprised of 646 residential units in the Springfield area. He has contracts to sell 62 properties comprised of 71 units, which will retire about $1.4 million in debt. If those sales close, Gatley will own 391 properties totaling 575 units.

The company values the properties at less than $19 million, which is how much Gatley owes creditors.

Weiss said he and his client were in the process of negotiating resolutions with all the creditors and meeting with the city to "resolve issues that have existed in the past." He said those issues involved establishing procedures for responding to complaints and making sure problems are addressed promptly on the city's and 417 Rentals' end.

McDonald, the city's attorney, said 417 Rentals owes the city money that is not listed in the company reorganization plan. The city installed sewer pipes that serve 417 properties, but the rental agency never paid the bill.

Moreover, 417 Rentals owes the city more than $22,000 for cleanups the city has conducted on rental properties.

"Either we have cleaned trashed-out yards that make neighborhoods look like a hurricane hit, or we have cut overgrowth," McDonald said.

Because Gatley owns so many properties in the city, McDonald said, tracking which ones require maintenance is a "moving target." The landlord may fix one property to the city's satisfaction only to have two more pop up, "sort of Whac-A-Mole style," he said.

The creditors also are concerned about the lack of detail in Gatley's reorganization plan regarding maintenance of the properties, insurance for them and Gatley's ability to pay real estate taxes.

Gatley receives roughly $278,000 a month from several hundred tenants. He plans to supplement cash flow to make payments under the plan by actively seeking out tenants and buyers.

Here is his debt:

Arvest Bank - $1.4 million
Bancorp South - $756,463
Bank of Bolivar - $1.4 million
Bank of Missouri - $1.4 million
Great Southern Bank - $1.4 million
Guaranty Bank - $2.9 million
Legacy Bank and Trust - $1.5 million
Mid Missouri Bank - $912,392
Old Missouri Bank - $1.4 million
Simmons Bank - $2.1 million
Southern Missouri Bank of Marshfield - $1.3 million
Southern Bank - $1.7 million
Systematic Savings Bank - $714,621
Unsecured creditors - $41,022

(Story shared by Springfield News-Leader. Read the original article here.)


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