As the expression goes, the value of real estate is in the eye of the beholder. Ultimately, the value is whatever the market is willing to pay. While income producing properties, particularly with credit worthy tenants, may be fairly routine to value based on current rate of return demands in the market, non-income producing properties may be more speculative. For example, even the most seasoned appraiser may struggle with finding comparative sales for a property. A landowner might see their property value go up exponentially “if only” the city council will allow for a zoning variance. Many an owner believes their property is in the “path of progress”, but when? Is it reasonable to value a property “as stabilized” if it is only forty percent leased? These are the types of questions we will consider. To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/valuing-real-estate-assets-2020/

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5. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
5

6. Meet the Faculty
MODERATOR:
David Levy - NRC Realty & Capital Advisors
PANELISTS:
Jonathan Aberman – Dykema Gossett PLLC
Matthew Christensen - Angstman Johnson
Biff Ruttenberg - Atlas Partners LLC
6

7. About This Webinar
Valuing Real Estate Assets
As the expression goes, the value of real estate is in the eye of the beholder. Ultimately, the
value is whatever the market is willing to pay. While income producing properties, particularly
with credit worthy tenants, may be fairly routine to value based on current rate of return
demands in the market, non-income producing properties may be more speculative.
For example, even the most seasoned appraiser may struggle with finding comparative sales
for a property. A landowner might see their property value go up exponentially “if only” the city
council will allow for a zoning variance. Many an owner believes their property is in the “path
of progress”, but when? Is it reasonable to value a property “as stabilized” if it is only forty
percent leased? These are the types of questions we will consider.
7

8. About This Series
Ethical Issues in Real Estate-Based Bankruptcies
It does not take a complex corporate chapter 11 bankruptcy to encounter serious ethical issues that must
be confronted in a case. In fact, the relative simplicity of a real estate-based bankruptcy will shine the
light on all of the main case details, bringing increased scrutiny to all of the debtor’s actions and
decisions. Real estate-based bankruptcies are some of the most common matters filed. As an attorney,
you are your client’s advocate and need to navigate the waters to provide effective counsel while playing
within rules. In this series we tackle some common ethical scenarios that present themselves in real
estate-focused bankruptcies frequently, including matters related to valuing assets, insider lease
agreements, and Single Asset Real Estate (SARE) cases. At the end you will be better equipped to
answer questions like Is your client being astute or asinine? This this scheme clever or cagey? Under the
rules of bankruptcy, is an inside arrangement shady or shrewd?
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
8

9. Episodes in this Series
#1: Valuing Real Estate Assets
Premiere date: 1/28/20
#2: Insider Lease Agreements
Premiere date: 2/18/20
#3: Single Asset Real Estate Cases
Premiere date: 3/17/20
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10. Episode #1
Valuing Real Estate Assets
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11. What Are Ethics?
Webster: (noun) The discipline dealing with what is good and bad and with moral duty and
obligation; The principles of conduct governing an individual or a group; A guiding philosophy;
A set of moral issues or aspects (such as rightness)
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12. What Are Legal Ethics?
The American Bar Association (ABA) Model Rules of Professional Conduct were adopted by
the ABA House of Delegates in 1983. They supply the general ethical rules which govern the
practice of law which have been adopted by most states and jurisdictions.
A number of the Model Rules are implicated in bankruptcy cases (as they are in litigation in
general). Examples include the lawyer’s duty to bring meritorious claims, to be truthful with
the Court (and not withhold information relating to criminal or fraudulent enterprises), to be fair
to opposing party/counsel, to refrain from engaging in conduct which would disrupt a
proceeding or seek to exert undue influence on any Judge or party, and to be truthful in
statements to the Court and to others.
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13. Model Rules of Professional Conduct
Model Rules to be discussed in this presentation:
Rule 1.3: Diligence: Client-Lawyer Relationship
Rule 3.3: Candor Toward the Tribunal: Advocate
Rule 3.4: Fairness to Opposing Party & Counsel: Advocate
Rule 4.1: Truthfulness in Statements to Others

14. Model Rules of Professional Conduct
Rule 1.3: Diligence
Client-Lawyer Relationship
A lawyer shall act with reasonable diligence and promptness in representing a client.
Rule 3.3: Candor Toward the Tribunal
Advocate
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of
material fact or law previously made to the tribunal by the lawyer;
(2) fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the
lawyer to be directly adverse to the position of the client and not disclosed by opposing
counsel; or

15. Model Rules of Professional Conduct (cont.)
Rule 3.3: Candor Toward the Tribunal
Advocate (cont.)
(a) A lawyer shall not knowingly (continued):
(3) offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or a
witness called by the lawyer, has offered material evidence and the lawyer comes to know of
its falsity, the lawyer shall take reasonable remedial measures, including, if necessary,
disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a
defendant in a criminal matter, that the lawyer reasonably believes is false.
(b) A lawyer who represents a client in an adjudicative proceeding and who knows that a
person intends to engage, is engaging or has engaged in criminal or fraudulent conduct
related to the proceeding shall take reasonable remedial measures, including, if necessary,
disclosure to the tribunal.

16. Model Rules of Professional Conduct (cont.)
Rule 3.3: Candor Toward the Tribunal (cont.)
Advocate (cont.)
(c) The duties stated in paragraphs (a) and (b) continue to the conclusion of the proceeding,
and apply even if compliance requires disclosure of information otherwise protected by Rule
1.6.
(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to
the lawyer that will enable the tribunal to make an informed decision, whether or not the facts
are adverse.

17. Model Rules of Professional Conduct (cont.)
Rule 3.4: Fairness to Opposing Party & Counsel
Advocate
A lawyer shall not:
(a) unlawfully obstruct another party' s access to evidence or unlawfully alter, destroy or
conceal a document or other material having potential evidentiary value. A lawyer shall not
counsel or assist another person to do any such act;
(b) falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a
witness that is prohibited by law;
(c) knowingly disobey an obligation under the rules of a tribunal except for an open refusal
based on an assertion that no valid obligation exists;

18. Model Rules of Professional Conduct (cont.)
Rule 3.4: Fairness to Opposing Party & Counsel
Advocate
(d) in pretrial procedure, make a frivolous discovery request or fail to make reasonably diligent
effort to comply with a legally proper discovery request by an opposing party;
(e) in trial, allude to any matter that the lawyer does not reasonably believe is relevant or that
will not be supported by admissible evidence, assert personal knowledge of facts in issue
except when testifying as a witness, or state a personal opinion as to the justness of a cause,
the credibility of a witness, the culpability of a civil litigant or the guilt or innocence of an
accused; or

19. Model Rules of Professional Conduct (cont.)
Rule 3.4: Fairness to Opposing Party & Counsel
Advocate (continued)
(f) request a person other than a client to refrain from voluntarily giving relevant information to
another party unless:
(1) the person is a relative or an employee or other agent of a client; and
(2) the lawyer reasonably believes that the person's interests will not be adversely affected by
refraining from giving such information.

20. Model Rules of Professional Conduct (cont.)
Rule 4.1: Truthfulness in Statements to Others
Transactions With Persons Other Than Clients
In the course of representing a client a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third person; or
(b) fail to disclose a material fact to a third person when disclosure is necessary to avoid
assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

21. Key Bankruptcy Definitions
Secured Collateral: Bank’s collateral for its loan (i.e. the real estate, other personal property)
Automatic Stay: An injunction that halts actions by creditors, with certain exceptions, to collect
debts from a debtor who has declared bankruptcy. Under section 362 of the United States
Bankruptcy Code, the stay begins at the moment the bankruptcy petition is filed.
Adequate Protection: Relief created to protect the value of a secured creditor's lien so that it
does not diminish during the bankruptcy proceeding. The relief can be in the form of periodic
payments, interest payments, or a replacement lien on other property.
21

22. Key Bankruptcy Definitions
Plan of Reorganization: The plan of reorganization outlines how the debtor will reorganize its
business, administer its assets, make distributions to creditors and emerge from bankruptcy.
In order to move forward with the plan of reorganization, it must be voted on by the various
classes of creditors, satisfy the specific dictates of the Bankruptcy Code, and be confirmed by
the Bankruptcy Court.
Single-Asset Real Estate Case (SARE): Real property constituting a single property or
project, other than residential real property with fewer than 4 residential units, which
generates substantially all of the gross income of a debtor who is not a family farmer and on
which no substantial business is being conducted by a debtor other than the business of
operating the real property and activities incidental.
Absolute Priority Rule: Rule governing the priority of payments among creditors and
shareholders, in the event of a corporate liquidation. The absolute priority rule is used in
corporate bankruptcies, to decide the order that payments that be distributed to each party.
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23. Uses of Valuation in Bankruptcy Cases
• Asset Schedules:
 Asset value vs. Liabilities
 Asset value vs. revenues/cash flow
• Priority of payments under Absolute Priority Rule
• Liquidation value of the company
• Adequate protection for lender
• Plan of Reorganization
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24. Sides of the Argument
• Lender: Sufficient collateral for their loan
• Debtor: Varies depending on the challenges their business faces
• Judge: Reasonableness
24

25. What are the Ways to Value Real Property?
• MAI Appraisal
• Broker Opinion of Value
• County Assessed Value
• Debtor’s Book Value
• Arm’s Length Offers Received
• Foreclosure Value (higher) vs. Replacement Value (lower)
• Commercially Reasonable Sale Process
• Public Auction
25

26. How Does the Court Decide Issues of Valuation?
• Attorney briefs
• Expert Witnesses
• Broker Testimony
• Buyer Testimony
26

27. Ethical Situation Case Studies
27

28. Over-Valuation
Donald owns a 25,000 sf conference and event center with 2.1 acres of excess property in
Florida. The building cost $5 million to build and Donald values the land at $2 million. When
Donald bought the property he received approved for a Planned Unit Development (PUD)
from the local municipality to build a hotel onsite. This would be the only conference center in
the area with a hotel connected to it. However, Donald has been unable to secure a
developer for over 10 years. Donald’s business became distressed and he was unable to pay
his mortgage. As foreclosure neared, Donald filed for bankruptcy to invoke the automatic
stay. Donald assigned a value of $19 million dollars and stated “Fully Developed” as the
valuation method?
Are there ethical implications of this valuation method? Is this shady or shrewd?
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29. Under-Valuation
Mike owns a chain of station and convenience in Indiana. He borrowed against four of his stores to
purchase four more in the past 18 months. Given the financial picture of business he is paying a
higher interest rate than he would like, but he got the financing. Mike would like to buy even more
stores, but does not have the collateral and does not want to sign personally. His growth plans
were hurt further when there was a lot of construction in a part of town where many of his stores
are located. To ease the cash flow Mike stopping paying key vendors. Eventually, they started
requiring him to pay in cash, so he stopped paying his mortgage. When his lender commenced
foreclosure action, he sought out a commercial litigation “workout” and bankruptcy attorney who
tried to get the bank to agree to a longer term and lower interest rate. The bank refused, so Mike
filed bankruptcy. Mike didn’t want his lender to “get too comfortable” as he pursued a restructuring,
so he valued his stores based on a nearby store that was closed and sold for a very low price.
Are there ethical implications of this valuation method? Is this asinine or astute?
29

30. Suspect Valuation
Mick owns a 125,000 square foot industrial warehouse in South Carolina, which he bought for
$4,500,000. The property is just a few years old, state of the art, right off the highway and a close
distance to a BMW automobile production plan, making it highly desirous to vendors. Mick acquired this
building through a 1031 tax deferred exchange and rents have increased so steadily he was able to
refinance the property to take about $1,800,000, which he promptly used to buy a dream home on the
beach. Following a change in tariff policy, Mick lost a few tenants and discovered that because other
facilities in the same area had the same issue, that rents were dropping quickly. Mick needed the income
to pay the mortgage on his new home, so he stopped paying his bank. The bank, concerned with their
local reputation, did everything they could to work something out, but ultimately had no choice but to
pursue foreclosure. When Mick filed bankruptcy he scheduled the property as being worth $12,500,000
($100/sf) on grounds that a 3,000 sf building nearby just sold for $300,000 ($100/sf). To prove he was
serious about selling it to pay off the bank, he hired his next door neighbor to sell the property and gave
her a 1-year listing agreement.
Are there ethical implications of this valuation method? Is this cleaver or caggy?
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31. Notable Valuation Case Law
Replacement Value
Associates Commercial Corp. v. Rash, 520 U.S. 953, 965, 117 S.Ct. 1879, 1886, 138 L.Ed.2d
148 (1997) (“Rash”), mandated the application of the replacement-value standard in a cram
down plan. The Supreme Court defined that standard as the amount a willing buyer would
pay on the open market for like property. (Followed by In re Sunnyslope Hous. Ltd. P’ship,
859 F.3d 637 (9th Cir. 2017), as amended (June 23, 2017)).
Hybrid Approach
In re Heritage Highgate, Inc., 679 F.3d 132 (3d Cir. 2012), the court adopted the replacement
value standard identified in Rash, and applied it in a case that involved real
property. However, that court equated replacement value with the asset’s
31

32. Notable Valuation Case Law (cont.)
Foreclosure Value
United Air Lines, Inc. v. Reg’l Airports Imp. Corp., 564 F.3d 873 (7th Cir. 2009), in valuing
airline terminal gates that the debtor had improved, the Court of Appeals for the Seventh
Circuit determined that foreclosure value operates to set a floor on the secured creditor’s
recovery. That court stated: “[i]f the Lender foreclosed and took over the space, it could rent
the gates to United or some other airline at more than $17 a square foot- at perhaps four
times that much, to go by prices at the airport’s one terminal that leases fully built-out
gates.” Id. at 876-77.

33. Notable Valuation Case Law (cont.)
Cram Down Plans - Valuation of Equity Interests – “New Value Plans”
Bank of America National Trust & Savings Ass'n v. 203 North LaSalle Street Partnership, 526
U.S. 434, 119 S.Ct. 1411, 143 L.Ed.2d 607 (1999), (competition is the way to tell whether a
“new value plan” makes the senior creditors (and the estate as a whole) better off, vs
funneling value from the lender to an insider/equity holder. A plan of reorganization that
includes such a new investment must allow other potential investors to bid. In this
competition, creditors can bid the value of their loans. (See also RadLAX Gateway Hotel, LLC
v. Amalgamated Bank, ––– U.S. ––––, 132 S.Ct. 2065, 182 L.Ed.2d 967 (2012) (upholding
secured creditors’ right to credit bid full amount of secured claim, protecting creditors against
plans that would give competing claimants too much for their new investments and thus dilute
the creditors' interests.)

34. Notable Valuation Case Law (cont.)
Cram Down Plans - Valuation of Equity Interests – “New Value Plans” (Cont.)
In re Castleton Plaza, LP, No. 12-2639 (7th Cir. Feb. 14, 2013). addressing whether an equity
investor can evade the competitive process by arranging for the “new value” in the plan to be
contributed by (and the new equity to go to) an “insider,” as 11 U .S.C. § 101(31) defines that
term; Court rules that the answer is no - competition is essential whenever a plan of
reorganization leaves an objecting creditor unpaid yet seeks to distribute an equity interest to
an insider.

35. About the Faculty
35

36. About The Faculty
David Levy - david.levy@nrc.com
David Levy is Vice President of Business Development for NRC Realty & Capital Advisors.
NRC conducts structured sales, sealed bid sales, and auctions of all types of real estate and
real estate-based businesses. NRC’s clients include corporations, small businesses, banks,
private equity, hedge funds, non- traditional lenders, receivers, trustees, investors, and more.
The firm has experience in consensual sales of premium, surplus or non-strategic assets, as
well as those involved bankruptcy, restructuring, and other distressed situations. NRC is
distinguished for being the largest broker of gas stations and convenience stores in the U.S.
The firm also provides financial advisory services with a focus on the gas station and
convenience store and franchise restaurant sectors. NRC has sold $1.5 billion in commercial
and residential real estate assets in its 30-year history. Mr. Levy has an MBA from Miami
University and holds the prestigious CCIM designation.
36

37. About The Faculty
Jonathan Aberman - jaberman@dykema.com
Jonathan E. Aberman leads the Chicago Bankruptcy, Insolvency & Creditors' Rights practice and is a
member of the Business Services, Corporate Finance and Financial Industries Groups. Mr. Aberman's
national practice is committed to helping clients find creative, valuable and cost-effective solutions to
complex bankruptcy and insolvency-related problems, both in and out of court. He has helped
businesses, banks and non-bank lenders, finance companies, special servicers and other secured and
unsecured creditors protect their assets and interests in bankruptcy cases, workouts and restructurings,
foreclosures, receiverships and assignments for the benefit of creditors. In addition, he regularly
structures business deals and financial transactions with these situations in mind. With almost twenty
years of experience, Mr. Aberman has handled all of the aspects of complex chapter 11 cases in
Bankruptcy Courts across the country, including debtor-in-possession financing and cash collateral
disputes, auctions and asset sales, plan formation and confirmation, claims and objections, preference
actions and fraudulent transfer suits.
37

38. About The Faculty
Matthew Christensen - mtc@angstman.com
Matt Christensen joined Angstman Johnson in 2008 as an associate attorney. Now a member of the firm,
Matt has a civil litigation practice involving commercial law (finance and secured transactions),
bankruptcy, real property, and business matters. He also has a transactional practice involving real
estate, finance and business matters, including franchising. Matt frequently represents bankruptcy
trustees and other fiduciaries in recovering assets and administering estates. Prior to joining the firm, Matt
was a Junior Partner at a Meridian, Idaho, law firm and also established a solo practice. In addition to
practicing law, Matt is an adjunct professor at the University of Idaho College of Law where he teaches
international trade/business, real estate transactions and law practice management courses. Matt
obtained his Bachelor of Arts in International Studies from Brigham Young University in 2002. He earned
his J.D. and LL.M in International and Comparative Law degrees from Duke University School of Law in
2005. While at Duke, he was an Articles Editor for the Duke Journal of Gender Law & Policy.
In addition to practicing law and teaching, Matt also enjoys spending as much time as possible with his
wife and five children and expanding his ever-growing library of books.
To read more, go to: https://www.financialpoise.com/financialpoisewebinars/faculty/matthew-christensen/
38

39. About The Faculty
Biff Ruttenberg - biff@atlaspartners.com
Biff Ruttenberg has 48 years of retail development, redevelopment, management, and leasing
experience. His real estate background, including mortgage banking, construction, real estate brokerage
and lending experience, has contributed to Mr. Ruttenberg’s years of successful business projects and
relationships. He holds a BA from the University of Pennsylvania and an MBA from the Kellogg Graduate
School of Management at Northwestern University. He is the president of Atlas Partners, LLC, a real
estate services firm focusing on consulting to asset-based lenders, institutions and other users of
commercial space. It specializes in workouts, turnarounds, dispositions, and maximizing the value of
difficult properties. The company’s registered slogan is “The real estate department for companies that do
not want to be in the real estate business…but are.”®. Affiliates of Atlas Partners also acquire distressed
debt and operating businesses. Mr. Ruttenberg is also the president of Lakewest Equity, Inc., a Chicago-
based developer and owner of retail properties and his has holdings in Illinois and five other
states. Affiliates of Lakewest Equity also invest with other developers as an equity partner.
To read more, go to https://www.financialpoise.com/financialpoisewebinars/faculty/biff-ruttenberg-2/.
39

40. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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