St. John’s Apartments Sees Stalking Horse Bidder

St. John’s Apartments in Little Rock filed for Chapter 11 bankruptcy reorganization last month and listed $8.5 million in debts.

The financially troubled St. John’s Apartments project in Little Rock could have a new owner soon.

Harbour Capital Corp. of Aiken, South Carolina, said it would be the “stalking horse bidder” for the 224-unit apartment complex and set the opening bid at $3.025 million.

You may remember that St. John’s filed for Chapter 11 bankruptcy reorganization in June.

David Henry’s Henry Management Inc. of Little Rock had managed the complex until 2012, when a Pulaski County Circuit Court judge appointed a receiver because Henry Management defaulted on $7.9 million worth of bonds in 2012. Since 2014, Carl Schultz, vice president and co-owner of United Properties Management of Little Rock, has been the receiver for the southwest Little Rock complex, which has a corporate name of St. J Apartments Limited Partnership.

In the bankruptcy filing, St. John’s showed $8.5 million in debts and $3.03 million in assets.

But a reorganization wasn’t promising. While the criminal activity and complaints about the property declined under Schultz, the complex is in need of repairs in order to attract more tenants, according to St. John’s bankruptcy filing. The complex “is operating at a negative monthly cash flow rate of approximately $15,000 to $20,000,” the filing said.

St. John’s said it determined that a reorganization “is not a viable option” because of the negative cash flow. U.S. Bankruptcy Judge Richard D. Taylor approved Harbour as the stalking horse and said bids could be submitted to St. John’s attorney, James E. Smith of the Williams & Anderson law firm in Little Rock, until 5 p.m. Oct. 23. An auction will be held on Oct. 26, if necessary.

If Harbour isn’t the winning bidder, it will receive a breakup fee of $100,000.

A stalking horse bidder is common in buying assets out of bankruptcy. It usually provides some level of assurance for other bidders that somebody has come in and done due diligence.