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EMCID may lose millions unless dino-project built

Tuesday, January 24, 2012

Cynthia Calvert

Marlin-Atlantis ousted as developer of EarthQuest

Marlin-Atlantis, the Dallas-based real estate developer of Whitestone and the related EarthQuest theme park, is no longer associated with the project.

Frank McCrady, president and CEO of the East Montgomery County Improvement District, (“EMCID”), said Marlin-Atlantis is not associated with the dinosaur theme park any longer and, in fact, said that Marlin-Atlantis has no legal liability to repay the millions of dollars EMCID has given them until and unless the park project is opened.

The Marlin-Atlantis company which purchased the land several years ago, Whitestone Houston Land Ltd., filed for bankruptcy last summer.

McCrady said that a new developer, Contour Entertainment of Los Angeles, has assumed the financial responsibilities for the bankrupt project.

“Marlin-Atlantis is no longer capable of delivering the theme park project. They have an obligation for repayment once the project occurs. That obligation has been assumed by our existing developer, Contour Entertainment. Our approach has been for the bond repayment to be project specific and not developer specific. Developers come and go, however the project remains viable and is moving forward as we speak.”

Chris Brown, president of Contour Entertainment offered a somewhat different answer as to his firm’s involvement.

"That is not how I would characterize it,” Brown said. “Actually, we have an agreement in place with an option on the intellectual property licensing agreements with EMCID. We are working to raise the money, $500 million. That is a lot of money. However, we have not raised it yet. That is something we are working on.”

Brown said Contour was not looking to EMCID for money. “We have not received any funds from EMCID. They have already written a lot of checks [to the previous developers].” Brown said Contour expected to get financial assistance from EMCID once the park is built.

“EMCID has a partnership role with us and through their backing and support, we have achieved legislative changes that will support the project once it is built, once it is operating. But not in the current development phase. Raising this kind of money in this economy is entirely different for us and a big challenge.”

Brown said the impending bankruptcy and possible foreclosure on the original property was not a concern to Contour as they had built land costs into their business plan. If the original site becomes unavailable, Contour has chosen several other nearby alternative sites.

“We are interested in that property, but we have also looked at other sites. Our preference is that particular piece of land but it doesn't have to be. The project is not dependent exclusively on that,” Brown said.

McCrady remains emphatic that the project will be built and that EMCID will recoup the $9-$13 million already invested with the previous developer. The project must be built for EMCID to recapture the money, unless another form of retail development occurs.

“Our incentives are what makes the project viable. Any developer wanting access to these incentives would have to come to EMCID and negotiate to receive these and in that negotiation, we would require them to repay the outstanding bonds in order to receive our incentives,” McCrady said.

Notwithstanding McCrady’s confidence, the threat of the park not getting built was voiced almost two-and-one-half years ago by John Howell, bond counsel to EMCID. In a board meeting on August 24, 2009, Howell expressed his concern to the EMCID board about the possibility of the theme park not being constructed. Howell advised the board that they should make efforts “to protect the [Improvement] District in the event no park is developed.”

He advised the EMCID board that the [Improvement] District “should request an interest in the land with a preferred return on land sales.” McCrady answered that the developer (Marlin-Atlantis) would not agree to that option. The board then directed McCrady to discuss other possible options with the developer to protect the interests of the Improvement Zone in the event no park is ever built. What, if any, actions were taken by McCrady to protect the interests of the Improvement Zone are not mentioned in the board minutes.

As if the possibility of the park not getting built isn’t serious enough by itself, the bank holding the lien on the property has filed a motion with the bankruptcy court to allow it to foreclose its lien.

On January 16, 2012, according to www.trollerbk.com, Bank Midwest, N.A., successor in interest to Hillcrest Bank, N.A. (Whitestone’s lender), filed a motion of objection with the bankruptcy court in response to Whitestone’s plan of reorganization. The objection motion is quite lengthy and can be read in its entirety at the end of this article.

The purpose of the motion is for Whitestone’s lender to be granted permission by the bankruptcy court to proceed with a foreclosure on all of the properties that Whitestone owns, including the Dino-Park land.

This motion paints a far different picture of the status of the EarthQuest project than what has been commonly portrayed by various interested parties and some publications. Excerpts from the lender’s motion include the following quotations which are in response to Whitestone’s plan of reorganization (the “Plan”):

“On or about July 31, 2007, Hillcrest Bank, N.A., loaned Whitestone up to $19.6 million for the acquisition of real property in New Caney, Texas. The initial maturity date of the note was January 1, 2009 . . . but was extended to November 1, 2010 . . . at which time Whitestone defaulted in its obligations . . . and was subsequently declared in default on November 19, 2010. . . The indebtedness remains unpaid . . . in the [current] amount of $21,377,520.24.”

“The Plan ‘envisions a new third-party debt facility’ and [that] the Plan will be implemented through ‘the revenue from Whitestone’s future business operations and an equity investment put in by the ‘New Capital Partner.’ The alleged New Capital Partner is not identified, disclosed or supported. Whitestone’s future business operations and ‘development’ are not explained or supported. In addition, there is no support for the Plan’s feasibility because . . . the Plan is not feasible.

“Whitestone has no equity in the property . . . Whitestone has no history . . . [and] is a start-up venture . . . Considering Whitestone’s prior inadequate performance in regards to developing the property . . . the current state of the new home market . . . and the speculative nature of an amusement park . . . the Plan is not feasible.”

The objection motion goes on to state that, although Whitestone contends that the property is worth $27.4 million, the lender has certified appraisals stating that the property’s current value is only $9.88 million.

The bankruptcy court has not yet ruled on the lender’s motion of objection. If the court does rule in Hillcrest’s favor, then it is expected the lender will foreclose its lien on the property, take ownership of the land and subsequently place the land on the market for re-sale. The act of foreclosure will terminate the interests of all prior owner(s) and any other interested parties.

If the property is foreclosed, the feasibility of the EarthQuest project going forward is, at best, questionable. More importantly, once the foreclosure occurs, it is doubtful Whitestone’s lender will have an interest in reinvesting in another speculative venture. The most likely scenario is that the lender’s focus will be to sell the property in order to recover its loan proceeds.

Although many have been surprised at the seemingly current problems of the EarthQuest project, it appears the EMCID board has been in damage control mode for almost a year. Based on comments recorded in the EMCID board minutes, warning signs about the project apparently surfaced as early as mid-2009.

Examples of these concerns, listed by board meeting dates, are as follows:

August 24, 2009

The first of two major restructures of the contractual arrangement between the developer (Marlin-Atlantis) and EMCID is proposed. The developer requested: (i) forgiveness of its obligation to repay several million dollars of bond proceeds previously given to the developer by EMCID; (ii) forgiveness of its obligation to repay $1.5 million in bond proceeds utilized for the benefit of ESD # 7; (iii) a request for EMCID, rather than the developer, to pay a ‘site locater’ fee of @ $3 million; along with other concessions.

According to the minutes, the EMCID counter-proposed that a $1 parking tax would be levied on all future park visitors to: (i) repay the millions of dollars of bond indebtedness owed by the developer (as requested); (ii) utilize the same parking levy to payoff the $1.5 million bond indebtedness related to ESD #7 (as requested) (iii) ask the developer to donate to EMCID the planned site of the future EarthQuest Institute; and other considerations.

The Tribune does not have a copy of the final restructured agreement therefore, the final terms are unknown. Furthermore, what, if any, additional assurances McCrady was able to achieve with the developer is unknown.

November 9, 2010

The EMCID board learns that the project is not going to happen as planned. A second major restructure of the project is proposed. John Marlin, president of Marlin-Atlantis, informed the EMCID board that a $500 million “greenfield” project like EarthQuest was not feasible in the current market. Consequently, the project would have to be “phased” to reduce development and construction costs. The phasing of the project proposed that the theme park would be constructed first, followed by subsequent phases for related amenities.

February 1, 2011

In the meeting, McCrady states that the [Improvement] District is “a little behind on revenue projects . . .” The board then discussed areas where the budget could be reduced if the revenues did not match the budget. Director Linda Floyd “recommended that the travel by the EarthQuest consultants “be restricted or eliminated.”

There is no mention of why Floyd was so concerned about the traveling expenses of the EarthQuest consultants. But from financial records obtained by The Tribune it is obvious that EMCID has paid for extensive travel and other accommodations for the EarthQuest consultants.

March 10, 2011

EMCID director Floyd again appears concerned about money. She questioned a wire transfer of funds to EarthQuest Institute. Floyd is on the record as saying, “It was her understanding that such funding had ended.” She further asked the board “to recall the EarthQuest Institute wire.” The amount of this wire transfer was not referenced in the minutes and is unknown. What is clear is that Floyd’s concern about the wire transfer to EarthQuest reflected a growing concern on the part of some of the EMCID board members.

June 16, 2011

Chris Brown, president of Contour Entertainment, informed the EMCID board that his company was “assuming” the position of Marlin-Atlantis as developer for the EarthQuest project. In light of the complex contractual agreements that exist between EMCID and various Marlin-Atlantis entities, it is unknown if this is a formal assumption of the developer’s role or a temporary measure until a more permanent solution is determined.

November 10, 2011

The EMCID board approved an assignment and release with “Dino” Don Lessem. Reportedly renowned worldwide for his expertise in paleontology, Lessem was the brainchild, founder and director of the EarthQuest Institute. Lessem received thousands of dollars consulting on the project for several years and his extensive travel and entertainment expenses were paid by EMCID. The circumstances of Lessem’s departure were not disclosed in the minutes. What effect his leaving will have on the project is unknown. The EarthQuest Institute was a tax-exempt entity which held several fund raisers to raise money for the museum facilities. The status of those funds is unknown.

December 8, 2011

The EMCID board approved the expenditure of $25,000 to renew the Whitestone [sanitary sewer] waste discharge permit to Caney Creek. Reportedly, the permit will be assigned to EMCID. It appears that EMCID is trying to preserve the early (and limited) development work that Marlin- Atlantis performed on the Whitestone property when it was originally planned as only a residential community. This specific permit most likely was the Caney Creek Plant Permit No. WQ0014559001, which was originally issued in April of 2005. There is a companion waste permit that will also soon need to be renewed, if that has not already been done. That will be for the Peach Creek Plant Permit No. WQ0014559001, which was also first issued in April of 2005.

With Marlin-Atlantis having left the project, these type of real estate expenses will be regular occurrences as EMCID tries to preserve whatever interests it can in the EarthQuest property.

Chris Brown of Contour emphasized this. “EMCID is trying to do what it can to protect the investment it has made in the project,” he said.

Questions Remain

This complex and convoluted situation, the seriousness of which has been further magnified by the potential foreclosure of the EarthQuest property, has prompted valid inquiries by this newspaper and the public to the EMCID board.

How much money has EMCID funded to the various entities involved in the proposed EarthQuest / Dino-Park venture?

The Tribune previously asked both EMCID attorney David Marks and McCrady this specific question. Marks said he did not know but “Frank should.” McCrady responded that EMCID has funded “about” $9 million “for expenses to date.” (Note: The original Tribune article reported an amount of $7.8 million). However, in a Houston Chronicle-This Week article dated August 26, 2009, Connie Bloodworth, a board member of EMCID, then stated that EMCID had a potential exposure to the project of $13 million. “Director Connie Bloodworth said the requested changes will add up to a net initial incentive cost to the district of some $13 million. 'Right now we're putting ourselves and the community on the line,” said Bloodworth. “He's (Marlin) got his neck on the line, but we do too.'”

Why did the EMCID board not inform the public that the entity owning the land for the proposed EarthQuest property filed for bankruptcy protection more than five months ago on August 1, 2011?

Why did the EMCID board not inform the public about Marlin-Atlantis leaving the project?

Why did the EMCID board ignore the advice of its own bond counsel to seek additional security in order to protect its multi-million dollar investment in Marlin-Atlantis and the EarthQuest project.

How much money has EMCID expended for travel, accommodations, food, gifts, etc. for the various EarthQuest personnel and consultants?

Based on financial records in the possession of The Tribune it appears to be extensive. A review of those expenses is underway and will be reported on in a future article.

Samuel M. Stricklin (State Bar No. 19397050)

Michael L. Dinnin (State Bar No. 05888100)

Brian C. Mitchell (State Bar No. 24046452)

Bracewell and Giuliani LLP

1445 Ross Avenue, Suite 3800

Dallas, Texas 75202-2711

Telephone: (214) 468-3800

Facsimile: (214) 468-3888

Email: sam.stricklin@bgllp.com

Email: michael.dinnin@bgllp.com

Email: brian.mitchell@bgllp.com

Attorneys for Hillcrest Bank, N.A.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION

IN RE: §

§ CHAPTER 11

§

WHITESTONE HOUSTON LAND, LTD., § CASE NO. 11-42400

§

§

Debtor. §

HILLCREST BANK, N.A.'S OBJECTION TO CONFIRMATION OF

DEBTOR’S FIRST PLAN OF REORGANIZATION DATED OCTOBER 28, 2011

Hillcrest, N.A. ("Hillcrest"),

1

secured creditor and party in interest herein, files this

Objection to Confirmation of Debtor’s First Plan of Reorganization Dated October 28, 2011

(“Objection”), and in support thereof would show the Court the following:

JURISDICTION AND VENUE

1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and

1334. This Objection is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue is proper in

this district pursuant to 28 U.S.C. § 1409.

1

On November 7, 2011, Hillcrest Bank, N.A. merged with Bank Midwest, N.A., and now operates under the name

Bankr Midwest, N.A.OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 2

RELEVANT BACKGROUND

A. Debtor’s Bankruptcy Filing

1. On August 1, 2011 (the "Petition Date"), Whitestone Houston Land, Ltd.

("Whitestone" or “Debtor”) filed a voluntary petition for relief under chapter 11 of title 11 of the

United States Code (the "Bankruptcy Code") in the Eastern District of Texas, Plano Division (the

"Bankruptcy Court"), Cause No. 11-42400. This is a Single Asset Real Estate case.

2. On October 28, 2011, the Debtor filed its First Disclosure Statement Dated

October 28, 2011 [Dkt. No. 15] (“Disclosure Statement”) and its Chapter 11 Plan of

Reorganization Dated October 28, 2011 [Dkt. No. 14] (“Plan”). The Debtor filed its First

Modification to Disclosure Statement on December 11, 2011 (“Disclosure Statement

Modification”). [Dkt. No. 24]. On December 20, 2011, the Court entered an Order Approving

First Disclosure Statement Dated October 28, 2011 as Modified. [Dkt. No. 27].

B. Hillcrest Bank’s Secured Claim

3. On or about July 31, 2007, Hillcrest and Whitestone entered into a secured loan

agreement (the "Loan Agreement") whereby Hillcrest agreed to loan Whitestone up to

$19,600,000.00 in connection with the acquisition of real property located in New Caney,

Montgomery County, Texas (the "Property"). Pursuant to the terms of the Loan Agreement, and

contemporaneously therewith, Whitestone executed a Promissory Note (the "Note") for the

principal sum of $19,600,000.00 in favor of Hillcrest. The Note was secured by a Deed of Trust

granted by Whitestone in favor of Hillcrest, which provided Hillcrest a security interest in the

Property (the “Deed of Trust”).OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 3

4. The initial maturity date of the Note, for full repayment of the entire principal

balance and unpaid interest to Hillcrest by Whitestone, was January 1, 2009. The maturity date

was subsequently modified twice via agreement, so that the maturity date under the Note was

November 1, 2010. However, Whitestone defaulted under the Loan Agreement and Note, and

Hillcrest notified Whitestone of the events of default on November 1, 2010. Whitestone failed to

cure the default, and on November 19, 2010, Hillcrest accelerated the outstanding indebtedness

(the “Indebtedness”) under the Note and Loan Agreement. The Indebtedness remains unpaid,

and as of August 1, 2011, the approximate amount due and owing by Whitestone under the Note

and Loan Agreement, including principal and accrued interest, was $21,377,520.24. Interest and

fees continue to accrue on this amount.

BASIS FOR OBJECTIONS

C. The Debtor Bears the Burden of Proof for Confirmation

2. A debtor in bankruptcy bears the burden of proving each and every element of

§ 1129(a) by a preponderance of the evidence in order to attain confirmation of its plan. In re

Cajun Electric Power Cooperative, Inc., 230 B.R. 715, 728 (Bankr. M.D. La. 1999); In re

Barnes, 309 B.R. 888, 895 (Bankr. N.D. Tex. 2004) (citing In re T-H New Orleans Ltd. P'ship,

116 F.3d 790, 801 (5th Cir. 1997)); In re 8315 Fourth Avenue Corp., 172 B.R. 725, 735 (Bankr.

E.D.N.Y. 1994). Furthermore, the court has a mandatory duty to determine whether the plan has

met all of the requirements for confirmation, whether specifically raised by dissenting creditors

or not. Williams v. Hibernia National Bank, 850 F.2d 250, 253 (5th Cir. 1988). The Debtor in

this case is unable to meet its burden for confirmation.OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 4

B. The Plan Violates § 1123(a)(5) Because it Does Not Provide Adequate Means For Its

Implementation

3. The Court cannot confirm a plan unless it complies with the applicable provisions

of title 11. See 11 U.S.C. § 1129(a)(1). A debtor’s plan must provide adequate means for the

plan’s implementation. See 11 U.S.C. § 1123(a)(5). Whitestone’s Plan does not provide

adequate means for the Plan’s implementation; therefore, the Plan cannot be confirmed.

4. The only information in the Plan regarding its implementation is in Article II,

Concept of the Plan, Generally, and Article VI, Means for Implementation of Plan. The Concept

of the Plan is merely a “plan of reorganization.” See Plan, 2.01. The Plan “envisions a new third

party debt facility,” and the Plan will be implemented through “the revenue from the Debtor’s

future business operations and an equity investment put in by the New Capital Partner.” Id. The

alleged New Capital Partner is not identified, disclosed, or defined. Id. The Debtor’s future

business operations and “development” are not explained or supported. Id. In addition, there is

no support for the Plan’s feasibility, likely because, as discussed infra, the Plan is not feasible.

The Means for Implementation of Plan simply states that the “Plan will be implemented pursuant

to § 1123(a)(5) of the Code, by the commencement of payments as called for above.” See Plan,

6.01. Further, the Plan “relies on the revenues generated from the Debtor’s property and the

Equity Investment.” Id. Similar to New Capital Partner, the Equity Investment is not defined,

explained, or identified. Therefore, the Plan does not provide any means for implementation

other than the baseless and conclusory statements that it will be implemented. The Plan does not

comply with the provisions in section 1123(a)(5) and, as a result, should not be confirmed.

C. The Plan Violates 11 U.S.C. § 1129(a)(7) Because Hillcrest Receives Less Under the

Plan Than it Would in a Chapter 7 Liquidation

5. Pursuant to 11 U.S.C. § 1129(a)(7), impaired classes of claims under the Plan

must receive property on account of their claim that is not less than the amount they would OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 5

receive in a case under chapter 7. The Plan is not confirmable because the Debtor has failed to

meet its burden under § 1129(a)(7). The Debtor bears the burden of proving § 1129(a)(7) by a

preponderance of the evidence. Heartland Fed. Sav. & Loan Ass'n v. Briscoe Enters. (In re

Briscoe Enters.), 994 F.2d 1060 (5th Cir. 1993).

6. There is nothing in the Plan regarding liquidation, and in its Disclosure Statement

Modification, the Debtor merely states that “in a liquidation the property would sell for less than

the secured debts given today’s market conditions and the costs of sale.” Disclosure Statement

Modification, ¶ 6. The Debtor states the Whitestone Houston Property Value is $25,000,000.00

(reduced by $2,000,000.00 for a liquidation) and its secured debt is listed as $21,377,520.24. Id.

Therefore, the Debtor’s statement that the property would sell for less than the secured debts is

incorrect, even with a $2,000,000.00 reduction in property value. There is no evidence that the

impaired classes will not receive less through the Plan than they would in a liquidation. The

Debtor has not met its burden to prove the requirements under § 1129(a)(7).

7. Further, Hillcrest will receive less under the Plan that it would under a chapter 7

liquidation. Under a liquidation, Hillcrest will receive the value of its secured claim

immediately.

2

However, under the Plan, Hillcrest must wait 120 days after confirmation before

it will receive payment of its secured claim, and will not be paid a market or otherwise

appropriate rate of interest. Further, it is unclear how Debtor intends to pay Hillcrest’s

$19,389,607.91 claim (plus continued accrued fees and interest) when there is no indication of

who the New Equity Investor is or how the Debtor will implement the Plan. Accordingly,

2

Debtor contends the Property is worth 27,400,00.00, which would allow Hillcrest to receive the full amount of its

secured claim through liquidation. However. even if the Property value is $9,880,000.00, as Hillcrest contends

based on its certified appraisal, Hillcrest will still receive more through a liquidation that it would under the Debtor’s

Plan. OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 6

Hillcrest will receive less than it would under a chapter 7 liquidation and confirmation of the

plan should be denied under § 1129(a)(7).

D. The Plan Violates § 1129(a)(11) Because it is Not Feasible

8. Whitestone’s Plan is not feasible and cannot be confirmed under section

1129(a)(11). Courts must scrutinize the plan carefully to determine whether it offers a

reasonably prospect of success and is workable. In re Beyond.com Corp., 289 B.R. 138, 145

(Bankr. N.D. Cal. 2003). Whitestone has failed to offer anything other than hope and

speculation regarding its ability to satisfy the obligations of creditors. See, e.g., In re M&S

Assocs., Ltd., 138 B.R. 845, 852 (Bankr. W.D. Tex. 1992) (“Confirmation of the Plan would

merely allow the Debtor to postpone the inevitable, and to gamble, with the [secured creditor’s]

money, on the long shot possibility of a drastic improvement in the real estate market”); In re

Pelham St. Assocs., 134 B.R. 700, 701 (Bankr. D.R.I. 1991) (denying confirmation of plan

predicated on a 5-year balloon payment to the secured creditor, concluding that the plan was

“pure pie in the sky, and no secured creditor should be required to depend on such illusory pie.”).

Whitestone has no equity in the Property, and this is a Single Asset Real Estate bankruptcy.

9. The proposed Plan does not have a reasonable probability of success because it

requires Whitestone to enter into a new third party debt facility and receive an equity investment

from a New Capital Partner in order to fund the reorganization. See Plan, 2,01. Simultaneously

with the refinancing, Whitestone will also place the Property for sale on the market. Id.

However, Whitestone does not explain how it will obtain a New Equity Partner and a new debt

financing facility when it intends to sell the Property, and Whitestone has no equity in the

Property. OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 7

10. Neither the Disclosure Statement nor the Plan provides any concrete explanation

for how creditors in this case will receive the value of their claims. Whitestone has no equity in

the Property, and this is a Single Asset Real Estate bankruptcy. More specifically, this case

involves more than 1,564.55 acres of raw/undeveloped land located in New Caney, Texas that

the Debtor purchased in 2005 and plans (at least in 2005) to develop into a mixed-use

multifamily, commercial, and retail development, a segment of the economy that is notoriously

struggling. See Disclosure Statement, Exhibit B, Development Overview. However, upon

information and belief, the Debtor actually intends to develop the majority of the Property into

an amusement park.

11. The only support for the Plan's success is contained in the Metrostudy Market

Overview and Development Feasibility Performa sections of Exhibit B of the Disclosure

Statement. However, the Market Overview is merely a conclusory summary of a pie in the sky

hope for what may happen to the real estate market, and there is no support for the Development

Feasibility of the Debtor’s Plan. Speculative and unrealistic projections are not sufficient to

prove the feasibility of a plan of reorganization. In re Canal Place Ltd. P’ship, 921 F.2d 569,

579 (5th Cir. 1991). Moreover, it is unclear when the Development Feasibility Proforma was

prepared (although it appears to be years ago), who prepared it, how the figures contained in the

Proforma were determined, what assumptions were made, etc. Notably, the proposed Plan relies

on revenues generated from the Property (which, to date, amount to zero) and additional

financing. "Section 1129(a)(11) requires the plan proponent to show concrete evidence of a

sufficient cash flow to fund and maintain both its operations and obligations under the plan." See

In re 8315 Fourth Ave. Corp., 172 B.R. 725, 735 (Bankr. E.D.N.Y. 1994); In re SM 104 Ltd.,

160 B.R. 202, 234 (Bankr. S.D. Fla. 1993). Plans often fail on feasibility grounds where the OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 8

assets needed to fund the Plan are speculative. See In re 8315 Fourth Ave. Corp., 172 B.R. at

735; In re Lakeside Global II, Ltd., 116 B.R. 499, 506-09 (Bankr. S.D. Tex. 1989).

12. Further, where a plan relies on operating revenues, “a debtor’s past and present

financial history are probative of the plan’s feasibility.” Id. The Debtor effectively has no

history – this is a start-up venture in bankruptcy. Considering the Debtor’s prior inadequate

performance in regards to developing the property (Whitestone has owned the Property since

2005, yet no development has taken place), the current state of the new home market (and the

speculative nature of an amusement park) and the conjectural and speculative projections in

support of the Debtor’s proposed Plan, the Plan is not feasible and cannot be confirmed as a

matter of law.

PRAYER

For the foregoing reasons, Hillcrest respectfully requests that the Court deny

confirmation of the Plan and grant Hillcrest such other and further relief as is just and proper.

Dated: January 13, 2012

Respectfully submitted,

BRACEWELL & GIULIANI LLP

By: /s/ Brian C. Mitchell

Samuel M. Stricklin

State Bar No. 19397050

Michael L. Dinnin

State Bar No. 05888100

Brian C. Mitchell

State Bar No. 24046452

1445 Ross Avenue Suite 3800

Dallas, TX 75202-2711

Telephone: (214) 468-3800

Facsimile: (214) 468-3888

ATTORNEYS FOR HILLCREST BANK, N.A.OBJECTION OF HILLCREST BANK, N.A. TO CONFIRMATION

OF DEBTOR’S FIRST PLAN OF REORGANIZATION – PAGE 9

CERTIFICATE O

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