Great Value Storage (GVS), which operates 64 self-storage facilities across 10 states, filed for Chapter 11 bankruptcy protection on Monday. The filing by affiliate GVS Portfolio I B LLC effectively delays foreclosure efforts by financial-services firm Teachers Insurance Annuity Association of America (TIAA), which GVS has been battling since 2019, according to the source.
Chapter 11 generally provides for reorganization of finances under a court-approved plan and frees a company from the threat of creditors’ lawsuits while it regroups. It also allows the debtor to remain in control of the business and its assets. The act must be approved by a majority of creditors.
In its filing in District of Delaware U.S. Bankruptcy Court, GVS listed assets between $100 million and $500 million against liabilities between $50 million and $100 million, the source reported. GVS Portfolio I B LLC is owned by GVS Portfolio I C LLC, which has the same Austin, Texas, address as parent company World Class Holdings, a real estate firm. Real estate entrepreneur Nate Paul, 34, founded World Class in 2007. He’s listed as president of GVS Portfolio I C in bankruptcy documents.
GVS filed for protection after a New York judge ruled on March 31 that its self-storage portfolio comprising more than 4 million square feet could be foreclosed. That ruling came after a March 9 restraining order stopped a foreclosure sale scheduled for March 10, according to the source.
TIAA sought foreclosure on the GVS portfolio after the self-storage operator defaulted on a mezzanine loan. As of August 2020, court records indicated GVS owed more than $90 million. In 2019, the company generated about $20.5 million in net operating income, the source reported.
Though eight bidders submitted qualified participation statements for the foreclosure sale, TIAA sold the loan on March 8 to RREFIII Storage LLC, which was expected to be in the field of qualified bidders. The sale of the loan prompted the March 9 restraining order, according to the source.
Through affidavits, Paul has maintained that sale of the GVS properties would be “commercially unreasonable” largely due to heavy damage to several facilities across Texas during severe winter weather in February. Paul argued “the collateral will be sold at a deep discount, not relative of its actual value.” He requested sale of the portfolio be delayed until June 8 to allow GVS to complete repairs and allow for additional showings, the source reported.
New York Supreme Court Judge Andrea Masley ultimately ruled that GVS “failed to support its theory of price depression,” noting that the argument of extensive damage wasn’t supported by photographic evidence.
In 2019, the FBI raided World Class’ Austin offices and searched Paul’s home, though the reasons were unclear. Since then, World Class has filed more than 20 bankruptcies and been involved in legal fights with real estate investment firm Stonelake Capital Partners and nonprofit Roy F. and Joann Cole Mitte Foundation, according to the source.
World Class placed No. 18 on the 2020 Inside Self-Storage Top-Operators List of facility owners, which ranks the top 100 property owners by net rentable square feet.
Austin Business Journal, Nate Paul's Great Value Storage files for Chapter 11 Bankruptcy Protection