Rockport Development filed for bankruptcy in May, 2020 under Chapter 11 in Santa Ana. The company develops, builds and/or “flips” high end single-family and multi-family residential homes in Southern California.
The company is owned by Kevin Zhang. Allegations of impropriety surfaced against Mr. Zhang in connection with several of his real estate projects, which led to the Chapter 11 filing.
The stated purpose of the Chapter 11 filing is to liquidate enough of the company’s real estate holdings to pay its unsecured creditors–and to establish a claims process in which all claims against the company can be heard by a single judge. Therefore, there will undoubtedly be several adversary proceedings filed in this matter.
Properties will be sold free and clear of liens, with liens attaching to the sale proceeds as per Bankruptcy Code Section 363.
Rockport Development and its Affiliates own twenty-seven (27) projects, with Debtor owning six (6) of the properties. So far, one property is pending sale for $2.4 million, which should clear about $1 million in equity value. That may be a good start, but unsecured debts exceed $19 million.
Two observations are in order here: first, it is hard to see how a real estate developer in the red-hot Southern California market of the past few years could be upside down $19 million; second, there is a long way to go before all creditors will be satisfied.
Creditors will likely need to take aggressive action against both Rockport Development and Mr. Zhang if they expect to be made whole.