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Date of Issue: April 19, 2007

Rejected buyer rips into GSR restructuring officer

To the surprise of no one involved with Island real estate and the collapse of bankrupt GSR Development LLC, none of the company's Island properties sold before the court-ordered March 16 deadline. But it wasn't for lack of offers.

David and Jane Freeman of Duluth, Ga., said they submitted bids on four of GSR's properties to GSR restructuring officer William Maloney, offers that were flatly rejected by Maloney.

In fact, claimed David Freeman, Maloney was "nearly impossible to deal with" on the offers.

"We looked at all Island properties. We did our homework based upon the current Island real estate market and made our offers based upon our sense of what the market is today," he said.

But Maloney replied through Freeman's real estate agent that he "didn't consider the offers to be reasonable."

He also advised the agent that Freeman shouldn't base his offers on the current Island real estate market because there really was "no market during the first quarter of '07 [sic]."

Maloney commented that he is "not as highly motivated as you may think, just because the company is in bankruptcy." Maloney, although employed by GSR principals Robert Byrne and Steve Noriega, claimed that he represents "the interests of creditors and other parties of interest. Unfortunately, debt levels and equity in the property are issues I need to consider."

When Freeman indicated he was going to write to the bankruptcy court, Maloney responded that he has "sole authority to act on behalf of the debtor," but that Freeman and his real estate firm were welcome to "approach ‘the court'" or others that you think may be sympathetic to your cause. Unfortunately, in issues like this, it's a little like Santa Claus mail."

In other words, said Freeman, don't expect an answer.

But offers for GSR properties have been few and far between. Maloney has asked federal bankruptcy court Judge K. Rodney May to allow him to hold a public auction of some of GSR's properties using an international auctioneering firm.

"What's the point of that?" said Freeman, who has written May to request that he not approve the auction, but consider his offers.

"It would be very surprising to us if auctioning these properties would fetch prices for net amounts that are materially above our offers," Freeman said. Given the repairs needed on the four properties, the current market conditions and the associated risks, Freeman contends his offers are fair.

 As of April 16, May had not yet issued a ruling on the motion to hold a public auction.

Freeman was surprised to learn that all of GSR's properties are heavily mortgaged and none of his offers would pay off the first mortgage on any of the properties. He was also unaware that Maloney has been offered a $125,000 bonus if he restructures GSR so that all creditors are paid 100 percent of their claims.

The unsecured creditors of GSR have $6.1 million in claims against the company, while the total bankruptcy is $46 million.

Freeman said that if the court rejects his plea and decides to put GSR's properties up for public auction, he likely won't participate because the properties would have a "reserve price" well above what he considers they are worth.

Efforts to reach Maloney for comment on Freeman's allegations were unsuccessful.

The four properties Freeman offered to purchase, along with the GSR asking price and his offer, are:

Address Asking price Offer price

  • 506 74th St. $795,000 $355,000.
  • 604 Foxworth Lane $725,000. $455,000.
  • 518 Key Royale Drive $1.7 million. $800,000.
  • 407 74th St., Unit A $625,000. $415,000.