In Re SW Boston Hotel Venture LLC, 449 B.R. 156

Debtors SW Boston Hotel Venture LLC et al. seek relief from the automatic stay under 11 U.S.C. § 362(d)(2) sought by Prudential; City of Boston also objects; the court held a three-day evidentiary trial with multiple appraisers and witnesses.
Prudential asserts a large secured claim ($~154M to Prudential; $6M to City net of collateral) secured by a broad collateral package including the W Hotel, condominiums, and related collateral from related debtors.
Agreed facts establish value for W Hotel and several related properties, with cross-party appraisals and agreed values for certain parcels (e.g., 131 Arlington Street, 109 & 121-127 Arlington Street, Pinckney properties) used for valuation.
The W Hotel and condominiums generate ongoing cash flow; the Debtors have made postpetition condominium sales and projections show a three-year sellout and hotel cash flow, with substantial payments already made to Prudential.
The court must decide (1) whether the Debtor has equity in the encumbered property, (2) whether the collateral is necessary for an effective reorganization, and (3) whether the Debtor sustains a plan in prospect; the court ultimately denies relief and finds a reorganization in prospect.
The court notes exclusivity periods and ongoing efforts to formulate a plan, with conditional potential plan scenarios including significant payments to creditors and possible refinance over time.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Debtors lack equity in the property encumbered by Prudential	Prudential contends there is no equity after considering all collateral	Debtors argue equity cushion exists due to total collateral value	Debtor lacks equity in the W Hotel and Condominiums for §362(d)(2)(A) purposes
Whether the collateral is necessary for an effective reorganization	Prudential argues no realistic prospect of reorganization without relief	Debtor shows plan in prospect with three-year condo sellout and hotel cash flow	Debtor has a reasonable possibility of reorganization within a reasonable time; collateral deemed necessary
Adequate protection under §362(d)(1)	Equity cushion insufficient after erosion risk	Payments during pendency and excess collateral protect Prudential	No cause to lift stay for lack of adequate protection; cushion exists and debt not devaluing currently
Prospect of confirming a plan under §1129	Prudential contends plan improbable; equity holders risk	Debtor presents plausible plan outlining payments and refinancing possibilities	Court finds credible prospect of confirmation; plan in prospect with reasonable time and progress observed

Timbers of Inwood Forest Assocs., Ltd. v. Green, 484 U.S. 365 (U.S. 1988) (adequate protection and timing of reorganization relief under §362(d)(2))
In re Jug End in the Berkshires, Inc., 46 B.R. 892 (Bankr. D. Mass. 1985) (equity analysis in §362(d)(2) context)
DCI Publishing of Alexandria, Inc., 160 B.R. 538 (E.D. Va. 1993) (restricting equity calculation to debtor collateral for §362(d)(2)(A))
In re New Era Co., 125 B.R. 725 (S.D.N.Y. 1991) (alternative views on considering collateral beyond subject property)
In re KRC, Inc., 226 B.R. 112 (Bankr. D. Idaho 1998) (equity determination regarding collateral scope)
Till v. SCS Credit Corp., 541 U.S. 465 (U.S. 2004) (indubitable equivalent and plan treatment under 11 U.S.C. §1129)
Bank of America Nat. Trust & Sav. Ass'n v. 203 North LaSalle Street P'ship, 526 U.S. 434 (U.S. 1999) (absolute priority and market-testing concepts for plan confirmation)
In re Situation Management Systems, Inc., 252 B.R. 859 (Bankr. D. Mass. 2000) (market testing of plan value and equity considerations)