IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ------------------------------------------------------x In re: : : MERVYNS HOLDINGS, LLC et al.

, : : Debtors. : : :
:
:

Chapter 11 Case No. 08-11586 (KG) Jointly Administered

Hearing Date: December 23, 2008 at 10:30 a.m.

Objection Deadline: December 21, 2008 at 4:00 p.m. Extended to December 22, 2008 @ 4:00 p.m.
Related to Docket No. 973 and 1156

------------------------------------------------------x LIMITED OBJECTION OF KIMCO REALTY CORPORATION TO THE MOTION OF DEBTORS AND DEBTORS IN POSSESSION FOR ORDERS (I) ESTABLISHING AUCTION AND BID PROCEDURES FOR SALE OF DEBTORS' INTERESTS IN THEIR REMAINING REAL PROPERTY LEASES; (II) APPROVING AND AUTHORIZING SALE OF LEASES TO WINNING BIDDERS FREE AND CLEAR OF ALL LIENS, INTERESTS, CLAIMS AND ENCUMBRANCES; AND (III) GRANTING RELATED RELIEF TO THE HONORABLE KEVIN GROSS, UNITED STATES BANKRUPTCY JUDGE: Kimco Realty Corporation (Kimco), by and through ita undersigned attorneys, hereby makes this Limited Objection to the Motion of Debtors and Debtors in Possession for Orders (I) Establishing Auction and Bid Procedures for Sale of Debtors' Interests in Their Remaining Real Property Leases; (II) Approving and Authorizing Sale of Leases to Winning Bidders Free and Clear of All Liens, Interests, Claims and Encumbrances; and (III) Granting Related Relief (the Motion), and in support thereof avers: 1. Kimco is the owner or agent for the owner of the Anaheim Plaza

(Anaheim) shopping center, Anaheim, CA in which Debtors operate a retail store pursuant to a written lease (the Lease) which is affected by the relief sought by the Motion. The Anaheim premises are premises located in a shopping center, as that term is used in 11 U.S.C. 365(b)(3). See In Re: Joshua Slocum, Ltd., 922 F.2d 1081 (3d Cir. 1990).

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2.

On or about December 11, 2008, Debtors filed their Notice of Assumption

and Assignment of Unexpired Nonresidential Real Property Leases [D.I. 1156], whereby Debtors indicated their intent to assume and assign the Anaheim Lease (Debtor Store # 39) to Forever 21, Inc. (Forever 21). General Objections to Sale of Leases 3. Kimco objects to the proposed assumption and assignment of the

Anaheim Lease to any assignee unless Debtors and/or the assignee comply with all of the requirements of Sections 365(b) and (f) of the Bankruptcy Code. Absent the ability, or willingness, of the Debtors and the Assignee to satisfy said requirements any proposed assumption and assignment must be denied. 4. Pursuant to Section 365(f)(2)(B) of the Bankruptcy Code Debtors may

only assign the Leases if adequate assurance of future performance by the assignee of such . . . lease is provided,. . . . As set forth in Section 365(b)(3), adequate assurance of future performance in the shopping center context includes, inter alia, adequate assurance: (A) of the source of rent and other consideration due under such lease, and in the case of an assignment, that the financial condition and operating performance of the proposed assignee and its guarantors, if any, shall be similar to the financial condition and operating performance of the debtor and its guarantors, if any, as of the time the debtor became the lessee under the lease; *** (C) that assumption and assignment of such lease is subject to all the provisions thereof, including (but not limited to) provisions such as radius, location, use or exclusivity provision, and will not breach any such provision contained in any other lease, . . . relating to the shopping center;. 5. The burden of proof on adequate assurance issues is with the Debtors.

See, In re Lafayette Radio Electronics Corp. 12 B.R. 302, 312 (Bankr. E.D.N.Y. 1991). 2
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6.

Pursuant to the BAPCPA amendments to the Bankruptcy Code, which

took effect for cases filed on and after October 17, 2005, such as the instant matter, the antiassignment provisions of Section 365(f)(1) may no longer be used to override the specific protections afforded to landlords by Section 365(b). Cure 7. Set forth below is Kimcos monetary claim for rentals due, exclusive of

any sums which have become due or been paid after December 15, 2008, unless otherwise noted. The claim set forth is the base cure claim amount subject to additional qualifications and modifications (such as reimbursement of attorneys fees) as more fully set forth below.
DEBTORS CURE $ LANDLORDS CURE $

SHOPPING CENTER

STORE #

EXHIBIT

Anaheim Plaza 8.

39

$0.00

$96,715.89

Kimco further avers that additional amounts, not as yet known, may also

be due with regard to the pre-petition and post-petition periods, such as year-end adjustments to various items including, but not limited to, real estate taxes and common area maintenance, as well as annual percentage rental. Section 365(b) requires that a debtor cure all defaults in conjunction with a lease assumption. Since certain accrued, unbilled items may not have been invoiced to date, there can be no default for the failure to pay same. Nevertheless, Debtors and any proposed assignee must acknowledge, and any Order approving cure amounts and assumption or assumption and assignment of any of Kimco Leases should provide, that the proposed assignee shall be liable for the unbilled items, even though they may cover, wholly or partially, a pre-petition and/or pre-assumption period of time, and that payment of year end adjustments will be made by the assignee when due pursuant to the terms of the Leases. If the Debtors, rather than the assignee, are to be liable for those year-end adjustments then a separate 3
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segregated escrow, for the benefit of Kimco only, must be established to provide that the amounts due will be paid to Kimco when the adjustments come due under the Anaheim Lease. 9. Kimco further requests that it be reimbursed as part of the cure payments

for all of its actual pecuniary losses including, but not limited to, attorneys fees and costs expended with regard to Debtors bankruptcy proceedings. 10. In addition to the monetary obligations that Debtors must satisfy under

Section 365 of the Bankruptcy Code, the Anaheim Lease also provides that Debtors must indemnify and hold Kimco harmless with regard to existing claims as well as with regard to events which may have occurred pre-assumption but which are not made known to Kimco or Debtors until some period post-assumption. Accordingly, either the assignee must assume all indemnification liabilities or Debtors must be required to evidence, or obtain adequate insurance in order to guaranty, (by way of purchase of a tail or otherwise) that their indemnity responsibilities will be met. Claims for indemnity may include, but are not limited to, claims for personal injuries which occur at the leaseholds, where an Objecting Landlord is joined as a party defendant, damage and destruction to the property by Debtors or their agents, claims for environmental damage or environmental clean up, etc. Use 11. In the event that Forever 21 intends a use of the premises other than the

current use permitted by the Anaheim Lease Kimco objectsto any such change of use. Tenant Mix and Balance 12. Kimco also objects to any change of use on the grounds that such change

may adversely impact tenant mix and balance at Anaheim Plaza.

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Assumption and Amendment Agreement 13. Kimco requests that, as a condition to any order approving assumption

and assignment of the Anaheim Lease, the assignee shall be required to enter into a short form Assumption and Amendment Agreement whereby the assignee shall become directly obligated to Kimco and the provisions of the Anaheim Lease regarding Forever 21s notice address and trade name will be modified. Objection to Proposed Sale Order 14. The proposed Sale Order directs each Affected Party to sign any

instruments, applications, consents or other documents which may be required by a Winning Bidder, or any public or quasi-public authority, for the purposes of obtaining the permits, approvals or other documentation necessary to enable the Winning Bidder to remodel, alter, convert, open and operate each of the properties. Kimco does not object to executing such documentation provided that (a) any such required action is without any cost to Kimco and (b) the work which Forever 21 seeks to have approved is work which is being accomplished in accordance with the terms of the Anaheim Lease. 15. Paragraph 9 of the proposed Sale Order states that the Winning Bidders

will be taking assignment of the Leases free and clear of any claims and that the Debtors alone should be responsible for curing any and all monetary and non-monetary defaults. This provision does not address the issue of which party will be responsible for satisfying year-end adjustments when those adjustment billings are produced by Kimco, as more fully set forth above. 16. Paragraph 10 of the proposed Sale Order permits the Winning Bidders to

(i) remodel the premises, including exterior alterations and replacement of building signs as

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necessary to convert the property to a Forever 21 store (ii) cease retail operations and go dark for up to eighteen (18) months following the assignment effective date, without being in default under the Anaheim Lease or otherwise subject to any lease termination, recapture or similar rights. The assumption and assignment of Kimcos lease is subject to all of the provisions thereof, including those provisions regarding alterations and construction of the premises. Accordingly, unless otherwise agreed to in writing by the Kimco, all alterations, construction and signage must conform to all of the provisions of the Anaheim Lease as well as any applicable REAs and other documentation governing the shopping center of which the affected premises is a part. 17. With regard to the provision of paragraph 10 allowing the Winning Bidder

to go dark for up to eighteen months, Kimco specifically objects to any such provision. Indeed, the 2005 amendments to the Bankruptcy Code specifically provided that a default under a lease for failure to operate is cured by the debtor or assignee performing at and after the time of the assignment in accordance with such lease. Kimco objects to any go dark period in excess of four months. In addition to the specific violation of the provisions of the Bankruptcy Code, a closing for an excess of four months may cause Kimco to be in default of various cotenancy provisions in other leases at the shopping center. 18. the Anaheim Lease. 19. Kimco objects to the general language set forth in paragraph 13 of the Kimco objects to the striking of any continuous operation provisions of

proposed Sale Order and requests that same be specifically limited to any provisions which Debtors and Forever 21 are able to demonstrate apply directly to the Anaheim Lease and are subject to modification under the Bankruptcy Code as amended by the 2005 amendments. 6
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Reservation of Rights 20. be appropriate. Joinder in Other Landlord Objections 21. Kimco hereby joins in the objections filed by Debtors other landlords to Kimco reserves the right to make such other and further objections as may

the extent that such objections are not inconsistent with the provisions hereof. WHEREFORE, Kimco prays for relief consistent with the foregoing Limited Objection; and WHEREFORE, Kimco prays for such other and further relief as may be just and required under all of the circumstances.

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Dated: December 22, 2008 Wilmington, Delaware

Respectfully submitted, /s/ Leslie C. Heilman Tobey M. Daluz, Esquire (No. 3939) Leslie Heilman, Esquire (No. 4716) BALLARD SPAHR ANDREWS & INGERSOLL, LLP 919 N. Market Street, 12th Floor Wilmington, DE 19801 Telephone: (302) 252-4465 Facsimile: (302) 252-4466 E-mail: daluzt@ballardspahr.com heilmanl@ballardspahr.com and David L. Pollack, Esquire Jeffrey Meyers, Esquire BALLARD SPAHR ANDREWS & INGERSOLL, LLP 51ST Fl - Mellon Bank Center 1735 Market Street Philadelphia, Pennsylvania 19103 Telephone: (215) 864-8325 Facsimile: (215) 864-9473 Email: pollack@ballardspahr.com meyers@ballardspahr.com Counsel for Kimco Realty Corporation

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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE ------------------------------------------------------x In re: : : MERVYNS HOLDINGS, LLC et al. : : : Debtors. :
:

Chapter 11 Case No. 08-11586 (KG) Jointly Administered

------------------------------------------------------x CERTIFICATE OF SERVICE I certify that a copy of the enclosed Limited Objection of Kimco Realty Corporation to the Motion of Debtors and Debtors in Possession for Orders (i) Establishing Auction and Bid Procedures for Sale of Debtors Interests in Their Remaining Real Property Leases; (ii) Approving and authorizing Sale of Leases to Winning Bidders Free and Clear of All Liens, Interests, Claims and Encumbrances; and (iii) Granting Related Relief has been served upon the following persons via email or telecopier unless otherwise noted. Howard Beltzer, Esquire Neil E. Herman, Esquire Wendy Walker, Esquire Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 FAX: 212-309-6001 Daniel DeFranceschi, Esq. Richards Layton & Finger, P.A. One Rodney Square 920 North King Street Wilmington, DE 19801 FAX: 302-651-7701

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Jay R. Indyke, Esquire Cathy Hershcopf, Esquire Cooley Godward Kronish LLP 1114 Avenue of the Americas New York, NY 10036 FAX: 212-479-6275 William P. Bowden, Esquire Ashby & Geddes, P.A. 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, DE, 19899 FAX: 302-654-2067 Jonathan Helfat, Esquire Daniel Fiorillo, Esquire Otterbourg, Steindler, Houston & Rosen, P.C. 230 Park Avenue New York, NY 10169 FAX: 212-661-9100 Paul M. Basta, Esquire Kirkland & Ellis LLP 153 East 53rd Street New York, NY 10022 FAX: 212-446-6460 Peter Gilhuly, Esquire Latham & Watkins LLP 355 South Grand Avenue Los Angeles, CA 90071-1560 FAX: 213-891-8763 Robert J. Dehney, Esquire Morris, Nichols, Arsht & Tunnell LLP Chase Manhattan Centre, 18th Floor 1201 North Market Street Wilmington, DE 19899-1347 Fax Number: 302.425.4673

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Office of the U.S. Trustee 844 King Street, Suite 2207 Wilmington, DE 19801 FAX: 302-573-6497

Dated: December 22, 2008

/s/ David L. Pollack David L. Pollack, Esquire Jeffrey Meyers, Esquire BALLARD SPAHR ANDREWS & INGERSOLL, LLP 51ST Fl - Mellon Bank Center 1735 Market Street Philadelphia, Pennsylvania 19103 Telephone: (215) 864-8325 Facsimile: (215) 864-9473 Email: pollack@ballardspahr.com meyers@ballardspahr.com Counsel for Kimco Realty Corporation

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