Real estate investor DBSI files liquidation plan

WILMINGTON, Delaware (Reuters) - Failed U.S. real estate investor DBSI Inc presented a liquidation plan to bankruptcy court on Monday that pays less than 20 cents on the dollar for about $800 million in claims.

DBSI, based in Meridian, Idaho, was a investment firm that specialized in tenant-in-common arrangements and suffered from the crash in commercial real estate that eventually exposed improper uses of corporate cash.

The company filed for bankruptcy in late 2008 having arranged more than 200 tenant-in-common or TIC arrangements. Under the arrangements, DBSI would buy shopping malls, apartment buildings and offices and then sell interests in the property to investors.

DBSI would then lease the property from the investors and sublease it to retailers or as office space as well as manage the property.

However, a court-appointed examiner uncovered that the company was raising money from investors who thought they were purchasing stakes in real estate development projects. Instead DBSI's management was using the money to plug daily cash needs.

"The global enterprise did not generate a profit for investors and was kept afloat for many years by an ever-increasing volume of new investor money and heavily-leveraged real estate transactions," said the liquidation plan.

"This self-feeding cycle continued until the dislocation in the real estate, credit and other financial markets, stymied the debtors' ability to raise sufficient new capital from investors," the plan said.

The company proposed creating liquidating trusts and estimates that most creditors will recover only 18.5 percent of what they are owed. Several large groups of creditors will recover 6 percent of their claims or nothing at all, according to the plan.

The case is DBSI Inc, U.S. Bankruptcy Court, District of Delaware, No. 08-12687.

(Reporting by Tom Hals; Editing by Tim Dobbyn)