HAYNES AND BOONE, LLP 1221 Avenue of the Americas, 26th Floor New York, NY 10020 Telephone: (212)

659-7300 Facsimile: (212) 918-8989 Lenard M. Parkins (NY Bar #4579124) John D. Penn (NY Bar # 4847208, admitted pro hac vice) Mark Elmore (admitted pro hac vice) Attorneys for Midland Loan Services, Inc. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al., Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

MIDLAND LOAN SERVICES, INC.S LIMITED OBJECTION TO DEBTORS MOTION FOR THE ENTRY OF AN ORDER ESTABLISHING PROCEDURES FOR INTERIM COMPENSATION AND REIMBURSEMENT OF EXPENSES FOR PROFESSIONALS AND OFFICIAL COMMITTEE MEMBERS [Docket No. 18] Midland Loan Services, Inc. (Midland)1 hereby files its objection (the Objection) to the Debtors Motion for the Entry of an Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses for Professionals and Official Committee Members (the Fee Procedures Motion) and respectfully represents:

Midland is the special servicer pursuant to the Pooling and Servicing Agreement dated as of August 13, 2007 (the Special Servicing Agreement) for that certain secured loan in the amount of not less than $825,402,542 plus interest, costs and fees (the Fixed Rate Mortgage Loan) owed by certain of the above referenced Debtors. The Fixed Rate Mortgage Loan was made pursuant to that certain loan agreement dated as of June 29, 2007 (as amended, the Fixed Rate Mortgage Loan Agreement), and is evidenced by (i) a certain Replacement Note A-1 and (ii) a certain Replacement Note A-2, each dated as of August 9, 2007, and each in the original principal amount of $412,701,271. Replacement Note A-1 was assigned to LaSalle Bank National Association as trustee for the holders of the LB-UBS Commercial Mortgage Trust 2007-C6. Bank of America, N.A. is the successor-in-interest to LaSalle Bank National Association (the Fixed Rate Trustee). Replacement Note A-2 is currently held by the trustee for the holders of the LB-UBS Commercial Mortgage Trust 2007-C7.
LIMITED OBJECTION TO MOTION TO APPROVE FEE PROCEDURES F-283676 Page 1 of 6

1.

Generally, Midland has no opposition to creating reasonable procedures for

submitting and reviewing fee requests; however, the proposed procedures described in the Fee Procedures Motion fall short of creating reasonable procedures. 2. Midland has the following objections to the mechanics of the proposed

procedures described in the Fee Procedures Motion: a. Holding a secured claim in excess of $825 million, Midland is by far the

largest creditor in these cases and a larger percentage of its cash collateral is proposed to be used to fund these cases than any other creditor. Yet, the proposed procedures do not include Midland among the Notice Parties who would be allowed to review and object to fee requests.2 Midland must be included as a Notice Party.3 b. The proposed Order regarding the Fee Procedures Motion, if entered,

would also provide that [a]ny party may object to requests for payments made pursuant to this Order on the grounds that the Debtors have not: timely filed monthly operating reports, or remained current with their administrative expenses and 28 U.S.C. 1930 fees, or a manifest exigency exists by seeking a further order of this Court; otherwise, this Order shall continue and shall remain in effect during the pendency of the Chapter 11 Cases. Proposed Order at 8. The

The definition of Notice Parties in the Fee Procedures Motion (paragraph 8(a)) and its corresponding definition in the proposed Order (paragraph 2(a)) provides for notices to be provided only to (a) the Debtors, (b) the attorneys for the Debtors, (c) counsel for any committee and (d) the U.S. Trustee. The definition of Notice Parties must be revised to include Midland because the procedures provide that only Notice Parties are allowed to object to monthly fee requests.

For comparison, the similar procedure in In re General Growth Properties, Inc., Case No. 0911977, provided for monthly fee requests to be filed with the Court and allowed any party to object. Interim Fee Procedures Order, Docket No. 614, sub-paragraphs (b) and (d). Paragraph (d) provides, Any party in interest or the Court shall have at least fifteen (15) days after filing of party in interest receiving the Monthly Statement to review the statement and, if the Notice Party objects to the compensation or reimbursement sought in a particular statement, to serve upon the Professional to whose Monthly Statement the party in interest objects and the other Notice Parties a written Notice of Objection to Fee Statement, setting forth the nature of the objection and the amount of fees or expenses at issue.

LIMITED OBJECTION TO MOTION TO APPROVE FEE PROCEDURES F-283676

Page 2 of 6

relief that would be afforded by paragraph 8 of the proposed Order is not requested in the Fee Procedures Motion. Also, it might be argued that paragraph 8 would limit objections to the three items listed therein (timely operating reports, payment of current administrative expenses or manifest exigency). If the paragraph 8 is not deleted, it should instead provide that Any party may object to requests for payments made pursuant to this Order on any grounds for objecting to interim fee applications, including that the Debtors have not . . . . c. Finally, in actually implementing the fee procedures, Midland suggests a

streamlined approach that establishes a date certain for filing such requests and another date certain for objecting thereto. The proposed procedures for monthly draws and objections create a series of rolling deadlines to review and object to monthly fee and reimbursement requests. The process could be greatly simplified and ease the administrative burden on the Court and parties by setting one date as the monthly deadline for submitting requests and another date as the deadline for objecting. An example would be to set the twentieth of each month as the deadline for submitting requests for fees and expenses incurred in the prior month and the tenth day of the following month as the deadline to object. By doing so, the Court and parties could rely on those two deadlines for all requests instead of having to separately calendar and track two deadlines for each request. All requests would be due on the same date and all objections would be due by the same deadline. 3. As stated above, the Midland Cash Collateral would be the primary cash source of

the Debtors in these cases.4 As noted previously in its Objection [Docket No. 36] to the Debtors

The Fixed Rate Mortgage Loan is secured by cross-collateralized and cross-defaulted first priority mortgages, liens and security interests on forty-five (45) hotel properties and their contents and assets related thereto (collectively, the Midland Properties) and the other collateral, including all cash collateral as such term has meaning under section 363 of the United States Bankruptcy Code, generated by the Debtors hotel and business operations with respect to the Midland Properties, as set forth in the Fixed Rate Mortgage Loan Agreement. The Midland cash collateral (the Cash Collateral)is comprised of all of the cash collateral as such term has meaning under section 363 of the United States Bankruptcy
Page 3 of 6

LIMITED OBJECTION TO MOTION TO APPROVE FEE PROCEDURES F-283676

cash collateral motion [Docket No. 13], Midland does not consent to the use of the Cash Collateral as currently contemplated by the Debtors and specifically objects to the use of the Cash Collateral as the source for the payment of professional fees incurred in (a) the pursuit of the plan of reorganization (the Lehman / Apollo Plan) as described in the Declaration of Dennis Craven [Docket No. 33], and embodied in the proposed plan support agreement (the PSA/Lock-Up) between the Debtors and Lehman ALI, Inc. [Docket No. 15] or (b) otherwise to support any effort to cramdown Midlands secured claim, including as described in the Lehman / Apollo Plan. As fee requests are submitted, Midland will review each such request and anticipates consenting to the use of the Cash Collateral solely for the payment of fees incurred in administering these Chapter 11 cases. To be abundantly clear, Midland will not consent to the use of the Cash Collateral for payment of fees incurred in the Debtors prosecution of the Lehman / Apollo Plan or other efforts to cramdown Midlands secured position. 4. In a typical carve-out situation, a debtor (or other estate professional) is not

entitled to use a secured creditors cash collateral to finance efforts to challenge a secured lenders claims or interests in its collateral. Likewise, Midland specifically objects to the Debtors professionals, as estate professionals, using (and effectively surcharging) Midlands cash collateral to advocate the Lehman Plan, which is a direct challenge to Midlands secured position. Flagstaff Food Service Corp., 739 F.2d 73 (2d Cir. 1984) (holding that a secured creditors collateral may not be surcharged unless there is a direct benefit to the secured creditor); In re 680 Fifth Ave. Associates, 154 B.R. 38, 43 (Bankr. S.D.N.Y. 1993) (discussing the scenario where estate professionals must forego compensation when there are no unencumbered assets). Midland objects to the Fee Procedures Motion to the extent it seeks to
Code, generated before or after the petition date, from the Midland Properties, including, but not limited to, all profits, rents or proceeds of the Midland Properties.

LIMITED OBJECTION TO MOTION TO APPROVE FEE PROCEDURES F-283676

Page 4 of 6

implement fee procedures providing for the use of its cash collateral without its express consent for the payment of estate professional fees incurred in pursuing approval of the PSA/Lock-Up, the Lehman / Apollo Plan or the cramdown of its claims. See In re Blackwood Associates, LP, 153 F.3d 61, 68 (2d Cir. 1998) (consent cannot be implied or taken lightly). Local Rule 9013-1(a) 5. This pleading includes citations to the applicable rules and statutory authorities

upon which the relief requested herein in predicated and a discussion of their application to this pleading. Accordingly Midland submits that this pleading satisfies Local Bankruptcy Rule 90131(a). WHEREFORE, Premises Considered, Midland prays that the Court will sustain the Objection, revise the proposed Order to include Midland as a Notice Party, revise the procedures for objecting to interim applications, streamline the fee review and approval process, sustain its objection to the use of cash collateral to fund professional fees and expenses without Midlands consent and grant Midland such other and further relief to which Midland might show itself justly entitled. Dated: August 5, 2010 New York, New York HAYNES AND BOONE, LLP

/s/ Lenard M. Parkins Lenard M. Parkins (NY Bar #4579124) Mark Elmore (admitted pro hac vice) 1221 Avenue of the Americas, 26th Floor New York, NY 10020-1007 Telephone No.: (212) 659-7300 Facsimile No.: (212) 884-8211 - and

LIMITED OBJECTION TO MOTION TO APPROVE FEE PROCEDURES F-283676

Page 5 of 6

John D. Penn, Esq. (NY Bar # 4847208, admitted pro hac) Haynes and Boone, LLP 201 Main Street, Suite 2200 Fort Worth, Texas 76102 Telephone No.: (817) 347-6610 Facsimile No.: (817) 348-2300

ATTORNEYS FOR MIDLAND LOAN SERVICES, INC.

LIMITED OBJECTION TO MOTION TO APPROVE FEE PROCEDURES F-283676

Page 6 of 6