Legal Definitions - single-asset real estate

Single-asset real estate, in the context of bankruptcy, refers to a single piece of business property (excluding small residential properties) that generates nearly all of a debtor's gross income. This property must also have aggregate, secured debts totaling $4 million or less.

In the context of bankruptcy law, single-asset real estate refers to a specific type of commercial property that meets several criteria. It is a single piece of real property (excluding residential properties with fewer than four units) that a debtor operates for business purposes. This property must generate substantially all of the debtor's gross income, and it must carry a total of $4 million or less in aggregate, liquidated, noncontingent secured debts.

• Example 1: The Small Office Building

  Imagine a sole proprietor who owns a single, small office building. They lease out all the individual office suites to various small businesses like a law firm, an accounting service, and a marketing agency. The rental income from this building is the primary source of the proprietor's entire gross income. The building has a mortgage and a line of credit secured against it, totaling $2.5 million.

  This scenario illustrates single-asset real estate because the proprietor's business revolves around one commercial property (the office building), which generates nearly all their income, and the total secured debt is below the $4 million threshold. It's not a small residential property.

• Example 2: The Neighborhood Strip Mall

  Consider an individual investor whose entire business portfolio consists of one small strip mall. This strip mall houses a few different businesses, such as a dry cleaner, a local pizzeria, and a small boutique. The investor's income is almost exclusively derived from the rent collected from these commercial tenants. The investor has a mortgage and other secured loans on the strip mall amounting to $3.8 million.

  Here, the strip mall functions as a single piece of real estate operated for business. It provides the investor with substantially all their income, and the aggregate secured debt falls within the specified limit, making it a clear example of single-asset real estate under bankruptcy rules.