Commercial Real Estate Bankruptcies and Restructurings

Samuelson Law handles commercial real estate restructurings and bankruptcies. What distinguishes Samuelson Law, from most other restructuring/bankruptcy law firms, is that Samuelson Law focuses upon the transactional aspects of bankruptcies, rather than just the litigation. The same attorney formulates forbearance or workout agreements, pre-packaged bankruptcies, bankruptcy sale/bidding programs or contracts, and plans of reorganization in light of the realities of commercial real estate practice.

Samuelson Law’s restructuring/bankruptcy clients are mainly:

  • Single asset commercial real estate LLC’s or members thereof
  • Commercial real estate lenders and landlords in dealing with loan or lease defaults and restructurings
  • “White knights” and other investors in, or purchasers of, distressed commercial real estate, mortgages, or LLC membership interests
  • Developers and other businesses that qualify for Subchapter V
  • Real estate owner/operators considering sale-leasebacks
However, as a commercial real estate law boutique, Samuelson Law does not handle (a) bankruptcies of persons or individuals unless in connection with commercial real estate or a business; (b) workouts of contracts or loans for primarily residential real estate; or (c) foreclosures, landlord/tenant disputes, or evictions of, over or from residential properties.

Recent Issues
  • Trying to Avoid Being Characterized as “Single Asset Real Estate”. Subchapter V (of Chapter 11, of the Bankruptcy Code, i.e. the Small Business Reorganization Act) is designed to simplify the Chapter 11 process, to give the debtor greater powers to get a plan of reorganization approved by the Court, and to make the Bankruptcy less expensive. By contrast, the single asset real estate statutes are not debtor-friendly. The CARES Act raises the eligibility limit under Subchapter V to $7,500,000 for a year, but still does not allow “single asset real estate” debtors to take advantage of Subchapter V. That has increased the incentive for otherwise qualified real estate owners to try to find ways to convert themselves from “single asset real estate” debtors into “small business debtors”. See what happens when the mortgagor does not require the debtor to be a special purpose entity: In re: Moore Properties of Person County, LLC, 68 Bankr.Ct.Dec. 123, 2020 WL 995544, Memorandum Order (M.D.N.C., 2/28/2020).
  • COVID-19 or Coronavirus as a "Never let a crisis go to waste" event. A tenant has been suffering, for years, under a burdensome lease and requirements contract. COVID-19 has now pushed that tenant into qualifying to file bankruptcy. Is this that tenant's opportunity to get out of that lease and contract?
  • Subchapter V's 3/27/2021 deadline.
  • Unique Issues LLCs and Partnerships Face in Bankruptcy.
  • Trying to Avoid Having Loan and Lease Workout Agreements Being Subsequently Clawed-Back as Fraudulent Transfers or Voidable Preferences.
  • Foreclosure Defenses; Eviction Defenses; and Cycling Back and Forth Between Foreclosure (or Landlord/Tenant) Court and Bankruptcy Court.
  • Piercing the Corporate Veil. Managerial control and lack of separate capitalization as key issues.
  • Whether Self-Help is a Good Idea, to Evict Commercial Tenants, Pre-Bankruptcy. Self-help, to evict a commercial tenant in default, may be prohibited by statute or be deemed to be a misdemeanor breach of the peace, even where the subject lease allows it. At the least, it risks generating fraudulent transfer and voidable preference challenges and physical retaliation and break-ins.
  • Do Secured Lenders Have to Worry about the Debtor’s Attorneys’ Fees?
  • Defenses Against Spousal Guaranties.
  • Force Majeure Clauses. In most of the recent court decisions, Tenant's have not benefited from force majeure clauses or common law in connection with COVID-19 or coronavirus shutdowns or losses.  This has put a heavy emphasis upon negotiating such clauses in new leases, sales contracts, and construction contracts.