Bankruptcy Remote Entities in Commercial Real Estate Transactions

November 2015

Publication| Real Estate Services| Corporate Trust & Agency Services| Bankruptcy & Corporate Restructuring

Bankruptcy remote entities (BREs) are often used in commercial real estate financing transactions for loans exceeding a certain threshold amount, typically $10 million to $20 million (depending on the lender). To limit certain risks associated with a borrower’s bankruptcy filing, lenders often require borrowers to be BREs, which are separate legal entities that take title to the real property (and related personal property) securing the loan extended to the BRE.

Lenders typically prefer BRE borrowers to be Delaware limited liability companies (LLCs), and in some cases Delaware limited partnerships (LPs) or corporations, because Delaware entities may provide protections unavailable under the organizational laws of other states.

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