Bankruptcy Judge John P. Mastando, III of New York narrowly defined “single asset real estate.” Some of the language in his May 19 opinion might even be cited for the proposition that commercial real estate with two tenants isn’t “single asset real estate.”

However, the property was a condominium, allowing the debtor to sell or finance each of the two units separately. So, the holding may not be so broad after all.

The debtor owned a two-story, two-unit condominium in Manhattan. The property was subject to one mortgage and had been conveyed to the debtor in one deed. The ground-floor unit had been vacant for five years, and the second-floor unit had been vacant for two years. They had been leased to different tenants.

The downstairs unit had an easement in favor of the New York City transportation authority, and the upstairs unit had been declared a “community facility” by the city. Each unit had a different lot number. In chapter 11, the debtor was planning to sell or develop the units separately.

The ground-floor unit was worth some $22 million, while the upstairs unit had a value of maybe $8 million.

The lender filed a motion asking Judge Mastando to declare the property to be “single asset real estate” under Section 101(51B). Were the judge to agree with the lender, Section 362(d)(3) would terminate the automatic stay if the debtor did not begin monthly payments or file a plan within 90 days of a chapter 11 filing that has a “reasonable possibility” of confirmation within a “reasonable time.”

Judge Mastando denied the motion, finding that the property was neither a “single property” nor a “single project.”

Section 101(51B) defines “single asset real estate” as

real property constituting a single property or project, other than residential real property with fewer than 4 residential units, which generates substantially all of the gross income of a debtor . . . on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.

Judge Mastando said that the case presented an issue of fact and that the lender carried the burden of showing that it was a “single property or project.” He first analyzed whether the condominium units were a “single property.”

Having common ownership or a common border isn’t enough by itself to make it a “single property.” Judge Mastando said that the “predominant consideration” was whether the owner had a common plan or purpose for the property.

Judge Mastando said that the units had different lot numbers and could be valued, used and sold separately. Each unit had “unique characteristics,” he said. The bottom floor was subject to an easement, and the second floor was a “community facility.”

The debtor had no plans to combine the two units or use them for a single purpose, Judge Mastando said. The units became vacant at different times; they had different tenants and different values, and the debtor treated both units separately, he said.

Judge Mastando held that the property was not a “single property” because the units were not “linked by a common plan or scheme.”

Separately, Judge Mastando analyzed whether the property was a “single project.”

Although the units were conveyed by one deed and had one mortgage, Judge Mastando said that the “Debtor’s current use of the Properties does not demonstrate a common scheme.” The debtor’s plans for future development or sale also weighed against a finding of “single project,” the judge said, because the debtor was attempting to sell one unit, and “each had unique characteristics.”

Because the property was neither a “single property” nor a “single project,” Judge Mastando denied the motion to call the debtor the owner of “single asset real estate.”