Nuovo Ciao-Di LLC and George E. Shoup III
MEMORANDUM OPINION AND ORDER
APPEARANCES:
Counsel for Nuovo Ciao-Di LLC
480 Mamaroneck Avenue
Harrison, NY 10528
By: H. Bruce Bronson, Esq.
FRIEDBERG P.C.
Counsel for DCC Vigilant, LLC
10045 Red Run Boulevard, Suite 160
Baltimore, MD 21117
By: Jeremy Friedberg, Esq.
BODNER LAW PLLC
Counsel for 88 Washington Place Condominium
55 Cherry Lane, Suite 101
Carle Place, NY 11514
By: Jonathan S. Bodner, Esq.
SHANNON ANNE SCOTT, ESQ.
Office of the United States Trustee
Alexander Hamilton Custom House
New York, NY 10004
JOHN P. MASTANDO III
UNITED STATES BANKRUPTCY JUDGE
This case presents the question of whether two contiguous commercial condominiums located in Greenwich Village—which condominiums have the same owner and are subject to the same mortgage, but have different tenants, different commercial uses, differеnt plans for future sale and development and are listed as separate lots by the NYC Department of Finance—satisfy the definition of “single asset real estate” under
BACKGROUND
Creditor DCC Vigilant, LLC (“DCC“) filed a motion on February 28, 2023 seeking an order amending the petition of Debtor Nuovo Ciao-Di, LLC (the “Debtor“) and designating Debtor as a “single asset real estate” debtor pursuant to
Debtor commenced its case by filing a petition (the “Petition“) [Dkt. No. 1] under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code“) on January 20, 2023. In the Petition, Debtor idеntified itself as a corporation but did not check the box describing Debtor‘s business as “Single Asset Real Estate (as defined in 11 U.S.C. § 101(51B)).” Debtor also filed a declaration (the “Debtor Declaration“) [Dkt. No. 7] pursuant to Rule 1007-2 of the Federal Rules of Bankruptcy Procedure. Debtоr is the owner and operator of two contiguous commercial condominium units located at 350 Sixth Avenue in Greenwich Village, NY 10011 (the “Properties“). [Debtor Declaration ¶ 3; Motion ¶ 7]. In its Schedules, Debtor lists its real property assets as the Properties, with one unit located on the first floor and one unit on the second floor. [Petition]. Debtor‘s other listed assets are a defaulted security deposit held by Debtor‘s parent company Ciao Di Restaurant Corporation in the amount of $75,000.00, $95.00 held in a checking account with J.P. Morgаn Chase
DCC is the owner by assignment and holder of a note with a principal amount of $15,850,000 and mortgage secured by a first-priority lien on the Properties along with substantially all of Debtor‘s personal property. [Motion ¶¶ 5–6]. In its Motion, DCC contends that Debtor satisfies the definition of “single asset real estate” under
Additionally, DCC argues that Debtor‘s units should be considered either a “single property” or a “single project” under
Second, DCC argues that, if the Court does not find that the Properties constitute a “single property,” the Properties should be considered a “single project.” [Id. ¶ 17]. DCC states that Debtor‘s ownership of the units is analogous to the ownership of an office building or shopping mall, where separately rented units are still pieces of the same common plan. [Id. ¶ 22]. DCC also argues that the proximity of the units, the single deed and the single mortgagе weigh in favor of finding that the Properties constitute a “single project.” [Id. ¶¶ 23–24]. DCC contends that, as part of its plans for the sale of the Properties, Debtor has contemplated subdividing the first-floor unit and selling part of the unit with the second-floor unit. [Id. ¶ 25]. Finally, DCC states that Debtor is unlikely tо be able to produce a confirmable plan given the lack of tenants or prospective tenants. [Id. ¶ 26].
Debtor‘s Objection asserts that the Properties are two separate entities that should not be considered a “single property” or “single project.” [Objection ¶ 9]. In response to DCC‘s contention that the units constitute a “single property,” Debtor states that the “single project” analysis is more appropriate because the Properties are composed of multiple parcels. [Id. at 2]. Debtor also contends that no common plan or purpose exists for the Properties, and, therefore, they are not a “single project.” In support of this argument, Debtor argues that it treats the units separately because each unit has unique fеatures—the first-floor unit is subject to an easement owned by MTA and the second-floor unit is designated as a “community facility” by the City of New York. [Id. ¶¶ 6, 8]. As further evidence that Debtor treats the units separately, Debtor notes that the units can be valued separately, with the first-floor unit vаlued at $22,000,000.00 and the second-floor unit valued at $8,550,000.00, and that the Debtor Declaration contemplates the separate sale of the two units. [Id. ¶¶ 4–7; Declaration ¶ 12]. Debtor also refers to the Application Authorizing the Retention of Compass as Broker for thе Sale of Debtor‘s Properties and the attached Declaration of Adelaide Polsinelli (the “Polsinelli Declaration“) [Dkt. No. 13]. [Objection ¶ 7]. In the Polsinelli Declaration, the broker, Adelaide Polsinelli (“Polsinelli“), contemplates selling the Properties both together and separately. [Polsinelli Declaration]. Furthermore,
The Court held a hearing on the Motion on March 23, 2023, at which both DCC and Debtor appeared.
DISCUSSION
A. Legal Standard
As part of the Bankruptcy Reform Act of 1994, Congress added
The Bankruptcy Code 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 who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.
When determining whether multiple properties constitute a single project, “the mere fact of a common ownership, or even a common border, will not suffice.” In re McGreals, 201 B.R. at 742-43. Instead, “the properties must be linked together in a common plan or scheme involving their use.” Id. at 742. Courts should not consider the business activities of tenants when determining whether multiple parcels constitute a “single project.” In re JJMM Int‘l Corp., 467 B.R. at 278. Instead, the predominant consideration is “whether the debtor treats its property as a single project or property by virtue of a common plan or purpose.” See id. Courts may consider proximity and whether the parcels were conveyed under a single deed subject to a single mortgage to determine whether multiple parcels are a “single project.” See In re 218 Jackson LLC, 2021 WL 3669371, at *4.
DCC relies on In re Hassen Imports Partnership, in which the court utilized a non-exclusive list of four factors to determine whether a “single project,” as defined in
B. Analysis of the Properties as Single Asset Real Estate
In the instant case, Debtor conducts no substantial business other than the business of operating the Properties, Debtor is not a family farmer and the Properties are not residential real property under
Here, the two units are not a “single property.” Although the units are adjacent and were conveyed under a single deed and mortgage, they are still separate parcels with differing lot numbers. In re JJMM Int‘l Corp., 467 B.R. at 277. These parcels can be valued, used and sold independently of each other. [Debtor Declaration ¶ 3, 12]. The units also each possess unique characteristics, as the first-floor unit is subject to an easement and the second-floor unit is designated as a “community facility.” [Polsinelli Declaration, Schedule 2]. Therefore, the Court finds that units do not constitute a “single property.” See In re McGreals, 201 B.R. at 741.
As the units are not a “single property,” the Court must analyze whether the units constitute a “single project.” The Court finds that DCC has not satisfied its burden of establishing that the Properties are linked by a common plan or scheme. Although Debtor concedes that it purchased the condominium units under a single deed subject to a single mortgage, Debtor has not demonstrated any plans to combine the propertiеs or use them for a single purpose. See In re McGreals, 201 B.R. at 742; [Debtor Declaration ¶ 12–14]. As DCC acknowledges in its Motion, Debtor previously rented the second-floor unit separately from the first-floor unit. In addition, the Properties currently lie vacant and the vacancies began at different times. [Motion ¶ 13]. Thus, in contrast to the parcels at issue in JJMM, the Properties have not been leased to related entities. See In re JJMM Int‘l Corp., 467 B.R. at 278 (holding that three adjacent properties that were leased to three separate businesses all owned by the dеbtor‘s principal constituted a “single project“). In addition, the first-floor unit is subject to an easement and the second-floor unit is designated as a
DCC also contends that the factors of the “single project” test used by the court in In re Hassen Imports Partnership are satisfied in this case. See 466 B.R. at 507. While the Properties were conveyed to Debtor under а single deed subject to a single mortgage and the Properties are adjacent, these factors are not determinative. See id. at 508. Debtor‘s current use of the Properties does not demonstrate a common scheme, rendering the other factors irrelevant under the Hassen test. See id. Debtor‘s plans for future development or sale of the Properties also weigh against finding the units to constitute a “single property,” as Debtor is currently attempting to sell one of the Properties and each unit has unique characteristics. See id. Since the Properties are neither a “single property” nor a “single project,” the Properties do not fall within the definition of “single asset real estate” in
CONCLUSION
Based on the foregoing, the Motion to designate Debtor as a “single asset real estate” debtor under
It is so ORDERED.
Dated: May 19, 2023
New York, New York
/s/John P. Mastando III
HON. JOHN P. MASTANDO III
UNITED STATES BANKRUPTCY JUDGE