Opinion

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

FOR PUBLICATION

In re:

Chapter 11

25 MY RENTCO LLC, et al.,1

(Subchapter V)

Debtors. Case No. 25-12280 (MG)

MEMORANDUM OPINION AND ORDER SUSTAINING CREDITOR’S OBJECTION TO

DEBTORS’ DESIGNATION TO PROCEED AS SMALL BUSINESS DEBTORS UNDER

SUBCHAPTER V

A P P E A R A N C E S:

GOLDBERG WEPRIN FINKEL GOLDSTEIN LLP

Co-Counsel for Tribeca Space Managers, Inc.

125 Park Ave., 12th Floor

New York, NY 10017

(212) 221-5700

By: Kevin J. Nash, Esq.

RIVKIN RADLER LLP

Co-Counsel for Tribeca Space Managers, Inc.

477 Madison Avenue, Suite 410

New York, NY 10022

(516) 357-3000

By: Jeremy Honig, Esq.

Kenneth Murphy, Esq.

Matthew V. Spero, Esq.

TARTER KRINSKY & DROGIN LLP

Counsel for Tribeca Mews Ltd. and 25 My RentCo LLC

1350 Broadway, 11th Floor

New York, NY 10018

(212) 216-8000

By: Scott S. Markowitz, Esq.

Rocco A. Cavaliere, Esq.

Jacob B. Gabor, Esq.

1 Pursuant to an order entered by this Court on October 21, 2025 (ECF Doc. # 14), the above-captioned case

was procedurally consolidated with In re Tribeca Mews Ltd., Case No. 25-12281.

MARTIN GLENN

CHIEF UNITED STATES BANKRUPTCY JUDGE

This case was filed on October 16, 2025, on behalf of two debtors, 25 My RentCo LLC

(“RentCo”), Case No. 25-12280 (MG), and Tribeca Mews Ltd. (“Tribeca Mews”), Case No. 25-

12282 (MG) (together, the “Debtors”). The motion for joint administration was granted on

October 21, 2025. (ECF Doc. # 14.) The bankruptcy petitions designated the cases under

Subchapter V of Title 11. The largest creditor, Tribeca Space Managers, Inc. (the “Board”) is

the Board of Managers of the condominium project for which each one of the debtors have been

and currently are sponsor. The Board has filed an unliquidated claim of $36 million. It filed a

motion to dismiss the cases, which the Court has denied in part. (ECF Doc. # 69.)

The Board also filed an objection to the designation of the cases under Subchapter V,

arguing that the Debtors’ cases are “single asset real estate” (“SARE”) cases excluded from

eligibility for Subchapter V under section 101(51D) of the Code. (“Objection,” ECF Doc. # 42.)

The Debtors filed a response to the Objection (“Response,” ECF Doc. # 56), and the Board filed

a reply (the “Reply,” ECF Doc. # 63). The issue of the designation under Subchapter V is an

important issue in this case since the cramdown rules for Subchapter V cases may permit these

debtors to confirm a plan that allows the equity owners to retain their interest even though

unsecured creditors would recover less than the full amount of their claims and reject the plan.

This opinion addresses only the eligibility of the Debtors to proceed with this case under

Subchapter V. For the reasons explained below, the Court concludes that the Debtors are SARE

debtors and therefore ineligible to proceed as small business debtors under Subchapter V.

I. BACKGROUND

A. Prior Case History

The dispute between the Debtors and the Board had its start over a decade ago. In March

2006, Tribeca Mews became the sponsor of the sale of condominium units in a building located

at 25 Murray Street, New York, New York (the “Building”) pursuant to an offering plan (the

“Offering Plan”). (Declaration of Evan R. Scheiber, the “Schieber Decl.,” Adv. Pro. ECF Doc #

2-3 ¶ 2.) Tribeca Mews reconstructed the Building into a mixed use condominium tower

containing 74 residential units, 17 commercial units, one (1) superintendent’s unit, a cellar and a

sub-cellar. (Id. ¶¶ 4-5.) The Offering Plan required Tribeca Mews to regularly renew temporary

certificates of occupancy (“TCO”) until ultimately obtaining a permanent certificate of

occupancy (“PCO”). (Id. ¶ 6.) Prospective purchasers were informed that the building would be

under a TCO for a maximum of two (2) years before it would receive a PCO. (Id. ¶ 7.) Tribeca

Mews began to sell units July 1, 2008 – it failed to acquire a PCO on or before July 10, 2010, the

two-year deadline imposed by the Offering Plan. (Id. ¶¶ 9, 11.) By July 2011, Tribeca Mews

had sold all but ten (10) units in the Building and ultimately transferred seven (7) of the units to

RentCo, an entity organized by Tribeca Mews and owned by Tribeca Mews’ principals, for no

consideration. RentCo succeeded Tribeca Mews as sponsor. (Id. ¶ 12-13). RentCo continues to

control six (6) of the units (the “Units”). (Declaration of Brad Thurman, the “Thurman Decl.,”

ECF Doc. # 7 ¶ 6.) The Units are currently rented and/or occupied. (Id.) The Building remains

without a PCO – it had been covered by 24 TCOs between July 2008 and May 2021. (Schieber

Decl. ¶¶ 24-25). The Building has not had a TCO since May 2021. The absence of a PCO or

TCO allegedly substantially impairs the value of all of the units within the project, as well as the

ability of the unit owners to refinance or market their property.

Due to issues regarding the certificates of occupancy and alleged deficiencies with the

building, the Board commenced a lawsuit in New York State Court on September 23, 2013,

Tribeca Space Managers Inc. v. Tribeca Mews Ltd., et al., (Index No. 653292/2013, NY County)

(the “State Court Action”). After a mistrial in 2017 and a number of failed settlement

negotiations, the case was set for trial in New York State Supreme Court on October 20, 2025.

(Id. ¶ 31.) The bankruptcy cases were filed on October 16, 2025, staying the State Court Action.

The Debtors removed the State Court Action to this Court (Case No. 25-01143), which the Board

shortly after moved to dismiss (Case No. 25-01143, ECF Doc. # 3).

B. The Board’s Objection to Subchapter V Status

The Board argues that the Debtors are ineligible to proceed under Subchapter V. Section

101(51D) of the Code “exclude[s from Subchapter V] a person whose primary activity is the

business of owning single asset real estate . . . .” 11 U.S.C. § 101(52D). The Debtors argue that

they do not fall within the exclusion. The parties also dispute who has the burden: the Debtors

argue that the Board has the burden of showing that Debtors are SARE debtors; the Board argues

that the Debtors have the burden of showing they are eligible for Subchapter V.

The SARE definition in the Code lays out three requirements for a debtor to be

considered a SARE:

The term “single asset real estate” means 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.

11 U.S.C. § 101(51B); see also Ad Hoc Group of Noteholders v. Pacific Lumber Co. (In

re Scotia Pacific Co., LLC), 508 F.3d 214, 220 (5th Cir. 2007) (noting that the definition

sets out three requirements).

The Board argues that the six Units owned by RentCo generate substantially all of

RentCo’s gross income and the leasing of the Units is the extent RentCo’s business

operations. (Opposition ¶ 16.) The Board argues that the six Units owned by RentCo

should be considered as part of the overall “project” as defined by section 101(51B), as a

debtor can still be considered a SARE debtor if it operates multiple pieces of real estate if

they are a single project. (Id. ¶¶ 16-17 (citing In re Vargas Realty Enters. Inc., 2009 WL

2929258, at *4 (Bankr. S.D.N.Y. July 23 2009).)

The Board relies on two cases to support its argument. See In re Amerinvest,

LLC, 670 B.R. 40 (Bankr. E.D. Va. 2025) and In re Hassen Imps. P’ship, 466 B.R. 492

(Bankr. C.D. Cal. 2012). The cases enumerate a list of factors to consider in determining

whether multiple properties constitute a single project. Did the debtor have a “common

plan or purpose for the property?” Courts examine “(1) the use of the properties; (2) the

circumstances surrounding the acquisition of the properties; (3) the location of the

properties and proximity of the properties to one another; and (4) any plans for future

redevelopment, sale or abandonment of the properties.” In re Amerinvest, LLC, 670 B.R.,

at 46. In Amerinvest, the key aspect of the analysis in finding the debtor was a SARE and

therefore not eligible for Subchapter V was the use of the property—three parcels of land,

and the debtor’s “common plan” to rent out the three parcels and collect rent. Id. at 47.

The Board argues that the Offering Plan operates as the “common plan” governing the

use of the Units as it sets out that the Units will be leased out until they can be sold.

(Opposition ¶ 22.)

Finally, the Board distinguishes this case from Judge Mastando’s decision in In re

Nuovo Ciao-Di, LLC, 650 B.R. 785 (Bankr. S.D.N.Y. 2023), where he held that two

condominium units with the same owner did not satisfy the definition of a SARE. The

Board argues that the condominiums in Nuovo Ciao-Di had dissimilar uses, distinct

future plans, and unique characteristics which led the court to conclude there was not one

project; the Units in this case are of identical use, part of a common plan, and none of the

Units have unique characteristics. (Opposition ¶ 23; In re Nuovo Ciao-Di, LLC, 650 B.R.

at 780.) The Units are all held by RentCo for leasing and, according to the Board, cannot

be sold due to the continued lack of a PCO for the Building. (Opposition ¶ 23.)

C. Debtors’ Response

The Debtors contest the Board’s characterization of RentCo as a SARE debtor. First,

Debtors dispute that they have the burden of proof, arguing that the “movant bears the burden of

establishing that multiple parcels are a ‘single property or project’” in determining SARE

eligibility. In re Nuovo Ciao-Di, LLC, 650 B.R. at 788 (citing In re 218 Jackson LLC, 2021 WL

3669371, at *3 (Bankr. M.D. Fla. June 3, 2021)).

The Debtors then apply the four factors from In re Hassen, 466 B.R. 492, to support that

the Units are not a single property or project. (Response ¶ 14.) Each unit is separately titled and

could be valued, marketed, or sold without affecting interest in the remaining units – they are all

distinct entities not operated as a single enterprise. (Id. ¶¶ 15-16.) In addition, the Units were

not purchased nor retained pursuant to a single plan; rather the Building was developed and the

units sold over time, with RentCo still retaining ownership over the six units only due to an

inability to sell them. (Id. ¶ 17.) Third, Debtors argue that the proximity of the Units, all of

which are in the Building, is insufficient to prove they are a project. (Id. 18.) Lastly, RentCo has

no intention to retain the Units as part of a unified real estate project, as RentCo’s current

activities involve attempting to obtain the occupancy permits for the Building and working with

the Board on repairs, all of which constitute sponsor-based obligations. (Id. ¶ 19.)

The Debtors additionally argue that even if the Units generate substantially all of the

Debtors’ gross income (the Debtors’ counsel acknowledged at the Hearing the Debtors have no

other source of income), that alone does not satisfy section 101(51B) unless the Debtors’

activities are limited solely to passive property ownership. (Id. ¶ 23 (citing In re Chen

Foundation, 661 B.R. 34, 37 (Bankr. S.D.N.Y. 2024).) Debtors claim that RentCo’s activities

extend “well beyond” passive ownership, as they are involved in fulfilling the outstanding

obligations as building sponsor, including coordinating with the Board’s engineers, architects,

and consultants to address the Building’s deficiencies and securing TCOs. (Response ¶ 25.)

Debtors point to the work they have done litigating the State Court Action as demonstrative of

their ongoing business activities related to the sponsorship of the building and how their current

responsibilities go beyond passive ownership of the Units.

The Debtors look to case law to bolster their points. They believe that the Board is

incorrect in distinguishing this case from In re Nuovo Ciao-Di, 650 B.R. 785, and looking

towards In re Amerinvest, 670 B.R. 40, for support, and that the opposite is truly the case. As in

Nuovo Ciao-Di, RentCo owns separately titled units and remains actively engaged in other

responsibilities besides the passive ownership of the Units. (Id. ¶ 28.) And unlike in

Amerinvest, where the debtor owned the multiple parcels as one effective unit for rental income

and had no other ongoing obligations related to the parcels, the Units are not being held solely

for income generation and RentCo continues to have operations separate from the Units related

to its role as sponsor to the Building. (Id. ¶ 28.)

Additionally, Debtors raise that Tribeca Mews is eligible to elect Subchapter V as they

remain engaged in the commercial and business activities as the original sponsor and have

ongoing obligations under the Offering Plan. This, in addition to their ongoing defense in the

State Court Action, supports a finding that Tribeca Mews “engage[s] in commercial or business

activities” as required under the Code. 11 U.S.C. § 101(51D). The cases cited by the Debtors,

they argue, support reading the requirement broadly and inclusively, and that a debtor can be

Subchapter V eligible through winding down and addressing liabilities, even if it no longer

maintains revenue generating operation: “[T]he kinds of activities that are associated with a

business that is no longer operating – but is still pursuing and defending claims and otherwise

engaged in winding up its activities – can amount to ‘business or commercial activities’ for

purposes of Subchapter V eligibility.” In re Fama-Chiarizia, 655 B.R. 48, 62 (Bankr. E.D.N.Y.

2023).

D. The Board’s Reply

The Board notes at the outset of its reply that it is the Debtors that carry the burden of

proof on their eligibility because they have claimed a small business designation. See, In re

Fama, 655 BR 648, 658 (Bankr. E.D.N.Y. 2023) (“[I]f the debtor’s election to proceed under

Subchapter V is challenged, the debtor bears the burden to show that it is, in fact, eligible to

proceed in that way . . . . [T]he vast majority of courts addressing the issue have found that the

debtor bears the burden of proof to establish eligibility to proceed under Subchapter V. This is

consistent with the rule that courts apply in connection with eligibility to proceed under other

chapters.”) (internal quotation marks and citations omitted); In re Hillman, 2023 WL 3804195, at

*3 (Bankr. N.D.N.Y. June 2, 2023). The Board claims that this is the standard adopted by courts

within the Second Circuit, with a party seeking to impose a SARE qualification on a debtor only

carrying the burden of proof if the debtor had not already claimed a small business designation.

(Reply ¶ 2 (citing In re Chen Found., Inc., 661 B.R., at 38 n.4 (putting the burden on the movant

to prove a SARE designation in non-Subchapter V bankruptcy proceeding).)

The Board again reasserts that the Units are a project with a common business plan and

that RentCo is not involved in any other substantial business activity. First, the Board notes that

unlike in the cases cited by the Debtors where the properties in question were distinct and shared

little similarities, the Units all share the same residential use without any unique characteristic.

(Reply ¶¶ 3-5.) Regarding the business activity referenced by the Debtors, the Board diminishes

the activities touted in the Objection. While the Debtors claim to be engaged in sponsorship

obligations including obtaining a PCO, the Board notes the Debtors’ failure to actually do so

since 2010 and that the last TCO lapsed in 2021. (Id. ¶ 7.) In addition, the Debtors claim to

have engaged with vendors to conduct work on the building, but the Board argues that the

Debtors only cite to “outdated proposals dating back to 2022” (id ¶ 8), and that these proposals

are incidental activities that would not imperil the SARE designation (id ¶ 9). To make a

showing of substantial business activity, the Debtors need to provide evidence that there is an

alternative income producing business in the Building. (Id. ¶ 11.) According to the Board, the

Debtors fail to do so.

Lastly, the Board addresses the debt limit for a Subchapter V debtor, which was not

addressed in either the Objection or Response. The Board claims that while their claim has not

yet been fixed as the State Court Action is ongoing, the idea that the claim is “contingent or less

than the statutory minimum is pure sophistry” as it will cost more than the $3,024,725

Subchapter V debt limit to fix the issues plaguing the Building. (/d. 4 12.) The Board notes that

the State Court had previously found the Debtors at fault for being unable to secure a PCO due to

their failure to address outstanding work as required by the Department of Buildings. (/d. ¥ 15.)

The Board has retained an engineering firm and cost estimator who compiled a report that

estimates the costs to have the Building conform with the Offering Plan to be $42 to $45 million.

17, Exhibit C (Declaration of Cost Estimator Rajneesh Sayal) ¥ 7.) The fact remains,

however, that while the Board’s claim is likely to be substantial, it is presently unliquidated and

is not counted against the debt limit for eligibility for Subchapter V.

This Court held a hearing on April 6, 2026 on the Objection. During the hearing the

Debtors confirmed that the Units constitute their sole income source. Hearing at 15:50-18:08, Jn

re 25 My RentCo LLC (Bankr. $.D.N.Y. April 6, 2026) (No. 25-12280).

Il. LEGAL STANDARD

To be eligible for Subchapter V, a debtor must qualify as a “small business debtor” under

the code. 11 U.S.C. § 1182. Small business debtor is defined in code as:

(A) subject to subparagraph (B), means a person engaged in

commercial or business activities (including any affiliate of

such person that is also a debtor under this title and excluding a

person whose primary activity is the business of owning single

asset real estate) that has aggregate noncontingent liquidated

secured and unsecured debts as of the date of the filing of the

petition or the date of the order for relief in an amount not more

than $2,000,000 (excluding debts owed to 1 or more affiliates or

insiders) not less than 50 percent of which arose from the

commercial or business activities of the debtor; and

(B) does not include—

(1) any member of a group of affiliated debtors under this

title that has aggregate noncontingent liquidated secured

and unsecured debts in an amount greater than

$2,000,000 (excluding debt owed to | or more affiliates

or insiders);

10

(ii) any debtor that is a corporation subject to the reporting

requirements under section 13 or 15(d) of the Securities

Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)); or

(iii) any debtor that is an affiliate of a corporation described

in clause (ii).

11 U.S.C. § 101(51D) (emphasis added). SARE debtors are explicitly not eligible for

Subchapter V. The 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.” 11 U.S.C. § 101(51B).

Courts have found that a debtor owning multiple proprieties can qualify as a SARE if the

property is operated by the debtor under a “common plan.” See In re JJMM Int’l Corp., 467

B.R. 275, 277-78 (Bankr. E.D.N.Y. 2012) (“When, as in this case, a property is comprised of

multiple parcels, courts generally apply the ‘single project’ prong to determine if the property

satisfies the definition of a SARE. For a property or properties to constitute a single project,

common ownership alone is not sufficient; the debtor must also have a common plan or purpose

for the property.”); see also In re Nuovo Ciao-Di, LLC, 650 B.R., at 789; In re Yishlam, Inc., 495

B.R. 328 (Bankr. S.D. Tex 2013). This is a fact specific inquiry, and courts have cited to a non-

exclusive four-factor list to help guide the inquiry: “(1) the use of the properties; (2) the

circumstances surrounding the acquisition of the properties, including the time of the acquisition

and the funds used to acquire the properties; (3) the location of the properties and proximity of

the properties to one another; and (4) any plans for future development, sale or abandonment of

the properties.” In re Nuovo Ciao-Di, LLC, 650 B.R. at 789 (citing In re Hassen Imps. P’ship,

466 B.R. at 507). “Use of the properties, however, is the sine qua non of a single project

determination.” In re Hassen Imps. P’ship, 466 B.R. at 508.

The second factor at issue in the SARE analysis is whether the property or project at issue

generates “substantially all of the gross income of the debtor.” 11 U.S.C. § 101(51B).

The final factor of the analysis is whether the debtor conducts substantial business

activity other than operating the property or project. Id. The business activities related to the

property can extend to “incidental activities . . . intrinsic to owning and developing the real

estate” for the debtor to still be considered a SARE. In re Chen Found., Inc., 661 B.R., at 37

(quoting In re Vargas Realty Enterprises Inc., 2009 WL 2929258, at *4). These incidental

activities include the leasing and maintenance of rental property. In re Chen Found., Inc., 661

B.R., at 38; see also In re Vargas Realty Enterprises Inc. 2009 WL 2929258, at * 4 (finding that

a debtor managing property repairs and improvements to increase rental income were incidental

activities). A debtor is not a SARE “if it provides goods or services unrelated to the mere

ownership of real estate.” In re Chen Found., Inc., 661 B.R., at 38; see also In re 255 North

Front Street Condos, Inc., 2025 WL 1068714 at *3 (Bankr. E.D.N.C. April 8, 2025) (concluding

that a condo association debtor was not a SARE because its income was derived from services

pursuant to statutory obligations as a unit owners’ association and not deriving from the property

itself).

III. DISCUSSION

A. The Debtors Bear the Burden of Proof

The Parties dispute who bears the burden of proof. The Board argues that the Debtors

have the burden of proof to establish their eligibility to proceed under Subchapter V. (Objection

¶ 14; Reply ¶ 2.) If the Debtors are SARE debtors, they are not eligible to designate their cases

under Subchapter V. The Debtors argue that the Board bears the burden of proof as to RentCo’s

status as a SARE irrespective of any burden related to their Subchapter V status. (Response ¶

12.) The Code is silent who has the burden of proof for the purposes of SARE designation and

Subchapter V.

In the Second Circuit, courts have adopted the “majority position” that the debtor has the

burden of proof to show that it is eligible to proceed under Subchapter V. See In re Fama, 655

B.R., at 658; In re Hillman, 2023 WL 3804195, at *3. While neither Fama nor Hillman dealt

with an objection from a movant based on a potential SARE designation, courts which have

considered the issue overwhelmingly conclude that the burden remains on the debtor. See e.g. In

re Amerinvest, LLC, 670 B.R., at 47 (“The Court acknowledges that there is case law in other

jurisdictions holding that the burden of proof for SARE designation is on the moving party. . . .

However, because the matters before the Court implicate eligibility, and because the Court finds

that the debtor seeks to take advantage of the powerful tools and advantages of Subchapter V, the

Court will follow the majority approach to allocate the burden of proof on matters of eligibility

to the Debtor.”); In re Evergreen Site Hldgs, Inc., 652 B.R., at 316 (putting the burden on the

debtor is “consistent with long-standing case law in this district that the debtor has the burden of

proof in establishing eligibility to seek relief under various chapters of the Bankruptcy Code.”);

In re 255 N. Front St. Condos, Inc., 2025 WL 1068714, at *2 (“The assertion that the Debtor is a

SARE debtor is, at its core, a challenge to the Debtor's election to proceed under Subchapter V.

For that reason, the Debtor has the burden of establishing that it is not a SARE debtor.” (internal

citation omitted)).

The vast majority of courts have adopted the majority rule, the standard of this Circuit,

even when the movant is objecting to Subchapter V based on a potential SARE designation.

This Court will do the same; the burden is on the Debtors to show that they should not be

designated as SARE debtors and are thus eligible for Subchapter V.

B. The Units are a Project Subject to a Common Plan

The SARE analysis starts with determining whether RentCo’s ownership of the Units

constitutes a single property or project. It is uncontested that the Units do not constitute a single

property, thus the only question is whether the Units constitute a project subject to a common

plan.

Both parties cite In re Nuovo Ciao-Di and In re Amerinvest, LLC; the former case finding

the owner of two condominium units was not a SARE and the latter finding the owner of three

parcels of was a SARE debtor. In Nuovo Ciao-Di, the court noted that even though the units

were purchased together and subject to a single mortgage, the debtor had not demonstrated a plan

to use the properties for a single purpose, had not leased the units together, each unit had distinct

qualities – one unit was subject to an easement – and the debtor was contemplating selling one of

the units. In re Nuovo Ciao-Di, 650 B.R. at 789-90. The court in Amerinvest, for comparison,

noted that while the parcels of land in question were legally distinct entities, they were purchased

together and the debtors intended to continue renting parcels as a commercial landlord, which the

court considered to be the debtor’s “common purpose” for SARE designation. In re Amerinvest,

LLC, 670 B.R. at 49. Obviously, the Debtors argue that their situation mirrors that of the debtor

in Nuovo Ciao-Di while the Board argues that Amerinvest is instructive.

Many other cases have examined whether a similarly situated debtor to RentCo, an entity

which owns multiple units of a similar type of property, is considered a project subject to a

common plan. In In re Yishlam the court held that the debtor was not operating a project. The

debtor initially owned 57 units in two apartment buildings, but by the petition date had 20 total

unsold units remaining. In re Yishlam, 495 B.R. at 329. The court noted that there were facts

going both ways. In favor of a SARE finding, the court focused on that the units are in close

proximity to each other (the two buildings are 500 feet apart), are the debtor’s only source of

income, the debtor had no employees, and the debtor’s only debts are in relation to the operation

of the units. Id. at 330. Against a SARE designation, the two buildings were purchased at

separate times, converted at separate times, and operated separately. Id. Ultimately the court

held that the factors were largely in equilibrium, as the court gave greater weight to the fact that

the two buildings are operated separately, and ultimately held that the movant failed to

demonstrate that the two properties constituted a single project. Id. at 332.

In In re Vargas Realty Enterprises, the court denied a debtors’ motion for reargument on

the court’s prior order which held, in part, that the debtors should be designated as a SARE. The

debtors, all entities owned outright by one individual, each owned apartment buildings on West

111th Street in Manhattan. In re Vargas Realty Enterprises Inc., 2009 WL 2929258 at *1. The

court had granted the initial motion and found the debtors to be a project and therefore a SARE

as a single individual operated the properties from a single location, the buildings were jointly

financed, and the properties served as security for one another. Id. at *2. On reargument, the

debtors did not contest the finding that they operated as a project, focusing instead on the fact

that they operated a business beyond a rental building. The court found this argument

unavailing. Id. at *3 (holding that management of property and improvements to the buildings

were “intrinsic to owning and developing the real estate” and, therefore, incidental).

The court in In re Philmont Development Co., 181 B.R. 220 (Bankr. E.D. Pa 1995) dealt

with determining whether jointly administered debtors, limited partnerships who owned multiple

semi-detached homes purchased from another debtor, constituted a single project under section

101(51B) soon after the section was enacted. The court determined that the separate limited

partnerships, all of whom owned semi-detached homes, were a single project as they were

operated together:

The Court, in particular, does not believe it is legally significant that

Philmont Development built all of the semi-detached houses and then

separately sold a discrete number thereof to each limited partnership.

The fact remains that each limited partnership is operating real property

consisting of more than 4 residential units; and that the limited

partnerships are not conducting any substantial business other than

managing these residential units which, in turn, provide all of each

Debtor limited partnerships’ income.

Id. at 224.

RentCo has qualities similar to the other debtors found to operate as a single project: they

own six similar units in one building; RentCo gained control over the Units at the same time

upon transfer from Tribeca Mews for no consideration; the Units have been controlled by the

same principals (the Thurmans control both Tribeca Mews and RentCo) since conversion; and all

Units have been operated in the same manner since being transferred to RentCo through

residential leases. Applying at the Hassen factors, 466 B.R. 492, additionally points to RentCo’s

ownership of the Units being part of a common plan:

(1) The Units share a common use as residential rental housing;

(2) The Units were acquired by RentCo all at the same time through a transfer from Tribeca

Mews for no consideration;

(3) The Units are all located in the Building and all listed for rent; and finally

(4) RentCo has not taken substantial steps to show they truly intend to dispose of the units,

including their failure to acquire a PCO for the building. Cf. In re Nuovo Ciao-Di, LLC,

650 B.R. at 790 (The court notes the debtor “currently attempting to sell one of the

Properties” supports a finding that the debtor is not a SARE).

The facts show that the Units constitute a project subject to a common plan, satisfying the

requirement for SARE designation.

C. The Debtors’ Sole Income Comes from Renting the Units

The Debtors have failed to refute the Board’s claim that RentCo’s sole source of income

comes from renting the Units. The Debtors confirmed during the April 6 hearing that they do not

collect management fees from the other units in the Building. The Debtors have not made any

other income claims.

D. RentCo does not Conduct Substantial Business Activity Beyond the Passive

Ownership of the Units

The Debtor’s Objection claimed that RentCo conducts business activity separate from the

Units, including continued coordination with engineers, architects, and contractors related to

“addressing construction deficiencies and obtaining required regulatory approvals” necessary for

the Building. (Objection ¶ 28.) These activities, while not directly related to renting the Units,

are the type of “incidental activities . . . intrinsic to owning and developing the real estate” that

business activities can extend to and the debtor still found to be a SARE. In re Chen Found.,

Inc., 661 B.R. at 37. The court in Chen Foundation cited to several cases where a property

owner engaged in activities adjudged to be more than merely incidental, including a golf course

with associated car rental and concession stand (In re Larry Goodwin Golf, Inc., 219 B.R. 391,

393 (Bankr. M.D.N.C. 1997), a debtor hotel operating a gift shop, restaurant, and bus tours out of

the property at issue (Centofante v. CBJ Dev., Inc. (In re CBJ Dev., Inc.), 202 B.R. 467, 472-473

(B.A.P. 9th Cir. 1996), and a marina that offered more than just rental moorings (In re Kkemko,

Inc., 181 B.R. 47, 51 (Bankr. S.D. Ohio 1995)). In Chen Foundation, the court found that the

debtor’s operation of a portion of the property as an art gallery went beyond incidental activities

intrinsic to owning the property. In re Chen Found., Inc., 661 B.R. at 39.

None of the activities that Debtors raised as “substantial business activity” rose to levels

of the activities in the cases cited above. All of the Debtors’ activities are intrinsic to owning

and developing real estate, here the Building, for which it is a sponsor of and the Units that

remain in their possession. None of the activities are undertaken for additional profit separate

from their otherwise passive ownership of the Units.

Ultimately, the Debtors have insufficiently refuted the Objection; RentCo will be

considered a SARE and is therefore ineligible for Subchapter V status.

IV. CONCLUSION

For the reasons stated herein, the Board’s Objection is SUSTAINED. RentCo is

designated as a single asset real estate debtor under section 101(51B) of the Bankruptcy Code

and its small business debtor and Subchapter V designations under sections 101(51D) and

1182(1) are hereby REVOKED. It may proceed with these cases under Chapter 11.

IT IS SO ORDERED.

Dated: May 22, 2026

New York, New York

Martin Glenn

MARTIN GLENN

Chief United States Bankruptcy Judge