Borrower as a Single Purpose Entity

Summary

This practice note discusses a borrower as a single purpose entity (SPE). An SPE is a corporation, limited partnership, or limited liability company (LLC) formed under the laws of a U.S. jurisdiction for the express purpose of holding single asset real estate, which will have no assets other than the subject real property and no non-ordinary course liabilities. A lender may prefer to extend credit secured by real property to a borrower which is an SPE, and will often request that a prospective borrower form an SPE specifically so that the lender's collateral will be segregated from the parent company's other assets and liabilities. This practice note discusses SPEs as LLCs.