SPECIAL PURPOSE ENTITIES
Fulfilling Your Specific Needs In Real Estate & Beyond
You’re a sophisticated investor that knows the value of creating specific structures and processes in regards to your commercial portfolio. A tool sometimes used is a special purpose entity (SPE) which we will explore below.
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FULFILLING A NARROW PURPOSE
So, What's a SPE?
A tool used by real estate developers and commercial real estate owners to create attention to attract lenders, a special purpose entity or SPE is supposed to increase or promote the feasibility of “financing” for a specific project. When an investor looks at a plan to present to a lender in this way, they want to include specific provisions that will prevent certain circumstances from happening such as a foreclosure. We will touch upon what the characteristics of an SPE are and how best to use one.
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WHAT LEGAL ENTITY IS NEEDED AND CHARACTERISTICS
LLCs or LPs Can Be Used.
When creating the provisions that will need to secure financing, the operating agreement (in the case of a limited liability company LLC) or limited partnership (LP) agreement will provide the relationship between the lender and borrower. There are times when a lender would want to have a brand new entity for this purpose as to shield adverse events from any previous dealing with other parties.
Here are some other characteristics of SPEs to consider:
- Transaction or Entity Change Restrictions
- Member/Manager Subordination Rights
- Separtion of Entities
- Bankruptcy / Carve Outs
- Single Asset Covenants
EVERY LENDER IS DIFFERENT
CREATE A SPE TO BEST SERVE YOUR PARTICULAR COMMERCIAL ASSETS.
Creating a special purpose entity (SPE) has many details to consider whether its to favor both the actual members over other parties, separating assets from one’s portfolio or making investments attractive to potential investors. We have the depth and breadth of knowledge and past expertise in the field of SPEs and want to discuss how they could fit your current investment portfolio.
Contact Our Carmel Real Estate Attorney For Discussing Your Investment Strategy.
To schedule your no-obligation case evaluation to discuss SPEs, please contact our Indiana real estate attorney from our firm today!
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