Case Summary:
The court addressed the novel question of whether a debtor whose primary activity was once the business of owning single asset real estate can change the nature of its single asset real estate property by purchasing assets of its lessee and assuming the lessee’s business operations mere hours before filing its bankruptcy petition.  Prior to the petition date, the debtor owned the real estate and building where a dinner theater was operated, and a separate LLC owned by the same persons as the debtor operated the theater business and leased the real estate from the debtor.  On the petition date, but before the petition was filed, the debtor and the related LLC entered into an agreement whereby the debtor purchased the production and hospitality assets and operations of the related LLC.  A secured creditor filed an objection to the debtor proceeding under subchapter V on the grounds that 11 U.S.C. § 1182(1)(A) requires that the debtor’s primary activity must be something other than the business of owning single asset real estate.  After an evidentiary hearing, the court held that the debtor had not carried its burden to prove that its primary activity on the petition date was not the business of owning single asset real estate.  The court found the real property constituted a single property; the property generated substantially all the gross income of the debtor; and the debtor conducted no substantial business other than operating the real property and activities incidental thereto.  Accordingly, the debtor was not eligible to be a debtor under subchapter V.