Question 1

How does a §363 sale in SDNY New York bankruptcy court work?

Accepted Answer

The debtor files a motion for approval of bidding procedures, which sets the timeline, minimum bid requirements, and stalking horse protections. The court approves bidding procedures at a hearing. Qualified bidders submit offers by the deadline. If more than one qualified bid is received, an auction occurs. The winning bidder presents their offer at a sale approval hearing. The court approves the sale. Closing follows within the agreed timeline - typically 30-60 days from approval.

Question 2

What break-up fee is typical for a stalking horse in a New York commercial §363 sale?

Accepted Answer

SDNY bankruptcy judges have generally approved break-up fees in the 2-3% range for commercial real estate §363 sales, with expense reimbursements of $100,000-$500,000 depending on deal size. Some judges have pushed back on fees above 3%. The break-up fee is paid from sale proceeds if the stalking horse is outbid. For buyers, the fee is compensation for performing the due diligence that sets the floor price for the auction.

Question 3

Can out-of-state buyers participate in New York §363 commercial real estate sales?

Accepted Answer

Yes. §363 sales are federal proceedings - geography of the buyer is irrelevant. Buyers must demonstrate financial capability (proof of funds or committed financing) to qualify as bidders. Out-of-state buyers should retain New York commercial real estate counsel for title and transactional matters and may optionally retain SDNY bankruptcy counsel if they plan to be active in the bidding process, though it is not required.