EPC/OC structures explained: packaging a loan when the real estate sits in a separate entity
Rohan Deshpande · 2026-05-29 · 7 min read
Eligible passive company and operating company structures are common and frequently mis-packaged. Here is the rule set and the exhibits lenders expect.
The rule
An EPC may hold real estate and lease it to the OC when the OC is the borrower or co-borrower, the lease is for the term of the loan, rent does not exceed debt service plus taxes, insurance and maintenance, and the same owners control both entities in the required proportions.
Packaging implications
Both entities complete Form 1919. The lease must be in the package. The consolidated cash flow eliminates intercompany rent and presents the combined debt service. LoanPacket detects the EPC relationship from Schedule E and builds the consolidation automatically.
- Rent above the allowed level is an add-back only to the extent it will be reset under the new lease.
- The EPC cannot have other operations or tenants beyond the small unrelated-tenant allowance.
- Both entities guarantee the loan.