Merger of Entities

[Brian Hinkle]

I'm looking for ideas on how to best coordinate constructing new buildings to an existing apartment complex in PA. Our current lender requires that the borrower be a "Single Purpose Entity" and has specifically stated that adding new construction would be a violation of the Single Purpose Entity status. Therefore, the consideration is to create a new entity with the same ownership structure as the borrower, sell the improvable parcel to this new entity, and have the new entity construct the new  units, in hopes that the 2 entities can merge back together when the loan is refinanced in 10 years. 

Will this deal structure result in PA transfer taxes of the improved parcel? Is there any way to structure the deal so it is clean and won't result in a ton of hoops to jump through?