Distressed? Don't Overlook Due Diligence

ORANGE COUNTY, CA—Investing in and acquiring distressed commercial real estate assets via note sales is not to be done blindly or without understanding the risks involved. So said speakers at a recent Association of Corporate Real Estate Executives of Southern California luncheon in Long Beach, CA, who pointed out both the opportunities and pitfalls within this subcategory.

The panel, moderated by Carson Faris of Western Bay Group, emphasized that investors who purchase bank notes who should be knowledgeable in many facets of real estate. To mitigate risk, investors should understand applicable state and federal real estate laws, loan documents, borrower and tenant risk; environmental conditions; and entitlement rights. Faris said that the most important thing for any investor to understand when purchasing a note is that he is purchasing a lender’s position, not real property.