Animal spirits are stirring again in the commercial real estatemarket after the sharp drop in prices. But many properties remainin limbo because financial and legal problems are making shortsales, or even traditional sales, difficult, if not impossible. Sohow are some investors re-entering the market? By purchasing theloans on the properties.

Buying loans tied to the underlying properties enables equityinvestors to take control of the physical asset and then addressthe problems by restructuring the paper, making improvements,renegotiating leases, changing the tenant mix or anything else thatwill add value. Fundamental to this approach is a cost-benefitanalysis that factors expenses and risks.

For those willing to consider loan purchases as the route toproperty ownership, there are many opportunities to buy assets thatare 50% to 75% below their price just several years ago. Moneycenter banks, insurance firms, finance companies and investmentbanks are selling a growing volume of non-performing loans toimprove the health of their portfolios. For investors, theaccelerating number of loan sales translates into an unprecedentedopportunity to purchase distressed properties. Loans secured bymultifamily, industrial, retail and office projects are all forsale.