WASHINGTON, DC-The Goldstar Group and Spectrum Partners haveclosed on their second distressed debt purchase with theacquisition of a $13-million Key Bank loan secured by a partiallycompleted 142-acre active-adult gated community in southernConnecticut. The site was approved for a total of 233 homes with aclubhouse.

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This is the duo’s second distressed debt acquisition: the first,a $45-million note backed by theFloridian--a luxury condo building located at 919 and929 Florida Ave. in Washington, DC--having recently closed. Thedeal also allowed Goldstar to expand its footprint north, Goldstarfounder Michael Brodsky says, adding he is looking forward toexploring more opportunities in the debt markets as they presentthemselves.

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Indeed, in general, more distress opportunities are slowlybecoming available, says Cliff Mendelson, managing partner and CEOof Metropolis Capital Finance, which has teamed up with Goldstarfor these transactions. "Banks are still willing to work withborrowers through maturity defaults because it is not easy toreplace debt with the current state of the capital markets," hetells GlobeSt.com.

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But the borrower has to make the interest payments and otherwisehave the loan perform. If the borrower is not adding value—in otherwords, not making payments--then lenders are now more apt toforeclose, he says. "That was the case with the Floridian. Thedeveloper had nothing to offer as far as new capital coming to thetable. In that case it made more sense for the lender to sell thenote."

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The Connecticut loan, however, does not necessarily fall in thatcategory. "It was a complicated loan and we only had two weeks toclose it," Mendelson says. "But only Key Bank knows why it wantedto sell…as far as we know, the property was doing okay."

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