WASHINGTON, DC-The Goldstar Group and Spectrum Partners have closed on their second distressed debt purchase with the acquisition of a $13-million Key Bank loan secured by a partially completed 142-acre active-adult gated community in southern Connecticut. The site was approved for a total of 233 homes with a clubhouse. 

This is the duo’s second distressed debt acquisition: the first, a $45-million note backed by the Floridian--a luxury condo building located at 919 and 929 Florida Ave. in Washington, DC--having recently closed. The deal also allowed Goldstar to expand its footprint north, Goldstar founder Michael Brodsky says, adding he is looking forward to exploring more opportunities in the debt markets as they present themselves.   

Indeed, in general, more distress opportunities are slowly becoming available, says Cliff Mendelson, managing partner and CEO of Metropolis Capital Finance, which has teamed up with Goldstar for these transactions. "Banks are still willing to work with borrowers through maturity defaults because it is not easy to replace debt with the current state of the capital markets," he tells GlobeSt.com. 

But the borrower has to make the interest payments and otherwise have the loan perform. If the borrower is not adding value—in other words, not making payments--then lenders are now more apt to foreclose, he says. "That was the case with the Floridian. The developer had nothing to offer as far as new capital coming to the table. In that case it made more sense for the lender to sell the note."

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