The acquisition of distressed debt secured by commercial real estate, at or below par, whereby an investor assumes the role of lender in a loan relationship is an attractive option for commercial real estate investors.

Given the current economic climate, the investor who assumes the role of lender is often forced to exercise its default remedies against a non-performing borrower and/or guarantor. Before an investor purchases distressed real estate debt and steps into the lender’s shoes, if the transaction forecast indicates that the exercise of remedies will involve the completion of a judicial (versus non-judicial) foreclosure action, the investor should be aware of certain features of the judicial foreclosure process that may lead to increased transaction costs and greater delay in securing ownership rights in the property. Accordingly, the investor should make appropriate adjustments in any transaction cost forecast and completion timeline while considering the various strategic options to achieve its goals.

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