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

Given the current economic climate, the investor who assumes therole of lender is often forced to exercise its default remediesagainst a non-performing borrower and/or guarantor. Before aninvestor purchases distressed real estate debt and steps into thelender’s shoes, if the transaction forecast indicates that theexercise of remedies will involve the completion of a judicial(versus non-judicial) foreclosure action, the investor should beaware of certain features of the judicial foreclosure process thatmay lead to increased transaction costs and greater delay insecuring ownership rights in the property. Accordingly, theinvestor should make appropriate adjustments in any transactioncost forecast and completion timeline while considering the variousstrategic options to achieve its goals.

The Breakdown--Judicial vs. Non-JudicialStates: