You have a great development, a great developer, but too much debt—a relic of boom times—with no hope of finishing the job and having it make economic sense.
Not long ago, this combination would have pointed straight toward foreclosure, litigation and a multi-year disaster. More recently, struggling developers, cash-rich investors and realistic lenders have worked out a better solution.
The investor, perhaps with a new lender, buys into the deal at a price that makes sense today. Most of that new money goes to pay off the undersecured original lender at a discount. The rest goes to critical vendors and restarting the project. The developer stays in, with a monthly development fee for their expertise, attention and name recognition value.
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