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Purchasing Distressed Real Estate Debt: Performing Due Diligence, Documenting and Closing the Deal, Liquidating the Debt

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Tuesday, March 12, 2024

Recorded event now available

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This CLE course will examine the due diligence and transactional issues involved in acquiring distressed commercial real estate loans. The panel will provide best practices for negotiating and structuring these deals to take advantage of the opportunities currently available while mitigating inherent legal and financial risks for both the buyer and seller.


Distressed debt is once again becoming a frequent topic of discussion among real estate professionals given the current economic environment. The market landscape presents great opportunities for investors who aim to purchase these troubled loans at a significant discount, with the goal of a favorable outcome. Also, rather than amend a loan in default, or extend or refinance a matured loan, a lender is more likely to sell a distressed loan at a discount to par. While these market conditions present great opportunities for lenders and investors, debt acquisitions also carry significant legal and financial risks.

As a successor to the lender, investors can pursue remedies such as debt restructuring, loan-to-own strategies, reselling, or claim an interest in a debtor's bankruptcy proceedings. To ensure a successful transaction, it is critical that investors perform comprehensive due diligence relating to the loan and underlying collateral. Due diligence review should include an examination of title, zoning, building codes, and environmental concerns, as well as identify expenses and impediments to exercise any loan remedies such as receiverships or ongoing lawsuits.

When documenting and closing the deal, it is particularly important for buyers and sellers to obtain and review all relevant underlying documents including assignments, original loan documents and the loan file, the lender's title policy and assignment endorsement, and estoppels and consents. When drafting the loan purchase and sale agreement of the transactional parties, special attention should be given to the representations, warranties, and related remedies to ensure the client's interests, whether buyer or seller, are adequately protected.

After the closing, the investor's ability to realize its desired return will depend on the prompt repositioning or disposition of assets, requiring an analysis of the non-performing loan to determine if foreclosure is the best option or if other strategies are worth pursuing such as a loan workout, receivership, loan modification, or a deed-in-lieu of foreclosure. When deciding on the best approach, investors should bear in mind the income and property tax considerations, title coverage issues, mezzanine loan foreclosure issues, and any other issues that may present risks or expose the investor to liability.

Listen as our authoritative panel explores the key issues and considerations involved with underwriting, acquiring, working out, enforcing remedies, and liquidating distressed real estate debt.



  1. Current market conditions
  2. Things to consider before buying distressed debt
    1. Types of distressed debt
    2. Contractual constraints: intercreditor, participation, and pooling and servicing agreements
  3. Investigating and underwriting the deal
    1. Due diligence: property operations, loan documents, borrower parties, and loan history
    2. Known and unknown risks
    3. Potential pitfalls: uncooperative third parties
    4. Workout/modification and foreclosure/deed-in-lieu concerns
  4. Documenting and closing the deal
    1. Important deliverables
    2. Representations and warranties and other remedies
    3. Key terms in the loan purchase agreement for buyers and sellers
  5. After closing considerations: repositioning or disposition of the asset
    1. Mortgage foreclosure and guaranty enforcement
    2. Mezzanine foreclosure
    3. Deeds-in-lieu
    4. Title coverage issues
    5. Income and property tax considerations
    6. Other issues and considerations
  6. Bankruptcy risks


The panel will review these and other key issues:

  • What are the current market conditions prompting opportunities for investors seeking to acquire distressed real estate loans?
  • What are the risks and issues unique to acquiring, working out, and liquidating distressed real estate debt?
  • What are the key considerations for buyers and sellers when documenting and closing a distressed debt deal?
  • What are the issues related to working out or foreclosing the loan as the holder of distressed debt?


Fitzmaurice, Patrick
Patrick E. Fitzmaurice

Pillsbury Winthrop Shaw Pittman

Mr. Fitzmaurice's practice focuses on representing lenders and other creditors in workouts, restructurings,...  |  Read More

Guggenheim, Danny
Daniel B. Guggenheim

Mintz Levin Cohn Ferris Glovsky and Popeo

Mr. Guggenheim is an accomplished commercial real estate attorney who focuses his practice on traditional real...  |  Read More

Harcourt, Caroline
Caroline A. Harcourt

Pillsbury Winthrop Shaw Pittman

Ms. Harcourt represents lenders, owners, investors, developers and tenants in all aspects of commercial real estate....  |  Read More

Smith, Chris
Chris W. Smith

Of Counsel
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo

Mr. Smith has a multifaceted commercial real estate practice that encompasses a broad spectrum of acquisitions,...  |  Read More

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