Buyers Beware: Environmental Secured Creditor Protections in the Distressed Loan Market
Nationwide, investors are raising capital for an eventual plunge into the distressed real estate assets market. While many deals remain on hold, real estate investment trusts and other investors will eventually acquire troubled assets.
Some believe that buyers will target distressed commercial whole loans—where the investor purchases commercial mortgage notes and assumes all of the lender's rights and responsibilities—which may be easier to value than mortgage-backed securities.
My colleague Jonathan Spergel recently wrote about potential environmental liability issues to consider when evaluating distressed assets ("The Environment Surrounding the Purchase of Distressed Assets," MAREJ July 10, 2009). With investors poised to acquire troubled commercial loans, today's article will explore one facet in more detail: the scope, benefits, and potential pitfalls of environmental liability protections for secured creditors.