Early in the recession, commercial real estate investors eagerly awaited the flood of distressed properties expected to hit the market. They sat, they waited and they wondered when the trickle would turn into a flood so that they could expand their market share, enter new regions and pursue strategic and financial objectives through investments in this growing sector. But while the number of assets underwater is huge, very few have come to market.

Banks, the FDIC and CMBS servicers now hold more than $140 billion in troubled loans. Instead of waiting around for property holders to sell those assets into a bad market, many investors are seeing that $140-billion problem as a real opportunity to buy the defaulted loans at a deep discount in order to acquire the underlying real estate.

Ideally, not only can they acquire those assets, but they also get them at a discount because, regardless of the face amount of the note, a buyer of a defaulted loan is not going to pay more than the value of the collateral securing the loan. And then the buyer will apply a reduction to that lower value to take into account the various costs and risks in transitioning from note-holder to owner of the collateral.