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The First of the Worst

It's 2006. A well-located, quality property is on the market and attracts a plethora of qualified bidders. It ultimately trades for a very high price,…

By Sule Aygoren Carranza - Editor of Real Estate Forum. | Updated on December 09, 2011

It’s 2006. A well-located, quality property is on the market and attracts a plethora of qualified bidders. It ultimately trades for a very high price, thanks to the abundance of debt capital in the market. The buyer takes control, hoping to up the property’s value even further by increasing rental rates over the next few years.

But three years later, the economy has taken a nosedive and the rent roll hasn’t increased as much as anticipated. What’s more, the financial markets have done a complete ISO, and it’s impossible to find new financing or to sell the asset. Backed into a corner, the buyer ultimately defaults on the loan and gives up control of the property.

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