While we are still early in the pandemic-triggered recession, some investors are already seeing the distressed asset investment opportunities—and BH Properties is among them. The investor is expecting a wave of bankruptcies and defaults, and is launching a $200 million debtor-in-possession platform to act on those opportunities in the coming months.

"We've already seen a number of high profile bankruptcies and we're only four months from some of the first shutdowns," Andrew Van Tuyle, senior managing director at BH Properties, tells GlobeSt.com. "For many of these companies bankruptcy was inevitable; the pandemic just accelerated the process.  However, there are still a number of foreclosure and eviction restrictions in place as well as government subsidies that will eventually expire and likely cause a new wave of defaults, evictions and foreclosures.  Many tenants won't be able to survive the prolonged lack of revenue, and we don't know what commerce will look like post-pandemic.  We are expecting to see lots of bankruptcies on both the tenant and landlord side for quite a while."

Specifically, BH Properties is planning to invest in middle market distressed assets that are either in receivership or facing bankruptcy. "Retail and hospitality are the obvious answers because they've taken the bulk of the short term hit," Van Tuyle says. "I've heard many stories about restaurants that have chosen not to return, with operators using this time to cut the less-profitable locations from their portfolio to create a leaner business model.  I believe that high-rise office could see some medium term impacts as tenant leases begin to expire.  We could certainly see a departure from the urban core and a flight to suburban areas where tenants have less exposure to elevators and common area amenities."