Why is an off-market sale superior for distressed CRE debt?

A public sale signals distress to the market and the borrower, collapsing the asset's value. Our confidential, off-market protocol preserves value by creating competitive tension among a curated list of vetted institutional buyers, ensuring true price discovery.

What is the 'REO Trap' for lenders holding distressed CRE notes?

The REO Trap is when a lender forecloses on a distressed property, transforming a financial asset (the note) into an operating liability (the property). They become responsible for insurance, taxes, and receiver fees. Selling the note off-market avoids this trap entirely.

How are non-performing commercial bridge loans valued?

Valuation is not based on the Unpaid Principal Balance (UPB). A true institutional valuation is based on the 'As-Is Value of the Collateral' minus the 'Cost to Complete/Stabilize' the project. This data-driven approach is the foundation of our protocol.

The Off-Market Mandate for Distressed CRE Debt | Fitzgerald

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The Off-Market Mandate for Distressed CRE Debt | Fitzgerald

The Off-Market Mandate For Distressed CRE Debt

The "Extend and Pretend" era is over. As the CRE maturity wall arrives, our Off-Market Protocol provides the definitive path for banks and funds to divest non-performing bridge loans and recover capital with absolute discretion.

Market Intelligence: The Maturity Wall & The REO Trap

"Value-Add" bridge loans from 2020-2022 were underwritten on assumptions that no longer exist. With rent growth flat and debt service doubled, these projects are stalled. For lenders, the choice is now binary: foreclose and assume the liability of Real Estate Owned (REO), or execute a strategic, off-market divestiture of the note.

In the current cycle, foreclosure is a strategic error. Taking title to a stalled project transforms a financial asset into an operating liability, exposing the lender to insurance spikes, receiver fees, and continued cap rate decompression. A private sale of the non-performing commercial bridge loan is the superior protocol.

The Divestiture Solution

Don't Foreclose; Divest. By selling the note prior to taking title, you transfer the operational risk to a specialized distress fund. You take a calculated haircut on the paper, but you preserve liquidity and avoid years of litigation and carrying costs.

Valuation of Distressed CRE Debt

We do not price commercial paper based on the Unpaid Principal Balance (UPB). Our valuation is based on a forensic analysis of the As-Is Value of the Collateral minus the Cost to Complete/Stabilize. Our valuation matrix analyzes the priority of the Capital Stack:

Senior Secured (First Lien): Highest recovery rate. We target buyers looking for "Loan-to-Own" strategies.
Mezzanine Debt: High risk. We market these positions to aggressive yield-seeking funds capable of curing the senior lien.
Preferred Equity: Often wiped out, but tradable as "Control Positions" to specialized developers.

The Off-Market Execution Protocol

We execute Private Treaty Sales. We do not list commercial notes on public boards like CoStar or LoopNet. Public listings signal distress to the borrower and the market, collapsing the asset's value. Our confidential process is the key to preserving value.

Forensic File Audit: We perform a deep review of the Note, Mortgage, Guaranty, and Intercreditor Agreements to create an institutional-grade file.
Confidential Marketing: We present the mandate to a closed loop of vetted Institutional Buyers (Private Equity, Family Offices, Special Situations Funds).
Certainty of Execution: We manage the bidding process, PSA, and closing. Funds are wired, and the Assignment of Mortgage is recorded. You exit the position cleanly.

Initiate a Commercial Mandate

If your fund is holding stalled Multifamily, Office, or Construction bridge loans, immediate liquidity is your best hedge against further market deterioration. Contact us to begin the Off-Market Protocol.

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