A common theme adopted by the industry is that lenders continue to delay action on distressed assets for as long as possible.
The fact is that this scenario is borrower-specific. If a borrower is acting in good faith, the lender may allow the asset to continue operating, resulting in a commercial property “Twilight Zone.”
The Twilight Zone is made up of properties on which loans have defaulted or in which default is likely imminent, but the borrower is still willing to provide all available cash flow to the lender, even if it is not enough to cover the payments. The lender agrees to accept net rents and, in turn, keeps the building operational, albeit in a limbo period.
When the lender does finally pull the plug value opportunities can come in several different forms. See the article on Globe St.com for details on what they are.