Commercial real estate note buying is a strategy that allows investors to acquire loans secured by real estate rather than purchasing the properties themselves.
While often associated with distressed assets, today's note-buying market is increasingly driven by refinancing pressure, lender balance sheet management, and capital market dislocations rather than widespread property impairment and offers an opportunity for investors.
In a recent episode of Peachtree Point of View, Greg Friedman spoke with Daniel Siegel and Michael Ritz of Peachtree Group about how note acquisitions have evolved across the Global Financial Crisis, COVID-era disruptions, and today's higher-rate environment.
Commercial real estate note buying involves purchasing an existing loan from a lender at a negotiated price.
The buyer acquires the lender's position, including:
Unlike acquiring real estate directly, investors must underwrite both the collateral and the legal structure surrounding the loan.
Many investors assume loan sales occur because the collateral is fundamentally impaired.
In reality, banks often sell loans for reasons unrelated to property performance.
Common reasons include:
Understanding the seller's motivation can reveal opportunities where market pricing does not accurately reflect asset quality.
One of the key themes from the discussion was the difference between today's market and the Global Financial Crisis.
During the GFC:
Today's market is different.
Current challenges are more frequently driven by:
In many cases, the underlying real estate remains fundamentally sound.
Successful note acquisitions require investors to evaluate three critical areas:
Investors must assess:
Investors review:
Investors evaluate:
In many cases, borrower behavior becomes the most important determinant of investment outcomes.
Some of the best opportunities emerge when lenders need liquidity, regulatory relief, or balance sheet flexibility rather than when properties are distressed.
Successful investors underwrite legal rights, incentives, and borrower behavior alongside real estate fundamentals.
Many current opportunities involve stronger underlying collateral than previous cycles, creating potentially more attractive risk-adjusted outcomes.
A commercial real estate note is a loan secured by a commercial property. The note represents the lender's right to receive payments and enforce loan terms.
Buying the loan can provide downside protection through collateral rights while offering multiple potential paths to return generation, including repayment, modification, refinancing, or asset recovery.
No. Many note purchases involve performing or near-performing loans that are being sold for institutional or balance-sheet-related reasons.
Direct real estate investing focuses primarily on property ownership and operations. Note buying requires evaluating the property, the loan structure, and borrower behavior simultaneously.
For a deeper discussion on commercial real estate note acquisitions, market cycles, underwriting discipline, and lessons learned across multiple periods of market dislocation, listen to the full episode of Peachtree Point of View featuring Greg Friedman, Daniel Siegel, and Michael Ritz.
