Banks are important institutions for many reasons. When Minnesota companies need funds in order to obtain commercial property or to handle other business-related matters, they can often obtain the needed loans from banks. However, when a bank issues a loan, it becomes a creditor, and if a company is unable to stay on top of payments and upkeep of the property, it could become distressed real estate.
Recent reports indicated that potential distressed real estate has increased since the spring. In fact, the second quarter of this year showed that commercial real estate transactions saw a significant and unprecedented drop in activities. Of course, the current state of global affairs is having an impact on this sector.
The report also detailed that hotel and retail properties were hit the hardest. These sectors made up more than 90% of distressed real estate in this year’s second quarter. It was noted that potential distress exceeds outright distress by more than three times. Apartment assets and offices were also listed as sectors affected by potential distress, making up 20% and 15% respectively.
Distressed real estate can cause problems for Minnesota banks and other financial institutions as it often means they are not receiving loan payments. When this happens, it may be necessary for these institutions to take legal action to enforce their creditor rights. If so, it is vital that they fully understand those rights and the options they have for pursuing and collecting on outstanding liabilities. This type of ordeal can be complicated, so it is wise to have the right help.