Some real estate investment partnerships have to file chapter 11 because the lender doesn’t renew the loan at the time of balloon. Some file because of a technical default. Some file because something happens at the property that the owners couldn’t have predicted that hurts the occupancy rate. Some file because unexpected repairs cause financial hardship. Some are the victims of fraud.Some real estate partnerships end up filing chapter 11, because the economics of the property never made sense in the first place. The owners may have convinced themselves that they could get rents for the area that were well above average or that their delnquebcy, occupancy & repairs eyre all going to be well above market average. They’re usually smart investors, but the hunger to grow and to do a deal, just for the sake of doing a deal, gets the best of them. If they do these things, these investors will have to face the reality sooner or later.The best way to avoid filing chapter 11 for a real estate investment partnership is to think carefully before you ever do the deal. Are your projections really realistic? Does it really make sense?
If a real estate partnership does ever get themselves into trouble, GFCIB is here to help.