The flood of distressed commercial real estate transactions predicted to occur 2009 did not come to pass.

Why? First, although many loans are underwater (i.e. the borrower owes more than the property is worth), the borrower is able to make required loan payments because of historically low interest rates that currently exist.

Second, the precarious capital status of banks and other lenders has resulted in federal regulators encouraging banks not to pursue foreclosure or other enforcement action. Instead, may lenders "extend and pretend" and defer the problem into the future.

Whether the expected wave of distressed real estate transactions will occur in 2010 remains to be seen. However, we can exept that when distressed transactions do occur, they will be different from distressed transactions we have seen in prior commercial real estate recessions for a number of reasons.