What is a distressed asset?

A distressed asset is characterized by its underperformance or the financial difficulties it is experiencing, which can often lead to a decrease in its market value. These assets may include real estate properties with high vacancy rates, companies facing bankruptcy, or any asset that has significantly diminished in value due to operational challenges, market conditions, or other adverse factors.

Investors often look for distressed assets because they can present opportunities for substantial returns if the investor can successfully turn the asset around. The critical aspect of a distressed asset is its struggle to perform effectively, which differentiates it from fully performing assets that provide reliable income and returns. Understanding this concept is essential for anyone involved in investment management or distressed investing strategies.