The partnership membership will share profit, loss and so-forth.

Reason I ask is because what would happen in the event that after the LC was executed, the tenants were to completely trash the property (or some other scenario causing extreme property damage) and the expenses to repair would be so high that it would not make any financial sense to repair and re-rent out, and so the new owner decided to cut their losses and strategically default? 

The reason I ask, is that the more rental properties your acquire, the more likely one of them will eventually have a temporary large financial loss.  

Cash was king and many deals were suffering from a equity loss due to the financial markets.

Since you are lowest on the capital stack you are in first loss position.How fast you have to make a decision on this is also key.

Some contracts are being abandoned and obviously that creates some fines and losses.

No losses in any of the cases to me except for my time and some lawyer fees, a whole boatload of aggravation and some sleepless nights. 

I have also gotten loans based on a simple profit and loss statements.  

@Don Darnell sorry for your loss.  

Sorry to hear about your loss @Jenet Christiansen.