CRE Loan Workouts Shift Focus as Debt Maturities Loom

The End of ‘Extend and Pretend’

According to ULI, the US CRE market’s approach to distressed loans is quickly evolving. For years, many lenders tolerated delays, relying on loan extensions and the hope that lower rates would bail out owners in trouble. But as an estimated $1 trillion in commercial debt comes due in 2026, the tone in workout talks is shifting. At the ULI Spring Meeting in Nashville, industry veterans reported that both lenders and borrowers now face sharper scrutiny over which assets are still worth saving. Owners must engage lenders earlier, with transparent, realistic business plans—not last-minute rescue efforts—if they hope to avoid foreclosure, receivership, or bankruptcy. This harder line reflects how pandemic-era loans, often underwritten at historically low rates and optimistic values, now face a changed landscape with weaker property fundamentals and fewer refinancing options.

The Details

Panelists at the ULI conference, including Fox Rothschild’s Brett Axelrod, Hilco Global’s Matthew Mason, and FTI Consulting’s Alan Tantleff, described a more grueling climate for workouts. Loans originated at 3–4% are now rolling into 7% debt, creating serious valuation gaps for asset owners. Lenders now prefer comprehensive plans over quick fixes, and they’re less tolerant of fixes that come without their input. Distressed assets are often tangled in complex capital stacks—think CMBS, mezzanine, EB-5, preferred equity, and private credit—creating negotiation headaches as multiple stakeholders jockey for position. In some cases, lenders have already moved troubled properties into receivership to stabilize operations while restructuring efforts continue. In many situations, lenders are advancing funds while installing new management to preserve value outside foreclosure. The goal is to stabilize the project, then pursue a longer-term solution. Meanwhile, a swelling pool of private capital is chasing distressed deals, betting that today’s turmoil will generate outsize returns for those willing to take on operational and legal complexity.

Receivership and Private Capital Play New Roles

This cycle has reshaped views on receivership. Once stigmatized, many now see it as a practical restructuring tool. Panelists said receivership can preserve value, extend timelines, and better align lender interests. Mason said lenders may fund construction or repositioning efforts. However, they often require trusted third-party management. This approach helps protect collateral while supporting recovery plans.

Meanwhile, private debt buyers continue hunting distressed opportunities. Rising distress has expanded the pool of available deals. Still, industry veterans warn that many investors underestimate operational challenges.Many buyers seek discounted assets with stable returns. However, executing turnaround plans often proves far more difficult. Private capital adds liquidity, but it also raises execution standards. Buyers pursuing note sales or joint ventures need strong operational expertise.

Why It Matters

The CRE debt crisis has entered a more decisive stage. Lenders no longer rely on routine loan extensions. Instead, they demand credible restructuring plans, early engagement, and sometimes new capital. Panelists said capital stack complexity now shapes many outcomes. Property performance alone no longer determines success. According to CBRE, refinancing activity has fallen while distress indicators have risen. Office properties face pressure, and multifamily distress continues to grow.

Layered debt structures and new private capital sources complicate negotiations. As a result, workouts take longer and outcomes remain uncertain. Some borrowers must dilute equity or surrender control. Others must accept that certain assets cannot support current debt levels. Market observers point to the Sun Belt as a prime example. Pandemic-era overbuilding now collides with weak rent growth. Consequently, lenders and owners must adjust expectations. Aggressive underwriting assumptions no longer hold.

Workouts can succeed when parties collaborate and stay flexible. Strong documentation also improves outcomes. Without those elements, expect more receiverships, note sales, and foreclosures. Today, market participants focus less on delaying problems. Instead, they focus on triage. They must separate recoverable assets from those headed toward liquidation or control transfers.

What’s Next

As 2026 progresses, expect more forced transitions and fewer blanket forbearances. Borrowers who proactively address problems, communicate clearly with lenders, and are open to new partners or management will have the best shot at preserving value. Multifamily distress—long shadowed by office headlines—is likely to accelerate in oversupplied markets like Austin, where new deliveries and rent softness are already putting pressure on property owners. The flow of private capital will continue, but successful navigation of workouts will increasingly hinge on legal discipline and operational experience. Looking ahead, CRE finance professionals anticipate further innovation in deal structures and a gradual culling of assets that cannot support current debt loads, marking a new, more sobering chapter in the workout cycle.