Still Messier with CRE Loans. So let’s extend and pretend


The culprits are three-fold: the structural collapse of demand in the office market, floating-rate mortgages, and loan maturities amid higher interest rates.

Loans are pulled off the delinquency list if the interest gets paid, or if the loan is resolved through a foreclosure sale with big losses for the CMBS holders, or if a deal gets worked out between landlord and the special servicer that represents the CMBS holders, such as the mortgage being restructured or modified and extended.

This extend-and-pretend is now all the rage because CMBS holders do not want to end up with a half-empty decades-old office tower, which is the gun the landlord holds to the lender’s head.


What Is a Commercial Mortgage-Backed Security (CMBS)?


And many landlords have already pulled the trigger over the past two years by walking away from the loan and the property, losing whatever equity they had in the building, and letting the lender take the remaining loss.

Even the biggest landlords, such as PE firm Blackstone, have been doing just that, even with huge office towers in the middle of Manhattan, 

Wolf Richter for WOLF STREET 2 July 2024

The World’s Empty Office Buildings Have Become a Debt Time Bomb

Bloomberg 23 juni 2023


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