Borrowers Appeal to Lenders for Loan Extensions as Maturities Approach

It’s happening. There are an estimated $4.4 trillion of outstanding commercial and multi-family mortgages, according to the Mortgage Bankers Association, and $728 billion of them mature in 2023 amid an incredibly frosty financial market. With high interest rates and economic uncertainty, lenders aren’t handing out refinancings like candy, leaving borrowers to scramble for ways to address impending debt repayments. Of course, property owners want to ride out the storm. Few are eager to hand keys back to the lender, walking away with a loss. Instead, a wave of borrowers is taking a let’s-make-a-deal approach with their lenders and pursuing avenues for loan extensions.

Banks are being receptive to loan extension negotiations. They’re not in the business of managing real estate and are reluctant to take possession of properties. In today’s climate, borrowers are finding that banks are willing to extend maturities or provide blend-and-extend mortgages involving refinancing and new terms, however, it all depends on the asset. A long-term relationship with a bank and an extensive track-record of successful borrowing don’t carry an enormous amount of weight in the current financial climate. It all boils down to metrics: debt coverage ratios, loan-to-value ratios, loan-to-cost ratios. For banks, the properties drive the decision-making when it comes to loan extensions because, in the end, banks want to make sure the loan is within their risk profile. The quality of the asset counts, but its performance and ability to recover in the market matter more.

The investors in these properties have to contemplate the same

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