This month alone, $8.6 billion of commercial mortgage-backed security loans are scheduled to come due. That's putting pressure on the property lending system after years of leniency on holders of maturing debt — and leading some industry professionals to expect an increase in foreclosures.
The debt maturities on the 16 loans of $100 million or more begin a wave of large financing coming due this year that's set to peak in October when nearly twice as much as the January amount is scheduled to mature, according to CoStar and CMBS data. The January total of $8.6 billion includes more than $3 billion for affiliates of private equity giant Blackstone, the largest chunk of debt coming due from the most active borrower in the CMBS market this decade.
The swell comes as lenders have for years allowed extensions when loans come due. In 2025, extensions are still largely being granted, but there are fresh concerns that loan servicers will be less likely to continue the practice. That hardened approach could lead to an increase in other types of debt resolutions, including foreclosures, they say.
"We expect servicers to be much more inclined to appoint receivers and foreclose on properties, rather than ink another modification," according to Stav Gaon, head of securitized products research and strategy at investment firm Academy Securities, in a report this week. He also said that "re-default workout dynamics will look different from the way situations played out when loans first defaulted two or three years ago."
Since the year the pandemic hit in 2020, lenders were encouraged to collaborate with borrowers by extending loan due dates. That trend carried into 2022 when the Federal Reserve began aggressively raising interest rates to fight historic levels of inflation.
Extending loan terms was the most popular CMBS modification type in 2024, according to bond-rating firm Fitch Ratings. Over 90% of modified loans by count last year included a short-term maturity extension.
Lower values
However, options other than extensions may now come into play, according to CMBS loan adviser Ann Hambly, founder and CEO of 1st Service Solutions in suburban Dallas, in an interview with CoStar News.
If a CMBS loan fails to pay off at maturity, it is transferred to special servicing, a status where cash-strapped borrowers typically work with lenders on making payments. It also triggers a required new property appraisal. In many cases, those appraisals are coming in at values less than the outstanding loan amount, according to Hambly. For office properties, those values average about 40% less, she said.
That has bondholders holding a large class of CMBS deals facing a potential loss on their investment. This group, called the controlling class, has the right to approve and direct certain actions of the special servicer.
This year Hambly is already seeing the controlling class of bondholders maneuvering aggressively to make deals ahead of final maturity dates, a possible indication that they aren't expecting the status quo to remain in the process.
Some of those modifications are expected to include discounted loan payoffs, or splitting the loan into two notes with one based on the current property value and the second note holding the remainder of the debt. Splitting the loan reduces the potential loss for the lender and bondholders while giving the borrower additional time to realize a return.
Such resolutions are favored over foreclosures or forced sales, but in some cases that harsher option could become more likely. That is particularly an additional risk for loans maturing this year that had previously received an extension, Gaon said.
Extensions are in the works for 85% of the loans maturing this month, with most of it coming from the borrowers exercising built-in extension options, according to CoStar and CMBS data.
The outcome is unknown on $1.33 billion in loans set to mature. If the loans do not pay off on time, they would be transferred to special servicing for default. That’s the expected outcome on a $514.7 million loan backed by a portfolio of single-tenant leased suburban office properties.
The larger the loan, the more clarity there is about the loan’s maturity outcome.
The largest volume of maturing CMBS loans is on four property portfolios owned by affiliates of Blackstone. The four loans total $3.1 billion. Blackstone has requested to exercise available loan extension options on the loans, according to CMBS data. The largest maturing Blackstone loan of $1.53 billion is backed by a portfolio consisting of 43 low-income multifamily properties in Florida.
Last month, bond-rating firm Morningstar DBRS confirmed its ratings on the CMBS deal containing the loan, noting the portfolio’s stable performance as evidenced by improved net cash flow and occupancy rates since debt issuance in 2022.
Blackstone has also requested one-year extensions on three other loans: an $879 million loan on a portfolio of warehouse properties; a $395 million loan on three Northern Virginia multifamily properties; and a $259.7 million loan on an eight-property Sun Belt multifamily portfolio.
Blackstone declined to comment to CoStar News.
Biggest loan due
The largest individual CMBS loan set to mature this month is for $2.08 billion on a 16-property New York City self-storage portfolio. Owner StorageMart requested an extension of the loan for another year, according to CoStar data. Morningstar last reported on the CMBS deal in November, confirming its initial credit ratings on all classes of the bond offering and noting stable performance.
All the loans coming due this month are current in their monthly repayments, and none are currently in special servicing, according to CoStar data.
Even so, Stonemont Financial Group, with an outstanding balance of $514.7 million on a portfolio of 41 single-tenant office and retail properties, requested the transfer of the loan to special servicing as the firm seeks to refinance the properties, according to CMBS data.
CMBS documents show Atlanta-based Stonemont sent a letter to loan servicers, saying the firm was searching for a refinancing or potential sale of the properties but felt it was appropriate to go into special servicing.
The letter was signed by William Markell III, president of Stonemont. Markell did not respond to an emailed request to comment from CoStar News.
Last month, Fitch downgraded the bond offering. The action was driven by a deteriorating tenant base and increase in space listed for sublease in the office properties, which make up 96% of the square footage, according to Fitch.
Other situations with CMBS data showing loans facing uncertain maturity outcomes in January include:
- The 481-unit Grand Plaza Apartments in Chicago is subject to a $186 million Freddie Mac securitized loan. The owner, Treeview Real Estate Advisors, has a requested a short-term extension of 60 days as it works out an exit plan, according to Freddie Mac data.
- A 318,689-square-foot office building owned by RFR Realty and leased to Amazon at 400 Ninth Ave. N in Seattle is subject to a $160 million loan. Last month, Morningstar reported the loan is expected to pay off in April.
- The 272,767-square-foot City Center shopping center in downtown Minneapolis is subject to a $130 million loan. Owner Samsung Electronics in Seoul, South Korea, is still discussing workout strategies for upcoming maturity, according to CoStar data.
- Luckman Plaza, a two-building office complex owned by Mani Brothers Real Estate at 9200 and 9220 W. Sunset Blvd. in West Hollywood, California, is subject to a $130 million loan.
- Cortland Portofino Place, an 812-unit apartment complex in West Palm Beach, Florida, owned by Cortland Partners is subject to a $115 million loan.
- The 394,110-square-foot Club Row office building in New York City owned by APF Properties is subject to a $110 million loan. APF Properties did not respond to a request for additional information.
RFR, Samsung, Mani Brothers, Cortland and APF did not respond to emailed requests for comment from CoStar News regarding their loan maturities.