Looming Wall of Loan Maturities: The buildings referenced below in yellow have sold within the previous five years. Typical loan length is three to five years at which point the total balance of the loan is due, forcing owners to attempt to refinance. As a result of high interest rates and lower building values, owners are forced to reinvest an additional 20%-30% equity in these assets or lose the property to the bank. Source: Building data sourced from Tributary, MLS and CoStar TRIBUTARYRE.COM W ith persistent high interest rates and falling values in many urban commercial real estate asset types, the industry faces a major challenge in 2024 and years to come: a looming wall of hundreds of bil- lions of dollars in loan maturities. This complex issue promises to have ripple effects far beyond the real estate industry and has the potential to impact the broader economy in a number of crucial ways. The lack of robust capital markets transactions in the past 12 months in combination with lender flexibility in extending loan terms has culminated in a large concentration of modified loans – previously maturing in 2023, now set to mature in 2024 and beyond. Known as “extend and pretend,” this has pushed the amount of CRE mortgages matur- ing this year from $659 billion to $929 billion: a 40% increase.[1] As this wall of maturities comes due, we can expect refinancing in some cases, but we should also antic- ipate many assets going into default and, consequently, receivership. This specter not only looms large over property owners, but tenants can often find themselves caught in the crossfire. Understanding the intrica- cies and potential impacts of receiv- ership is crucial for both landlords and tenants alike. n Understanding default: The unravel- ing process. In commercial real estate, a loan default occurs when property owners fail to meet loan obligations, often after a great deal of lender flex- ibility and attempts to reconcile (no one really wants to be in this posi- tion – banks aren’t in the business of being landlords). A default can stem from various factors, such as eco- nomic downturns, mismanagement or unexpected market fluctuations. If a borrower does default, many lend- ers turn to receivership as a next step and alternative to costly foreclosure proceedings. A court-appointed, third-party receiver is brought in to navigate the loan terms in an effort to best conserve asset value on behalf of both the lender and bor- rower. The default process timeline involves filing a legal dispute and seeking out a qualified receiver who is ultimately agreed upon and appointed through the court. The length of a receivership can range INSIDE Promising opportunity PAGE 8 Mixed-use submarkets and move-in ready spaces present a promising opportunity March 2024 PAGE 14 PAGE 25 Industrial evolution Is the industry able to respond and shape the trajectory of our industrial narrative? Solar flare Local and state governments implement building performance standards programs Please see Cullen, Page 32 Andy Cullen Partner and managing broker, Tributary Real Estate CRE receivership: Protecting tenant interests