The Refinance Wall: How Landlords Can Navigate Tightening Credit

The commercial real estate sector is heading toward a refinancing bottleneck. Billions in debt maturities are set to hit the market in the next 18 to 36 months, and landlords holding properties with loans originated during the low-rate era will face a very different lending environment. Banks are cautious, debt funds are selective, and bond markets are pricing risk with a sharper pencil than in years past. For landlords, the question is not whether refinancing will be more difficult, but how to proactively position themselves so they do not end up trapped in the refinancing wall.

Let’s walk through how to get it right.

The Maturity Wave and What Lenders Expect

Most loans coming due today were underwritten between 2019 and 2021, a period marked by cheap capital and aggressive loan-to-value ratios. Lenders leaned heavily on interest-only structures, underwrote rent growth that now looks overly optimistic, and stretched leverage in ways that today’s market simply won’t replicate. The result is that landlords are staring at paydowns of 10%–25% of principal just to meet today’s conservative underwriting standards.

Lenders today are scrutinizing net operating income trends more aggressively than ever. Falling valuations, paired with higher debt service coverage requirements, are pushing many properties out of refi range. Even well-performing assets are not immune, as debt costs have climbed far beyond what their original business plans anticipated. A stabilized multifamily property that penciled easily at 65% LTV three years ago may now only qualify for 55% with current debt terms.

The landlord who walks into a refinancing meeting with only last quarter’s rent roll will get sidelined quickly. Banks and debt funds expect forward-looking analysis. Stress-tested pro forma rent rolls, expense assumptions aligned with current inflationary pressures, and a clear story around tenant retention are all baseline requirements. Lenders are looking not just at today’s numbers but also at resilience under multiple stress scenarios.

Early Engagement as a Defensive Strategy

Waiting until a loan matures before opening refinancing discussions is a recipe for distress. Lenders want to see that landlords are monitoring maturities at least 12 to 18 months ahead. That window allows time to negotiate early extensions or modifications rather than waiting for maturity pressure to set in.

Landlords who approach lenders early can often secure short extensions at favorable terms, especially when they can demonstrate strong property performance and tenant stability. Even a one- or two-year maturity push can buy valuable time for interest rate relief or market rent growth. Early engagement also positions landlords as proactive managers rather than reactive borrowers, which can weigh heavily in lender decision-making.

Another benefit of early dialogue is the ability to gauge whether the incumbent lender intends to roll the loan forward or whether a property will need to be shopped in the broader capital markets. Many banks, under balance sheet pressure, are quietly signaling they won’t be able to extend loans they originated just a few years ago. Identifying this reality with a year or more of runway is critical.

Partial Paydowns and Equity Recapitalizations

For many landlords, refinancing without some form of equity infusion is going to be unrealistic. The choice is whether that comes in the form of a partial paydown from reserves, a capital call to existing partners, or a recapitalization with new investors.

Partial paydowns are becoming a common ask from lenders. In practice, that might mean coming to the table with 10–20% of principal at the time of refinancing. While that can be painful, landlords with sufficient liquidity should view it as the cleanest way to move forward, especially when paired with a short extension that allows time for values to recover.

Where liquidity is tight, equity recapitalization is a viable alternative. Bringing in a preferred equity partner or recapitalizing with a mezzanine lender can bridge the valuation gap. Preferred equity is often less dilutive than a full joint-venture recapitalization and can provide the necessary dollars to secure new senior debt without giving up majority control.hether a system qualifies under energy-efficient standards, which opens the door to parallel deductions.

The Role of Mezzanine and Bridge Debt

Debt funds and specialty finance groups are filling the gap left by cautious banks. Mezzanine debt and bridge financing are playing a critical role in helping landlords refinance properties that no longer pencil under senior loan underwriting. These products are expensive—spreads are significantly wider than senior debt—but they are often the only way to restructure the capital stack without selling at a discount.

The key for landlords is understanding how much risk they can absorb. Layering mezzanine debt on top of a strained property cash flow can backfire quickly if performance softens. Lenders providing mezz debt are acutely aware of this and will typically demand tight covenants and active reporting. That said, for properties with a strong rent roll and stable tenants, mezz debt can be the lifeline that keeps ownership intact until valuations stabilize.

Bridge loans are another tool, particularly for landlords who believe they can execute a near-term business plan—leasing vacant space, completing deferred capital projects, or marking rents to market—that will meaningfully improve the property’s refinance profile within 24 to 36 months. These loans often come with higher fees and floating rates, but they provide the flexibility to avoid a distressed sale.

Extension Negotiations: Terms That Matter

When negotiating extensions, landlords need to look beyond just maturity dates. Extension terms often come with new reserve requirements, cash sweeps, or performance hurdles that can significantly impact property operations. Some lenders are requiring upfront deposits into tax, insurance, or capital expenditure reserves as a condition of extension. Others are inserting cash sweep triggers if occupancy falls below a threshold.

Sophisticated landlords are negotiating these terms as carefully as they would the interest rate. A two-year extension looks attractive until a cash sweep diverts every dollar of free cash flow into a lender-controlled account. In some cases, offering a modest partial paydown in exchange for lighter reserves or fewer covenants can be a better long-term trade.

Portfolio-Level Strategies

Landlords with multiple assets should not treat maturities as isolated events. Lenders are increasingly evaluating borrower relationships at the portfolio level. A borrower who shows willingness to inject capital into one deal is more likely to get favorable treatment on another. Conversely, pushing a weak asset into default while asking for extensions on others can damage credibility across the board.

Some landlords are taking the opportunity to rebalance portfolios by selectively disposing of non-core assets to generate liquidity for paydowns elsewhere. Even in a slower transaction market, well-located, stabilized assets are trading. Using those proceeds strategically to preserve higher-growth assets may be the most rational move.

Another approach is cross-collateralization, where equity from one property supports refinancing on another. Not every lender will entertain this structure, but for landlords with diverse portfolios it can create flexibility that individual asset refinancing cannot.wnership, you can’t depreciate what you don’t own. Evaluate your procurement method before committing.

Preparing for the Next Cycle

The refinancing wall is not just a short-term challenge. It is forcing landlords to rethink how they structure debt going forward. The days of maximum leverage with minimal reserves are behind us, at least for the foreseeable future. Expect lenders to maintain tighter underwriting standards even after interest rates moderate.

Landlords who adapt now—building stronger balance sheets, diversifying capital sources, and stress-testing every loan scenario—will be positioned to capitalize when distress opportunities emerge. The refinancing crunch is painful, but it also reshapes the competitive field. Those with liquidity, lender relationships, and discipline in structuring debt will emerge stronger.

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