REAL ESTATE NEWS

Sponsors facing a wall of looming commercial loan maturities are finding that creativity—not luck—is what's keeping deals alive in 2026. With roughly $625 billion coming due this year, according to estimates, capital markets professionals are engineering new structures to navigate a tighter rate environment and bridge the gap between old and new financing terms.

In Washington, D.C., Berkadia's Patrick McGlohn, a capital markets expert whose team arranged $1.572 billion in commercial property loans across 52 transactions in 14 states last year, says discipline has returned to the market—but so has liquidity.

"I'd call the current environment highly unusual, but not completely unprecedented," McGlohn told GlobeSt.com. "We've seen stress before—early 1990s, the GFC, early COVID—but the mix of factors this time is unique."

That mix includes a rapid rate-tightening cycle following more than a decade of ultra-low borrowing costs and a record wave of loan maturities originally underwritten during that era. The Mortgage Bankers Association projects $875 billion in commercial mortgages maturing in 2026, after nearly $957 billion in 2025 and $652 billion in 2027, signaling that the pressure won't ease anytime soon.

Multifamily owners, McGlohn said, are somewhat better positioned because the agencies face only a small near-term wall—about $39 billion or four percent of their multifamily and health care mortgages mature in 2026—but the broader market is still contending with billions in upcoming maturities.

At the same time, construction and operating costs remain elevated and rental growth has cooled in many cities as new supply comes online.

"Sponsors are getting hit from both sides: higher debt costs and more conservative underwriting, while NOI growth is slowing or stalling," he said.

For many borrowers, the main challenge is the growing disconnect between the coupons on older loans and today's refinancing rates.

"Many fundamentally good assets don't refinance cleanly without fresh equity or more creative structures," McGlohn said.

"In prior cycles, the stress was more clearly about asset quality or demand; today, a lot of the pressure is a function of how quickly the capital markets math changed, compounded by rising costs and softer rent growth in certain submarkets."

Berkadia's D.C. Metro team has been meeting these challenges head-on by pairing traditional agency debt with structured capital to avoid forced sales or recapitalizations on unfavorable terms. McGlohn pointed to several recent examples. In one case, Berkadia arranged an agency-plus-preferred-equity solution totaling roughly $100 million for a $130 million Class A multifamily asset in the Southeast facing a maturing loan.

"We canvassed both the debt fund and pref equity markets and ultimately partnered with a public REIT as the preferred equity provider," McGlohn said. The result, he noted, was a lower-cost, more flexible structure that gave the client five years to continue building value rather than selling into a choppy market.

Another transaction combined agency debt and preferred equity totaling about $130 million for a $165 million workforce-housing property in the Mid-Atlantic.

"Again, we canvassed the debt fund and preferred equity markets and, in this case, landed with a money center bank as the preferred equity provider, pricing the preferred in the single digits at roughly 80% last dollar," he said.

The unusual aspect, according to McGlohn, was the 15-year duration, a long-term at relatively low-cost capital and higher leverage, allowing the sponsor to maintain flexibility while executing its value-add strategy.

"You don't often see that combination of duration, leverage, and flexibility in today's market," he said.

In yet another case, Berkadia is refinancing an $80 million construction loan for a national developer whose property remains less than 50% leased. Despite the slower activity, McGlohn said lenders were surprisingly open to refinance terms.

"What's notable here is that, despite the asset not yet cash flowing, the debt fund market was exceptionally aggressive on the refinance, purely on the strength of the sponsor and the real estate," he said.

"We ultimately identified multiple lenders willing to be unusually accommodating on structure and covenants—to a degree of flexibility we frankly haven't seen before in this kind of situation. I can't share all the specifics, but it underscores how, even in a tougher rate environment, the right combination of sponsor, asset quality, and story can attract very creative capital."

Across all three cases, McGlohn said, the message is clear: capital hasn't disappeared—it has evolved. "The structures that are getting done are highly tailored to the sponsor's business plan and the realities of today's lending environment," he noted.

Even with the challenges, McGlohn remains cautiously optimistic.

"We're past the peak of the rate shock, and while underwriting is still disciplined, there is plenty of debt capital available today for the right deals—agencies, banks, life companies, debt funds, and structured capital providers are all actively lending," he said.

"I don't expect a sudden return to the ultra-low-rate era, but I do think the current, more challenging phase is gradually easing rather than getting worse."

As the Federal Reserve nears the end of its rate-cutting cycle and policy becomes clearer, McGlohn expects more price discovery, narrower bid-ask spreads and greater confidence from lenders and borrowers alike.

The ingredients for a healthier recovery are in sight, he said. This includes rate stability, property value stabilization and a pickup in transaction volume.

"In other words, we're in a more selective market, not a frozen one," he said.

"There's ample capital on the sidelines and in the market already—it's just being more discerning. As visibility improves, that capital will continue to come off the sidelines and compete harder for quality multifamily opportunities."

Source: GlobeSt/ALM