Pretend and Extend Is Over.
Loans written at 3% are being refinanced into a world of 7% debt. The property didn't change. The math did.
Millions of square feet of commercial real estate are facing the same problem right now.
Loans written at 3% and 4% are being refinanced into a world of 7% and 8% debt.
The property didn’t change.
The payment did.
For the last few years, many owners have been running out the clock — hoping rates would fall, hoping lenders would grant one more extension, hoping the market would bail them out.
Some got lucky.
Most are still waiting.
The problem is that waiting has a cost now.
Lenders that were flexible in 2022 and 2023 are becoming less patient. Loan committees that once approved extensions without much resistance are asking harder questions. And the math that worked when money was cheap doesn’t work at today’s rates.
What started as a temporary solution has quietly become a major issue across commercial real estate.
The Refinance Problem Nobody Underwrote For
Many of these properties were acquired between 2020 and 2022, when borrowing money at 3% felt normal and refinancing seemed like a formality.
Loans were written at historically low rates.
The plan seemed straightforward:
Buy the property.
Improve the property.
Increase value.
Refinance later.
At the time, refinancing looked like a formality.
Today, it’s a completely different conversation.
A loan that once carried a 3% or 4% interest rate may now refinance closer to 7%, 8%, or higher, depending on the asset, leverage, and lender appetite.
That changes everything.
A property that comfortably supported debt service a few years ago may struggle with today’s payment.
Cash flow that once looked healthy suddenly looks thin.
Some owners discover that even if a lender is willing to refinance, the proceeds don’t fully pay off the existing balance.
Others discover there isn’t a lender willing to make the loan at all.
The property didn’t change.
The math did.
The Asset Isn’t the Problem
The zoning is still there.
The power is still there.
The infrastructure is still there.
The location is still there.
What changed is the cost of capital.
For years, rising values and cheap money covered a lot of mistakes.
Today, buyers and lenders are underwriting differently.
They’re focused on income, debt coverage, replacement cost, vacancy risk, and exit strategy.
The era of paying tomorrow’s price today is over.
A buyer who could justify a certain number when debt cost 4% may not be able to justify that same number when debt costs 8%.
That reality is showing up in valuations across the market.
What Sellers Need To Hear
Most owners already know what’s happening.
They know the refinance quote came in higher than expected.
They know the lender isn’t offering the same flexibility as before.
They know the monthly payment is about to increase substantially.
What they’re struggling with is accepting the adjustment.
Nobody likes watching equity disappear.
Nobody likes accepting that a property purchased in a low-rate environment may be worth less in a high-rate environment.
But rates matter.
A lot.
The difference between financing at 3.5% and financing at 7.5% can completely change what a buyer can pay and what a property can support.
That’s why so many owners are facing difficult decisions today.
Not because the building failed.
Not because the location failed.
Not because the zoning failed.
Because the debt structure that worked in 2021 doesn’t work in 2026.
The market has adjusted.
The cost of money has adjusted.
And waiting doesn’t change either one.
If Any Of This Sounds Familiar
If you’re dealing with a maturing loan, a difficult refinance, vacancy issues, or a property that simply isn’t moving, now is the time to understand your options.
The owners who have the most flexibility are usually the ones who address the problem early.
Not when the loan matures.
Not when the lender issues a deadline.
Not when the property is already in distress.
Early.
I’ve worked with owners facing loan maturities, lender pressure, declining values, and properties that no longer fit the market they were purchased in.
Sometimes there’s a path to refinance.
Sometimes there’s a path to restructure.
Sometimes the best option is to sell before the lender forces the issue.
The sooner you understand your choices, the more choices you’ll have.
Call or text 818-430-8497.
G.L. Mittin
Commercial Real Estate
Los Angeles
CA DRE 01177574 at 818-430-8497
Commercial Real Estate | Los Angeles
📘 Author of
Own Your Building with 10% Down
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Gary Mittin is a licensed commercial real estate broker, not a lender or financial advisor. SBA loan referrals and others are made to licensed participating lenders and CDCs. Program eligibility varies. Gary Mittin does not provide legal, tax or accounting advice and recommends you obtain such advice before entering into any real estate transaction.
The asset was never the problem, it was always the capital structure built around it. Most of the distress in commercial real estate right now isnt about bad buildings, its about good buildings underwritten to a rate environment that no longer exists.
The pretend and extend only works until the lenders patience runs out or the loan matures. Both are now arriving simultaneously.