Preparing for 2026 Commercial Real Estate Refinancing

“The road ends here, right? We gotta do something about this.” — Kyle Paxton

In this episode of Your CPA’s Take on Real Estate, host Daniel Roccanti and Kyle Paxton talk through commercial real estate refinancing heading into 2026, why roughly 17% of all commercial debt is coming due this year, and the timeline owners should be following to get ahead of it.

The conversation covers which property types are facing the most pressure, the options available when a straight refinance isn’t in the cards, and exactly what lenders are looking at when they evaluate a deal today. Daniel and Kyle also lay out a month by month game plan for owners with debt maturing in the next year or two.

Resources

• James Moore Real Estate Industry Page
• Your CPA’s Take on Real Estate YouTube Channel
• Watch: Preparing for 2026 Commercial Real Estate Refinancing

Full Transcript

[00:02] Daniel Roccanti: Welcome to Your CPA’s Take on Real Estate. I’m your host, Daniel Roccanti, back with Kyle Paxton on another video.

[00:04] Kyle Paxton: Always a pleasure, Daniel.

[00:06] Daniel Roccanti: Today we’re going to talk about something that’s pretty important in today’s real estate industry, and that’s preparing for refinancing. A lot of debt is coming due here in 2026.

[00:26] Kyle Paxton: Estimated about 17% of all debt in commercial real estate is basically due this year. That means about one in five properties with debt on it is going to have to think about refinancing. And if it’s not this year, it’s going to be in the next year or two. A lot of real estate was originated at a much lower rate period. When underwriting was done, a lot of assumptions may not hold today, because that was low interest rates, stronger valuations, easier capital availability, and more aggressive rent growth projections. In today’s market, that refinancing discussion needs to happen earlier, and you need to be much more prepared.

[01:21] Kyle Paxton: And Daniel, this is something we’ve been talking about for two years now, right? 2025 was even higher. We’re in this period now where over the last few years, as these things come due, we’ve been able to buy some time. You have extensions, modifications, sometimes short-term bridge solutions that move maturities down the road, but time and time again, the road ends here. We’ve got to do something about this. This is the conversation happening across asset classes. It’s not simply “can I refinance.” It’s what does my property support today, and if there are issues with that refinance process, what else is out there to help infuse additional capital into the deal.

[02:18] Daniel Roccanti: Yes, Kyle, and this is very important because a lot of times when we think refinancing, we think it’s going to be a simple task. Unfortunately that’s not the case. We have a tendency as human beings to procrastinate our problems, so we think, “that’s a next year problem.” And unfortunately, in the real estate world, that’s just not the right thing to do right now. You can really hurt your property by not thinking about refinancing, or just not thinking through your options and making sure you have everything in place.

[02:41] Daniel Roccanti: So let’s talk about what properties are going to be facing the most pressure. Everyone knows office is always the biggest pressure here. It makes the headlines, but it’s very variable. With work from home, there’s a lot of elevated vacancies. If you had an office place where the original loan was before the pandemic, that was a completely different scenario, and things have stabilized a little bit since.

[03:15] Kyle Paxton: Yeah.

[03:16] Daniel Roccanti: With office, I really notice it’s geographically based.

[03:39] Kyle Paxton: Definitely.

[03:41] Daniel Roccanti: Class A still does really well, but if you have an older Class C property, this could be a really tough decision. If you have an office place, you really need to get out in front of any kind of refinancing.

[04:03] Kyle Paxton: Daniel, like you said, office gets the headlines. I see a ton of this in multifamily right now too. We’ve talked about this before, but you’re really seeing the separation in modeling as you get to this refinance time, on who’s doing this right and who’s not, in regards to modeling around risk and the changes of assumptions that have created this refinance headache. It’s across asset classes, somewhat geographically defined. Take us into it a little more, Daniel. Do you mind expanding on why we’re talking about this now? Why does this matter, what’s the impact?

[04:44] Daniel Roccanti: The reason we’re talking about this now is, depending on your asset, we need to really understand how early we need to get out in front of this. What do we need to get ready for? Your lending experience for this refinancing is going to be different than when you first did it or when you last did it. We’ve really got to understand your options. One of the things we have to figure out first is what type of property we have. That’s the first step. If I have an office space right now, that’s already a high pressure asset class. Then I need to look into my asset: is it Class A, is it Class C, is it downtown or in the suburbs, is it in an area people are moving to or away from, what’s my occupancy. There’s a lot going on, and it’s not just office space, though office space gets the highest level of attention.

[05:53] Daniel Roccanti: We’re also looking at multifamily. Talking to developers right now, no one’s high on multifamily. We always need a place to live, so it’s doing better than office space just because everyone has to live somewhere.

[06:11] Kyle Paxton: Everyone has to live somewhere.

[06:15] Daniel Roccanti: But this was really overbuilt right after the pandemic, and rent growth is struggling right now, so no one’s really high, and lenders know this too. Multifamily is better than office fundamentally, but it’s not immune. You really need to get out in front of multifamily. A few other types: hotels are very volatile. Anytime you’re dealing with hotels, you’re dealing with tourism, and a lot of those loans mature all the time, so make sure you’re getting out in front of that.

[07:01] Daniel Roccanti: Industrial has been very strong the last couple years after the pandemic, because of the move to industrial. Fundamentals are much stronger, but a lot of this is maturing, and it’s not as good as you still think it is, because of the overall market. Retail is a bifurcated industry. If you’ve got a good grocery anchored shopping center with strong tenants, you’re probably going to be okay refinancing.

[07:25] Kyle Paxton: Yep.

[07:26] Daniel Roccanti: But if you have retail centers without a good anchor, you’re going to have a much harder time, so you really need to get out in front of that. Go ahead, Kyle.

[07:47] Kyle Paxton: I was going to say, you touched on exactly what I was going to touch on with retail: the grocery anchored center is still the key, an easy process. We see that time and time again in these conversations.

[08:04] Daniel Roccanti: Retail has definitely taken a turn back. After the pandemic, everything moved online, but I think people are more back into wanting to go into the store and try something on. Retail is a tale of two stories: one center is doing great, the next is doing terrible, and it depends on the actual characteristics of that shopping center.

[08:24] Daniel Roccanti: So let’s talk about the options here. Refinancing is going to be the main one, but you don’t technically have to refinance. You have other options, and you might need to use one of them if refinancing isn’t the right fit. Refinancing is the best fit for most properties, especially with stable NOIs, so it’s the cleanest path. It’s what most people want when their debt is maturing. But let’s talk about if refinancing isn’t an option or there are better options. Other options are to extend or modify your current loan. This isn’t a guarantee, and you need to be talking to your lender, but if you’re not quite ready for a full refinance, you can ask for an extra 12 to 24 months before starting that process. The lender might require some modifications or a pay down of principal, but it’s a good way to buy more time for better options when a property isn’t ready for a full refinance.

[09:47] Daniel Roccanti: Taking that a step further, another option is recapitalization. We see this a lot in different-

[09:56] Kyle Paxton: Yeah, deal structure types. This is the best fit when you have senior debt that can’t be refinanced to the current balance, and you have to find capital from somewhere else. Recapitalization can show up in many different forms: preferred equity deals, a cash-in refi, mezzanine debt, joint venture equity, rescue capital, partial asset sales, and in a more distressed situation, a discounted payoff or negotiated sale. There are a lot of shapes and sizes of recapitalization, and we see that a lot in tighter debt environments, where you have to get creative with how capital is infused. If you either can’t extend, or the extension is running out, and refinancing doesn’t make sense, you get into recapitalization territory, where you have to drum up new capital from somewhere to keep the deal going.

[11:16] Kyle Paxton: We do see deals go through that process, especially in this tighter lending environment of 2025 and 2026. Anyone in the real estate space is realizing loan capabilities are not what they used to be. A lot of properties now have multiple layers of debt. You’re not getting 70% like you used to, I’m seeing a lot more 55%.

[11:53] Daniel Roccanti: Yep.

[11:54] Kyle Paxton: So if you’re only getting 55%, you still have 15% to make up a lot of the time, and you have to figure out how you’re going to do that. I’ve seen a lot of mezzanine debt, or going the equity route to find preferred equity. Really what it comes down to is knowing your options, and if traditional refinancing doesn’t fully solve your problem, or only does partially, you need to think about other ways to bring capital into the deal to keep it going. One more point on recapitalization: you’re messing with the capital stack and the current ownership structure, so you have to make sure communication around it is tight, and the impact on returns to your other investors is well modeled and intentional.

[12:40] Kyle Paxton: Something to keep in mind as you go through that process is how it impacts everybody else involved in the deal.

[12:48] Daniel Roccanti: Absolutely. If you’re adding capital or adding equity in different forms, it can really affect the deal, the ROIs, and your originating investors, so you want to make sure you understand that.

[13:00] Daniel Roccanti: Yep. So let’s say it’s finally time for refinancing. How are lenders evaluating deals today? We’ve talked about how there’s a decent amount of commercial real estate debt coming up, but most banks have really tightened what they’re willing to lend, so the underwriting process is much longer. You’re actually seeing a lot more alternative lenders because of this. Right now we’re seeing over 53% of commercial real estate using some kind of alternative lender, where traditional banking is only about 22%. Lending standards have increased across the board, but the demand for new loans is basically unchanged, because that’s just how commercial real estate is.

[14:06] Daniel Roccanti: So really getting out in front of this and understanding what your lender is looking for matters. Your lender is looking at the worst-case scenario. No one wants to actually take your property from you, that’s not the business banks are in. They want you to pay them back and make interest. So they’re asking, “if things get worse, are we protected.” When you’re looking at underwriting, the top things lenders look at are: your debt service coverage ratio, can the asset cover debt service at today’s rate, which is a big difference because today’s rates could be double what you had previously.

[15:07] Kyle Paxton: Easily.

[15:10] Daniel Roccanti: And if you had an interest-only loan, which happened a lot with low interest rates, you didn’t even pay principal down, and now with double the interest rate, that’s pretty significant. So where’s your debt service coverage ratio. Debt yield is another area: how much can your net operating income support each dollar of loan proceeds, how far your actual profits go toward the loan. Another really important one is loan-to-value: what’s the loan amount relative to current, not peak, values. That’s the biggest difference here, because we’re all more optimistic about our own properties than everyone else is. What you think your property is worth right now, not what it was worth when you bought it or got your original loan, versus what a third party with no skin in the game, who isn’t sure you’ll pay the loan back, thinks it’s worth. Another factor is the quality of your net operating income: is it common and recurring, was it boosted. We really want to know the quality of that.

[16:32] Kyle Paxton: Daniel, I’m going to pause you there for a second, because it’s important to loop your CPA in on these things. We deal with banks and alternative lending all the time, we can speak this language and help translate the real estate operator to the bank. We sit in the middle to some degree. Especially with NOI quality, it’s helpful to bring the CPA in the fold to chart out what that’s looked like over time, and add context based on tax returns and other reporting the CPA has issued.

[17:02] Daniel Roccanti: Absolutely. Some other important lender factors are your lease rollover: what percentage of income expires during the loan term. This is really important for office space. Something like multifamily has a lot of turnover, so it matters less, but for office space, when a tenant leaves, especially a big one, it can be really difficult to replace, or you have to put a lot of capital in. They’re also looking at CapEx needs: if it’s an older, Class C property, is there going to be a lot of deferred maintenance. And at the end of the day, they’re looking at the sponsor: do I believe you’re going to do everything in your power to pay this loan back. What’s your net worth, your track record, your liquidity, your willingness to support the asset. The books have to look good, but you also need to look good, because you’re selling yourself in this too. Having a good relationship with a bank or lender is important, because that can be a crucial piece in deciding whether they’re willing to lend, based on believing in you as an individual.

[18:20] Kyle Paxton: The elephant in the room, Daniel, is the relationship game. It’s got to come back to the numbers, and the numbers have to make sense to the bank, but so much of this is relationship driven. We spend a significant amount of time networking with bankers for this reason, and as owners of real estate, you should be doing the same, to build those connections and get the soft comfort that comes with a relationship you’ve built. You’re going to be more willing to lend to somebody you have a strong relationship with over a new face. Relationships matter in real estate no matter what, but especially with your lender.

[19:04] Daniel Roccanti: Yep. So let’s give a bit of a game plan here. Say I have debt maturing, when do I need to start thinking about this? The rule is 18 months before. That seems like a long time, but at the 18-month mark, you need to start getting your financial metrics in order, the ones lenders are going to look at. From 18 to 12 months out, we’re diagnosing the problem: gathering documents, identifying options, and identifying where we need to improve, because we’re going to be giving this information to a lender and updating our valuation, a conservative valuation, not the one from when we bought the property or the one we have in the back of our head, because that’s what your lender is going to use.

[20:19] Daniel Roccanti: About a year out, 9 to 12 months, that’s when the conversation needs to start happening with the lender, so you have about a six-month runway to prepare for that conversation.

[20:39] Kyle Paxton: Hopefully you have an ongoing conversation with your lender already, so you’re always there. I highly suggest that. You don’t just disappear for several years and show back up once every five years, that’s usually not the best approach.

[20:58] Daniel Roccanti: But about 9 to 12 months out, you need to start having this conversation with the lender, when the pressure is the least. You have a lot of time to talk about financials, update your business plan, and talk through options: can we talk about an extension, a modification, what loan value are you going to give me. If it’s going to be a lot less than expected, you need to start talking about that gap. Talking to the lender early gives you as much time as possible, so you’re not rushing to get it done.

[21:40] Daniel Roccanti: About six to nine months out, now we’re actually preparing everything, potentially preparing a few different plans, so you have a couple of strategies in case anything discussed in the prior months goes south. Now you’ve talked to your lender, you know your options, you know your downside: can I do a clean refinance, do I need an extension or modification, or do I need to talk about recapitalization. If they’re only going to give me 55% but I needed 70%, what am I doing with that next 15%, I’ve got to find another plan.

[22:23] Daniel Roccanti: About three to six months out, this is when we’re actually executing whatever needs to be done.

[22:29] Kyle Paxton: This is unfortunately when a lot of people start thinking about it. To your point earlier, the procrastinators.

[22:38] Daniel Roccanti: This is when most people think about it, and the reality is this is the last step. This is when you’re actually doing the refinancing, when the lender is getting the packages and reports. If you were looking at this 18 months in advance, you had at least a year to get ready, to make the numbers better, and to see your options. If you wait until three to six months out, you’re just taking whatever the market gives you, and that’s when a lot of people run into problems, accepting the consequences instead of controlling where their property is going.

[23:17] Kyle Paxton: Daniel, I’ll take us out of here, my friend. What we’re talking about here is very real for 2026. Some owners will refinance, some will extend, some will need an infusion of new capital. This takes many different forms right now, it’s not a one-size-fits-all conversation in 2026. If you’re an owner with debt maturing in the next 18 months, start with your supportable loan proceeds, your current balance, your available liquidity. Chart out the metrics we talked about if you’re not already doing that, so you understand where you’re at in the refinance territory, or if you need to do some recap work. Review your debt schedules, make sure they’re up to date, identify maturities and any loan covenant issues, and start building that package now, before you’re in that last-minute procrastination window.

[24:00] Daniel Roccanti: And just one last thing: remind yourself refinancing is not a one-size-fits-all for everyone, and make sure you’re getting out in front of it 18 months out, or sooner if possible. Sooner is better than later, so when this is coming up, try to tackle it as soon as possible. You’ll be glad you did.

[24:21] Daniel Roccanti: So thanks for listening, and we’ll see you next time.

[24:24] Kyle Paxton: Thank you.

Watch the Full Conversation

For the complete breakdown on preparing for commercial real estate refinancing in 2026, including the full timeline and lender checklist, watch the full episode above.

 

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