Rising Refinancing Costs Force New Kind of Workout Conversation Article originally posted on Globe St. on June 11, 2026 Refinancing costs are reshaping how commercial real estate lenders and borrowers talk about troubled loans. Instead of assuming that every asset can be rolled forward with another extension, many players are confronting the reality that debt once priced in the 3 to 4 percent range is now resetting closer to 7 percent or higher, with dramatically different math for both sides of the table. The result is a new kind of workout conversation that pivots less on buying time and more on whether a given business plan, sponsor and capital stack can support today’s cost of money. For literally years now, CRE lenders and borrowers have engaged in a dance. Properties that were financed at ultra-low rates and with high leverage reached maturity and could not qualify for refinancing, at least not without significant additional equity investments. One loan after another received extensions under the magic of “extend and pretend,” which pushed looming problems into the future and kept them off lenders’ balance sheets. That playbook is breaking down as maturities collide with higher rates and tighter underwriting. The Urban Land Institute has released a new analysis noting that approximately $1 trillion in CRE debt comes due in 2026. Panelists at the ULI Spring Meeting said borrowers are “entering a more demanding refinancing environment.” They also said borrowers wanted greater transparency, earlier communications and reasonable business plans to avoid bankruptcy, foreclosure or receivership, according to the organization. The numbers behind these conversations have changed significantly. Loans that once priced between 3 percent and 4 percent are now being refinanced at closer to 7 percent or even higher and that jump is blowing open valuation gaps and making recapitalizations far more challenging. Owners are facing not just higher debt service but also lower proceeds, as lenders apply stricter underwriting and offer less leverage, which in turn forces sponsors to bring in new equity or rethink their strategies altogether. With this backdrop, the focus of workouts is shifting from delay to triage. To manage their decisions, lenders need more and better information to understand the true state of a given loan and property, including operating performance, leasing prospects, sponsorship strength and capital plans. Borrowers who move ahead with redevelopment or repositioning without first involving their lenders can quickly make a difficult situation worse in an environment where missteps are less forgiving. “A lot of times, when I step into a project, there may already have been movement toward that redevelopment without the lender being brought in,” Matthew Mason, executive director, head of real estate fiduciary services in the professional services division at Hilco Global, said during the ULI Spring Meeting.