Loan Modifications Shoot Up, Showing 'Extend And Pretend' Is Alive And Well

Downtown San Francisco Building Landscape

Roughly $162B worth of securitized commercial mortgages were due to mature last year, and many lenders and investors spoke about how the patience with building owners would wear off.

While patience may be wearing thin, it hasn't eroded. Loan modifications on CMBS and CRE collateralized loan obligations more than doubled last year, according to CRED iQ.

Around $20B of these loans, from 542 borrowers, secured loan modifications in 2023, a jump of 150% from 2022, the CMBS loan tracking firm found. The firm expects to see even more modifications this year, with roughly $210B of CMBS loans maturing in 2024.

Some owners of major office and multifamily properties secured several high-profile loan extensions or modifications over the past year, such as RFR Realty agreeing to pay down part of its $783M loan at the Seagram Building in Manhattan.

While the rates of loans that were delinquent or in special servicing rose last year, 13.7% of loans in special servicing were modified, 14% were returned to the master servicer as corrected and 8.4% were paid off, per CRED iQ. The remainder, almost 64%, stayed with the special servicer.

Extensions were the most popular form of modification in 2023, a trend that has continued into this year, per CRED iQ.

Among the largest modifications this year was at One Market Plaza, an office property spanning 1.6M SF in San Francisco’s Financial District. Paramount Group and Blackstone modified and extended the $975M CMBS loan for two years. The loan value is now $850M, per CRED iQ.

JEMB Realty secured a modification and one-year extension on the $255M loan at Herald Center, a 10-story, 250K SF retail and office tower in Manhattan’s Chelsea neighborhood, according to CRED iQ.

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