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CRE Lenders Move From Extensions to Foreclosures

CRE Lenders Move From Extensions to Foreclosures

Banks and lenders are finally cutting losses on troubled commercial real estate loans after years of extensions.

Nina Dale
May 20, 2026

In partnership with

Good morning. CRE’s long-awaited cleanup is finally underway. After years of extending troubled loans and hoping values would recover, lenders are now unloading distressed debt, foreclosing on properties, and accepting steep losses to reset the market.

🎙️This Week on No Cap: Michael Van Der Poel, Founding Partner at ACRE, breaks down how a post-GFC workforce housing thesis grew into a global platform spanning the US, Europe, and Asia. (Thanks to our podcast sponsor, Henry)

CRE Trivia 🧠

Which major U.S. city famously operates without a formal zoning code?

(Answer at the bottom of the newsletter)

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Market Snapshot

S&P 500

GSPC

7,353.61

Pct Chg:
-0.67%

FTSE NAREIT

FNER

837.77

Pct Chg:
+0.38%

10Y Treasury

TNX

4.661%

Pct Chg:
+0.038

SOFR

30-DAY AVERAGE

3.62%

Pct Chg:
-0.00

*Data as of 5/19/2026 market close.

Distress Cycle

CRE Lenders Move From Extensions to Foreclosures

CRE lenders are finally moving past years of delaying tough decisions, unloading troubled loans and foreclosing on distressed properties as the market reset gains momentum.

Distress hits the market: After years of extending troubled loans, lenders including Goldman Sachs and Deutsche Bank are now selling distressed debt at steep discounts or foreclosing outright. Shanghai Commercial Bank recently sold debt tied to a stalled Manhattan condo project at an 85% discount, underscoring the pressure to clear nearly $132B in distressed CRE debt.

Office pain deepens: Office properties remain at the center of the distress, especially older buildings losing tenants to newer space. Distressed office sales jumped 45% in the first quarter, while CMBS foreclosures hit their highest level since the post-financial crisis era. Deutsche Bank recently moved to foreclose on Hackman Capital’s Kaufman Astoria Studios loan, and lenders behind LA’s Radford Studio Center are pursuing a discounted sale to Netflix.

Multifamily lenders pull back: The reset is also hitting apartment lenders exposed to oversupplied Sun Belt markets. Ready Capital sold a pool of apartment loans at a roughly 30% discount and is seeking buyers for $1.5B in legacy CRE debt, while some lenders are increasingly taking over troubled properties and repositioning them directly.

Recovery signals emerge: Even with distress elevated, parts of the market are stabilizing. Commercial mortgage originations are expected to rise this year, led by multifamily, industrial, and retail activity, while banks are slowly increasing lending again as investors spot new opportunities.

➥ THE TAKEAWAY

The CRE reset is finally here: Painful write-downs and foreclosures may sting in the short term, but clearing distressed assets could help revive deal activity and lay the groundwork for the sector’s next recovery cycle.

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✍️ Editor’s Picks

Feeder funds: Turn your investor network into a repeatable, structured channel for raising capital into your deals. (sponsored)
Rate reality: Builder sentiment rose modestly in May as some buyers reentered the market, though high mortgage rates, affordability pressures and rising construction costs continue to limit housing demand.
Digital spinoff: Blackstone raised $1.75B through the IPO of BXDC, a new pure-play data center REIT that separates its fast-growing digital infrastructure strategy from BREIT’s diversified real estate portfolio.
AI in CRE is mostly noise: AI.Edge from the A.CRE team cuts through it with monthly training on the tools and workflows CRE pros are actually using. (sponsored)
Inflation alarm: Economists are warning inflation could climb as high as 6% by fall, driven by rising energy prices, higher Treasury yields and geopolitical uncertainty that may further pressure CRE markets.
Capital boost: The SBA is doubling the combined limit for its 7(a) and 504 loan programs to $10M, expanding access to growth and expansion capital for small businesses and manufacturers.
Lender crackdown: The USDA revoked ten lenders from its rural lending program after identifying roughly $620M in delinquent loans tied to irresponsible and noncompliant practices.

🏘️ MULTIFAMILY

Rent reckoning: Major landlords agreed to pay $218M to settle allegations tied to RealPage’s rent-setting software and will stop using nonpublic data to help determine apartment pricing.
Rental squeeze: Zillow ranked Providence as the nation’s hottest rental market this summer, driven by rising rents, low vacancies and limited concessions across supply-constrained cities.
Campus demand: U.S. student housing pre-leasing reached 68.2% for Fall 2026 by April, outperforming the market’s long-term average as demand remains strong near major campuses.
Debt divide: Private credit in multifamily is gaining support as lenders emphasize asset-backed underwriting and property cash flow, distinguishing it from riskier corporate direct lending models.

🏭 Industrial

Power play: NextEra plans to acquire Dominion in a $67B merger aimed at scaling power generation and grid capacity as AI-driven data center demand accelerates across the U.S.
Selective buyers: Owner-users and opportunistic investors are driving industrial transactions as softer pricing and reduced competition create buying opportunities in major logistics markets.
Bay bet: Harbor Associates acquired an $81M Orange County small-bay industrial campus, betting on near-zero vacancy and resilient demand for AI-resistant tenant space.
Storage scale: White Label Storage surpassed 300 self-storage facilities under management as the company expands its tech-driven platform and AI-powered revenue tools.

🏬 RETAIL

Retail scarcity: A thin retail construction pipeline is keeping space availability near historic lows, even as tenant demand and leasing momentum begin to soften.
Convenience wins: Retail real estate is shifting toward convenience-focused concepts like quick-service dining, fitness and healthcare as consumers prioritize speed, service and everyday accessibility.
Retail rebound: Chicago retail is rebounding post-pandemic as quick-service restaurants, medical tenants and tight vacancies drive renewed leasing activity across key shopping corridors.

🏢 OFFICE

Legal footprint: Law firms accounted for nearly 22% of office leases above $100/SF as demand for premium workspace continues to fuel the sector’s flight to quality.
Office reset: Tishman Speyer secured a loan extension for its Long Island City office complex after the property’s value fell 44% amid major tenant vacancies and refinancing challenges.
Debt drift: Dilweg appears to be behind on its $68.5M mortgage tied to Atlanta’s 101 Marietta office tower, which has been pulled from the market amid refinancing uncertainty.

🏨 HOSPITALITY

Pitchside shortfall: New York hotels are seeing weaker-than-expected World Cup bookings, with industry players hoping for a last-minute demand boost before kickoff.
Caribbean growth: Driftwood Capital is expanding its luxury hotel strategy across the Caribbean and Latin America, targeting select markets while pursuing value-add and repositioning deals.

📈 CHART OF THE DAY

Nearly all AI-driven investment growth since 2023 has come from a small group of mega-cap firms—primarily Amazon, Alphabet, Microsoft, and Meta—while smaller AI-positive firms have contributed very little.

CRE Trivia (Answer)🧠

Houston, TX. Instead of city-wide zoning laws, the city regulates development through a combination of private deed restrictions, subdivision ordinances, building codes, and public-nuisance laws.

CRE Lenders Move From Extensions to Foreclosures

Banks and lenders are finally cutting losses on troubled commercial real estate loans after years of extensions.

CRE Trivia 🧠