“You can extend as long as you want, but you can’t pretend if there’s no money coming in.”
– Michael Cohen, Brighton Capital Advisors
Why the refinancing story is less about “rates coming down” and more about process, patience, and proving a credible plan to the people who control the outcome.
In a recent episode of Deutsche Bank Research’s Structured Thoughts podcast, our Managing Partner Michael Cohen sat down with Ed Reardon, Head of Securitization Research at Deutsche Bank, for a candid conversation about what commercial real estate borrowers are actually facing as loans mature in 2026.
The framing of the discussion is one most market participants recognize right now: the “two-speed” environment. On one side, new issue CMBS has looked increasingly healthy, with stronger execution and tightening spreads. On the other side, a meaningful set of maturing loans still cannot refinance cleanly, especially in office, where payoff rates have lagged the broader market.
Michael’s core message was simple: the headlines are often brighter than the reality on the ground. Even as capital markets regain momentum, refinancing is still constrained by lender risk appetite, asset level fundamentals, and the friction of the servicing process when a loan is securitized.
Why higher-quality collateral is showing up in CMBS
One of the more interesting dynamics Michael highlighted is that CMBS has been pulling in better borrowers and better assets than it historically did. When banks and insurance companies pull back, even partially, capital seeks a new home. In this cycle, CMBS has benefited from that migration. Michael pointed to a market where recent securitized lending has often featured lower leverage and higher coupons, with borrowers either bringing cash to refinance or choosing CMBS as the most reliable path through uncertainty.
But that “flight to execution” does not solve the other half of the market. It creates a sharper divide between assets that fit today’s credit box and those that do not.
CMBS is an inflexible instrument, and that matters at maturity
Michael described CMBS in practical terms: it is built on “current facts” at origination, but it does not adapt when the world changes. As market dynamics shift, the loan documents do not shift with them, which is why modifications become bespoke, one-loan-at-a-time exercises.
That detail is not academic. For borrowers, it changes the entire playbook. Traditional balance sheet lenders can behave relationship-first. CMBS servicing is process-first, and frequently fee-driven. The special servicer is not your relationship manager, and the borrower typically has never seen the pooling and servicing agreement that governs what the servicer can and cannot do.
Michael’s takeaway is the opposite of what many borrowers assume the first time they encounter this system: you do not “force urgency” in CMBS by escalating your tone. You win by preparing early, presenting a plan the servicer can defend to the trust, and making it easy for the decision makers to say yes.
What’s stressing first: office gets the headlines, but watch multifamily and hotels
Office remains the most visible stress point, but Michael was careful not to reduce the market to a single property type. He emphasized three areas to watch closely: office, multifamily, and hotels.
Office: Michael’s view was that the market is still sorting itself out. Class A has shown signs of stabilization in certain pockets, while a large portion of suburban office will be slower to lease and slower to recover. The bigger structural issue is capacity: even if conduits are limiting office concentration in new pools, there is still a lot of office exposure that needs a “home” in a world where refinancing takeout is limited. Michael called it a “musical chairs” problem.
Multifamily: Multifamily fundamentals remain durable, but leverage is the pressure point. A large volume of multifamily loans refinanced in the 2018–2023 window, and higher debt costs plus valuation resets create real friction at maturity. Michael also noted that political and regulatory factors can change the underwriting story quickly in certain markets.
Hotels: Hotels can look strong on rate, but Michael flagged expense pressure as a key risk. Labor, utilities, and interest carry have all moved higher. Many properties that survived the COVID era did so through extensions and reserve usage, which can leave thinner cushions if demand softens.
“There are problems, but there are fixes”: what a workable solution looks like
A theme throughout the conversation was that distress does not automatically mean dead-end. Michael shared an example of a complex suburban office situation where the path forward required creativity, sequencing, and fresh equity. The specifics matter less than the structure of the solution: isolate underperforming collateral, monetize what can be sold, reduce and recast the remaining debt, and make the case for keeping the coupon while improving the credit story.
The point is worth underlining: workouts are possible when a borrower brings two things that servicers respond to.
A credible plan.
And real money.
Michael later summarized this even more directly when discussing office workouts: the two biggest things a borrower must bring are “a plan and money.”
The process reality: start early, expect friction, control what you can
If there is one repeated operational warning in the interview, it is timing. Michael stressed that borrowers who succeed typically begin six to nine months ahead of maturity, not after maturity.
He also gave borrowers a mental model for how to behave once a loan is in motion: patience and stamina. He described the posture you need as “a heart rate of a sloth,” because servicers can be deliberate, and not always because the file is complicated. Incentives matter. Special servicing fees are governed by the pooling and servicing agreement, and a servicer has no structural reason to rush if time increases fees.
That is why we consistently tell borrowers to focus on what they can control:
- Organize the story early, including updated property performance, leasing risks, and a realistic business plan.
- Identify what you can contribute and where you need flexibility.
- Put everything in writing and assume multiple parties will review it.
- Treat the process like an institutional credit memo, not a relationship conversation.
Michael also warned against a tactic borrowers sometimes consider when they are trying to “get attention” from the system: intentionally stopping payments to trigger special servicing faster. His view was blunt: do not do that. In this environment, the consequences can be asymmetric, especially when cash flow sweeps and waterfall mechanics start starving the property of operating liquidity.
Why “hope notes” are scarce, and what lenders are thinking instead
One of the more important capital markets points in the discussion was the limited use of principal forgiveness or AB note structures in this cycle. The idea is familiar from the GFC playbook, but Michael’s read is that lenders are reluctant to crystallize losses early when they believe time, process leverage, or a sale can improve their recovery.
In practice, that can translate into a message borrowers hear more often than they expect: “Go sell it, and we will finance the next buyer.” Michael’s pushback is that if the borrower is doing the work to produce an exit, the economics of that process need to be more balanced, so the borrower is not taking an additional hit simply to improve the lender’s outcome.
Our takeaway at BCA
We built Brighton Capital Advisors for this exact gap between what the market assumes should happen and what the CMBS process actually rewards.
This episode reinforces what we see every day: outcomes improve when borrowers treat maturity planning as a process problem, not just a rate problem. The borrowers who win are early, organized, realistic about value today and value tomorrow, and prepared to support a modification with a plan that can be defended inside the trust.
