In Part 2 of the Commercial Real Estate Secrets podcast, Brighton Capital Advisors Managing Principal Michael Cohen expands on the realities borrowers face once market stress meets inaction. While Part 1 explored the fundamentals of CMBS and the servicing framework behind it, this segment focuses on liquidity, distress across property types, and the consequences of waiting too long to open a dialogue with a servicer.
“The secret here is communication. If you wait too long, the options you had before are gone.”
– Michael Cohen, Brighton Capital Advisors
PART 2
Part 2 shifts from structure to timing. Market dynamics in cities like Denver and Chicago are shaping borrower outcomes and why proactive engagement is the most important variable a CMBS borrower controls. Behind every troubled loan is a sequence of decisions, deadlines, capital demands, and missed opportunities that compound when a borrower delays action. This episode is about understanding those pressure points before they become irreversible.
Liquidity at the Top and Stress Everywhere Else
Cohen begins with a striking contrast. At the top of the market, Class A assets with prime locations continue to perform. There is ample liquidity, competition from well capitalized buyers, and lenders who are still comfortable financing these properties with conservative leverage. These assets benefit from a clear flight to quality.
Class B properties tell a different story. Even a single lost tenant can disrupt refinancing or trigger a review by a servicer. Older buildings and suburban offices face structural questions about viability and cost. As Cohen notes, anything built before the mid 1980s may also carry environmental hurdles that make redevelopment or demolition impractical. These challenges layer into a broader national trend of uneven demand and stressed capital stacks.
Denver and the Rising Tide of CMBS Distress
Denver becomes one of Cohen’s most vivid examples of early and widespread CMBS strain. According to the data he shared, Denver has one of the highest percentages of office properties in special servicing among major U.S. markets, with significant portions of its CMBS office balance operating below a 1.0 debt service coverage ratio. Multifamily is also showing signs of pressure, with more than one hundred sixty properties on watchlists and additional delinquencies building.
Hospitality is experiencing similar headwinds. A meaningful share of Denver hotel loans are watchlisted or below a 1.0 DSCR, indicating that revenues are not keeping up with debt obligations. Cohen explains that many hotels received extensions during COVID that allowed brands and lenders to defer capital improvements, but those reserves are now depleted. With franchisors reinstating brand standards and lenders demanding updated performance, many hotel owners are facing difficult choices without easy options.
Why Distress Is Emerging Slowly Instead of All at Once
Many borrowers assume a wave of distressed sales will eventually reset values. Cohen pushes back on that expectation. Regulators and banks are deliberately avoiding rapid, mass dispositions to prevent a downward spiral in pricing. Instead, institutions are releasing loans and assets in smaller groups that attract bidding from private equity firms with significant dry powder.
This controlled release keeps pricing more stable and prevents the market from sliding into a panic. But for investors hoping for sudden bargains, Cohen cautions that patience is essential. A good deal can quickly turn bad if neighboring properties fall into distress or if lenders tighten terms further.
The Most Dangerous Mistake: Waiting Too Long
Across the episode, Cohen returns to one central theme: timing. Borrowers who wait until maturity, default, or a cash flow crisis severely limit their options. CMBS borrowers have fewer rights than they often expect, and their leverage declines with each passing month.
Cohen explains that borrowers who approach special servicing late often find that earlier opportunities for flexibility are no longer available. By the time a file is transferred to special servicing, the servicer has a narrower set of tools and little incentive to offer terms that could have been considered months earlier. Preparation and early communication are how borrowers protect themselves from this scenario.
Why Preparation Is the Borrower’s Best Defense
Borrowers cannot change the structure of CMBS, but they can change how prepared they are when a loan enters a period of stress. Cohen describes Brighton’s work as ensuring clients understand what to expect, what their documents allow, what fees they may incur, and what risks they must avoid. This includes working closely with counsel to prevent unintended recourse exposure and building a complete package that servicers can evaluate without delays.
As Cohen puts it, preparation means creating a workout on the borrower’s terms. By understanding the parameters in advance and presenting a credible plan, borrowers improve the likelihood of receiving a modification or extension that aligns with their goals.
Brighton Capital Advisors: Access and Credibility Where It Matters Most
Cohen concludes with the insight that defines Brighton’s role in the CMBS ecosystem. Brighton’s advantage is access. Over years of delivering complete and well reasoned proposals, the firm has built credibility with master servicers, special servicers, and controlling class holders. These parties sit in different organizations and each influences the outcome of a loan. A package that cannot be socialized across all three will fail.
Brighton works at the intersection of these decision makers. The firm understands the internal workflows of each servicer, the criteria controlling class holders apply, and the way proposals must be structured to move through the system efficiently. This access, paired with the firm’s advisory approach, allows borrowers to navigate a process that can otherwise feel opaque and stacked against them.
For Borrowers Facing CMBS Challenges
Whether a borrower is dealing with stuck reserves, a cash flow sweep, a blocked release, a stalled assumption, or a default they do not fully understand, the message is the same. Do not wait. Engage early. Understand your documents. Build the right advisory team. Timing and preparation shape outcomes more than the property itself.
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