Gray Capital Report: "Extend-and-Pretend" Has Created a New Wave of Loan Maturities

INDIANAPOLIS, Nov. 19, 2024 /PRNewswire/ -- Gray Capital, a private equity real estate company, has published a new report on an emerging wave of loan maturities in the multifamily market. Drawing from recent work by the Federal Reserve Bank of New York, Gray Capital's report highlights the impact of extend-and-pretend practices among borrowers and lenders, in which lenders extended or modified the terms of loans approaching maturity with the goal of avoiding realized losses.

"Extend and pretend is coming to an end, and as lenders are increasingly incentivized to cease these practices, opportunities to invest in distressed properties will be elevated, but at the individual asset level rather than sector-wide," says Spencer Gray, President and CEO of Gray Capital.

Gray Capital's new report follows its previous research on loan maturities in 2023 and helps to explain how the lending market handled last year's wall of loan maturities and how the blunted effects of 2023's loan maturity wave have been pushed forward, due in no small part to the loan extensions, accommodations, and workouts commonly referred to as "extend and pretend."

Based on data from CoStar and the New York Federal Reserve, Gray Capital projects a new wave of loan maturities in late 2025, early 2026.

"Multifamily-specific data from CoStar shows an October 2025 spike in loan maturities that's 25% larger than the October 2023 surge, which suggests that some of these 2023 loans were extended, contributing to that spike in October 2025," says Matt Bastnagel, Communications and Marketing Director at Gray Capital.

For multifamily borrowers, improved asset performance and a more active sales market preclude much of the losses they could have faced in 2023, and borrowers will also benefit from lower interest rates expected in 2025 and 2026. Despite these projections, interest rates and property prices will not improve as rapidly as needed for many borrowers, especially those who purchased assets at the market's peak in 2021-2022.

For additional data on the conditions shaping the market for borrowers, lenders, and investors, download the complete report, and Gray Capital will continue to follow the issue of loan maturities in its future research on the multifamily market. To learn more about Gray Capital, visit www.graycapitalllc.com or follow Gray Capital on LinkedIn, Instagram, and YouTube.

SOURCE Gray Capital