Colorado-Real-Estate-Journal_499210

Page 32 - December 17, 2025-January 6, 2026 www.crej.com Law & Accounting Greenberg Traurig is a service mark and trade name of Greenberg Traurig,LLP and Greenberg Traurig, P.A. ©2025 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved.AttorneyAdvertising.Contact: Neil Oberfeld in Denver at 303.572.6500.°These numbers are subject to uctuation. 42892 GREENBERG TRAURIG, LLP | 3000 AT TORNEYS | 50+ LOCATIONS WORLDWIDE ° 1144 15th St | Suite 3300 Denver, CO 80202 303.572.6500 411 E Main St | Suite 207 Aspen, CO 81611 970.300.5310 GTL AW.COM GT is growing in Colorado! Lauren Hammond Kevin Kelley Brady McShane Christopher Neumann Neil Oberfeld Katy O’Brien Tim O’Connor Carlos Schidlow Paul Seby Courtney Shephard Andy Spielman Christopher Thorne Matthew Tieslau Eric Waeckerlin Andrea Austin Mark Baker Brandy Booth Alex Cain Stephen Goler Alan Green eld Kimberly Ginsburg Meet our Real Estate and Environmental Teams! We aim to be more than legal service providers. By acting as strategic partners, we support our clients’ business goals with innovative, cutting-edge legal solutions. WORLDWIDE LOCATIONS United States, Europe and the Middle East, Asia, Latin America Moss Adams and Baker Tilly join forces to create a remarkable new organization. Unlock new possibilities for your business through deeper comprehensive service capabilities and expansive geographic reach, all with our continued commitment and personalized solutions for the real estate industry. MOSSADAMS.COM/COMBO ACCOUNTING – CONSULTING – WEALTH MANAGEMENT L I M I T L E S S Baker Tilly US, LLP, Baker Tilly Advisory Group, LP and Moss Adams LLP and their affiliated entities operate under an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations and professional standards. Baker Tilly Advisory Group, LP and its subsidiaries, and Baker Tilly US, LLP and its affiliated entities, trading as Baker Tilly, are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP and Moss Adams LLP are licensed CPA firms that provide assurance services to their clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. ISO certification services offered through Moss Adams Certifications LLC. Investment advisory offered through either Moss Adams Wealth Advisors LLC or Baker Tilly Wealth Management, LLC. © 2025 Baker Tilly Advisory Group, LP I ndustry experts have been predicting a “crash” in the commercial real estate mar- ket since 2023. Despite elevated delinquency rates, record-high vacancy in parts of the office mar- ket, and approximately $1 trillion in CRE debt maturing in 2025, the defining CRE trend in 2025 has been finding measured work- arounds to manage distress – a shift that may stand as the indus- try standard in 2026, with gradual stabilization rather than crisis. While charge-offs, short sales and enforcement proceedings persist, recent data suggests many lenders have successfully taken a disciplined approach to restructuring, choosing to stra- tegically modify, extend and re- underwrite existing loans rather than loan enforcement or short sales. The Federal Reserve Bank of St. Louis reported in October that modified CRE loans rose 66% year-over-year, increasing from $16.7 billion in the second quarter of 2024 to $27.7 billion as of June 30, 2025. Included in the analysis were term extensions and pay- ment restructures, possibly tied to both higher operating costs and the rapid rise in interest rates following years of cheap capital. This isn’t bad news. Put sim- ply, it means banks are choosing to r e p o s i t i o n viable assets rather than a d v a n c i n g toward imme- diate enforce- ment. In the hard-hit office sector, this approach is likely to continue in 2026. To that end, a recent Reuters investiga- tion found that lenders – and mid- sized regional banks in particular – are slowly reducing office expo- sure, weathering rising vacancies and restructuring allowances on office portfolios. And while some institutions have scaled back origination or sold portions of their portfolios, commercial banks still hold the largest share of CRE and multi- family mortgages – 38% nation- ally, according to the Mortgage Bankers Association. Again, this is a sign that ba nks continue to engage with the market – and suggests workout first strategies may be the new normal in 2026 and beyond. n Restructuring through the storm. During the Great Reces- sion and again during the early COVID-19 market disruption, future losses were often delayed through “extend and pretend.” However, merely extending maturity dates and hoping condi- tions improve isn’t a strategy, and financial institutions are chang- ing their approach. Increasingly, lenders and borrowers are reas- sessing fundamentals through re- underwriting. This process allows lenders to take a fresh look at the property, adjusting rental income expectations, lease-up periods, concessions, and borrower equity. Early, proactive engagement with regulators and distressed CRE borrowers is imperative. Strong borrowers and viable properties may be able to con- tinue performing with addition- al time or temporary covenant relief. Others may respond to an infusion of capital. Preferred equi- ty injections, mezzanine financ- ing and joint-venture recapitaliza- tions are all generally preferable to fire sales, which often trigger litigation and valuation disputes. Another viable alternative is loan participation sales, for lenders seeking liquidity with- out abandoning the loan rela- tionship. Banks can manage risk and free up capital by sell- ing a portion of a performing or near-performing loan, pro- viding flexibility when rates shift. Specific subsectors and indi- vidual properties will face sig- nificant stress in the coming year. Evidence nevertheless suggests that measured restructuring will sidestep a systemwide CRE catas- trophe. n Colorado fundamentals. Colorado – and Denver in par- ticular – reflect the national ten- sion between stress and stability. Office vacancies remain high, and refinancing costs continue to out- pace projected income in older buildings with fewer amenities. However, demand for other assets remains strong, includ- ing multifamily. And industrial demand in the Front Range con- tinues to outperform national averages, with new construction signaling a positive trend. Workouts make sense in these market conditions by protecting collateral value while recogniz- ing that CRE market recovery will vary by asset type. And while operating expenses have increased and tenant needs have changed, more complicated capi- tal stacks remain preferable to distressed sales. For markets like Denver, even a few successful workouts can prevent forced sales from resetting property val- ues significantly lower, preserv- ing overall market health as con- ditions improve. n Strategic discipline for 2026. As 2026 approaches, suc- cess will hinge not on waiting out volatility, but on structuring trans- actions that recognize evolving market realities. Notwithstand- ing the next wave of maturities, including loans extended in 2024- 2025, a survey of 880 global CRE experts taken by Deloitte reveals 88% expect revenue growth in the coming year and 68% antici- pate improved market conditions overall. For borrowers, the prevailing trend points toward partner- ship, creativity and strategic re- underwriting. Borrowers should come to the table with updated financials and realistic operating performance projections. Cred- ible business plans and transpar- ency provide lenders confidence and more options for viable loan modification. Finally, investors and devel- opers who understand these dynamics may also find oppor- tunities in this environment. The new normal may reveal strong assets that just need a smart deal to move forward. s mark.bell@stinson.com Lessons from 2025: ‘New normal’ for commercial real estate? Mark Bell Partner, Stinson LLP